SEC Filing | Sempra

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sre-20221231



UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-K

(Mark One)

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended

December 31, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File No.

Exact Name of Registrants as Specified in their Charters,
Address and Telephone Number

State of Incorporation

I.R.S. Employer Identification Nos.

1-14201

SEMPRA ENERGY

California

33-0732627

488 8th Avenue

San Diego, California 92101

(619) 696-2000

1-03779

SAN DIEGO GAS & ELECTRIC COMPANY

California

95-1184800

8330 Century Park Court

San Diego, California 92123

(619) 696-2000

1-01402

SOUTHERN CALIFORNIA GAS COMPANY

California

95-1240705

555 West 5th Street

Los Angeles, California 90013

(213) 244-1200



SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
SEMPRA ENERGY:
Common Stock, without par value	SRE	New York Stock Exchange

5.75% Junior Subordinated Notes Due 2079, $25 par value	SREA	New York Stock Exchange

SAN DIEGO GAS & ELECTRIC COMPANY:
None

SOUTHERN CALIFORNIA GAS COMPANY:
None


SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of Each Class
SEMPRA ENERGY:
None

SAN DIEGO GAS & ELECTRIC COMPANY:
None

SOUTHERN CALIFORNIA GAS COMPANY:
6% Preferred Stock, $25 par value

6% Preferred Stock, Series A, $25 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Sempra Energy

Yes ☒

No ☐

San Diego Gas & Electric Company

Yes ☐

No ☒

Southern California Gas Company

Yes ☐

No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Sempra Energy

Yes ☐

No ☒

San Diego Gas & Electric Company

Yes ☐

No ☒

Southern California Gas Company

Yes ☐

No ☒

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes ☒

No ☐

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit such files).

Yes ☒

No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Sempra Energy:

☒ Large Accelerated Filer

☐ Accelerated Filer

☐ Non-accelerated Filer

☐ Smaller Reporting Company

☐ Emerging Growth Company

San Diego Gas & Electric Company:

☐ Large Accelerated Filer

☐ Accelerated Filer

☒ Non-accelerated Filer

☐ Smaller Reporting Company

☐ Emerging Growth Company

Southern California Gas Company:

☐ Large Accelerated Filer

☐ Accelerated Filer

☒ Non-accelerated Filer

☐ Smaller Reporting Company

☐ Emerging Growth Company

2022 Form 10-K | 2


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Sempra Energy		☐
San Diego Gas & Electric Company		☐
Southern California Gas Company		☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report.

Sempra Energy		☒
San Diego Gas & Electric Company		☒
Southern California Gas Company		☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Sempra Energy	Yes ☐	No ☐
San Diego Gas & Electric Company	Yes ☐	No ☐
Southern California Gas Company	Yes ☐	No ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

Sempra Energy	Yes ☐	No ☐
San Diego Gas & Electric Company	Yes ☐	No ☐
Southern California Gas Company	Yes ☐	No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Sempra Energy	Yes ☐	No ☒
San Diego Gas & Electric Company	Yes ☐	No ☒
Southern California Gas Company	Yes ☐	No ☒


Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2022:

Sempra Energy			$47.2 billion (based on the price at which the common equity was last sold as of the last business day of the most recently completed second fiscal quarter)
San Diego Gas & Electric Company			$0
Southern California Gas Company			$0

2022 Form 10-K | 3


Common Stock outstanding, without par value, as of February 21, 2023:


Sempra Energy			314,569,519 shares
San Diego Gas & Electric Company			Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy
Southern California Gas Company			Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy

SAN DIEGO GAS & ELECTRIC COMPANY MEETS THE CONDITIONS OF GENERAL INSTRUCTIONS I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS REPORT WITH A REDUCED DISCLOSURE FORMAT AS PERMITTED BY GENERAL INSTRUCTION I(2).


DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Sempra Energy proxy statement to be filed for its May 2023 annual meeting of shareholders are incorporated by reference into Part III of this annual report on Form 10-K.

Portions of the Southern California Gas Company information statement to be filed for its May 2023 annual meeting of shareholders are incorporated by reference into Part III of this annual report on Form 10-K.

2022 Form 10-K | 4

Table of Contents


SEMPRA ENERGY FORM 10-K
SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-K
SOUTHERN CALIFORNIA GAS COMPANY FORM 10-K
TABLE OF CONTENTS
		Page
Glossary		6
Information Regarding Forward-Looking Statements		10
Summary of Risk Factors		11
PART I
Item 1.	Business	13
Item 1A.	Risk Factors	36
Item 1B.	Unresolved Staff Comments	59
Item 2.	Properties	59
Item 3.	Legal Proceedings	59
Item 4.	Mine Safety Disclosures	60

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	60
Item 6.	(Reserved)	60
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	60
	Overview	60
	Results of Operations	61
	Capital Resources and Liquidity	70
	Critical Accounting Estimates	87
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	91
Item 8.	Financial Statements and Supplementary Data	94
Item 9.	Changes in and Disagreements W ith Accountants on Accounting and Financial Disclosure	94
Item 9A.	Controls and Procedures	94
Item 9B.	Other Information	99
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	99

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	99
Item 11.	Executive Compensation	99
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	99
Item 13.	Certain Relationships and Related Transactions, and Director Independence	100
Item 14.	Principal Accountant Fees and Services	101

PART IV
Item 15.	Exhibits and Financial Statement Schedules	102
Item 16.	Form 10-K Summary	112

Signatures		113

Index to Consolidated Financial Statements		F-1
Index to Condensed Financial Information of Parent		S-1

This combined Form 10-K is separately filed by Sempra Energy doing business as Sempra, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any one of these individual reporting entities is filed by such entity on its own behalf. Each such reporting entity makes statements herein only as to itself and its consolidated entities and makes no statement whatsoever as to any other entity.

You should read this report in its entirety as it pertains to each respective reporting entity. No one section of the report deals with all aspects of the subject matter. A separate Part II – Item 8 is provided for each reporting entity, except for the Notes to Consolidated Financial Statements, which are combined for all of the reporting entities. All Items other than Part II – Item 8 are combined for the three reporting entities.

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The following terms and abbreviations appearing in this report have the meanings indicated below.


GLOSSARY

AB			California Assembly Bill
ADIA			Black Silverback ZC 2022 LP (assignee of Black River B 2017 Inc.), a wholly owned affiliate of Abu Dhabi Investment Authority
AFUDC			allowance for funds used during construction
AOCI			accumulated other comprehensive income (loss)
ARO			asset retirement obligation
ASC			Accounting Standards Codification
ASEA			Agencia de Seguridad, Energía y Ambiente (Mexico’s National Agency for Industrial Safety and Environmental Protection)
ASR			accelerated share repurchase
ASU			Accounting Standards Update
Bcf			billion cubic feet
Bechtel			Bechtel Energy Inc. (formerly known as Bechtel Oil, Gas and Chemicals, Inc.)
bps			basis points
Cameron LNG JV			Cameron LNG Holdings, LLC
Cameron LNG Phase 1 facility			Cameron LNG JV liquefaction facility
Cameron LNG Phase 2 project			Cameron LNG JV liquefaction expansion project
CARB			California Air Resources Board
CCA			Community Choice Aggregation
CCM			cost of capital adjustment mechanism
CEC			California Energy Commission
CFE			Comisión Federal de Electricidad (Mexico’s Federal Electricity Commission)
CFIN			Cameron LNG FINCO, LLC, a wholly owned and unconsolidated affiliate of Cameron LNG JV
Chilquinta Energía			Chilquinta Energía, S.A. and its subsidiaries
CNBV			Comisión Nacional Bancaria y de Valores (Mexico’s National Banking and Securities Commission)
COVID-19			coronavirus disease 2019
CPUC			California Public Utilities Commission
CRE			Comisión Reguladora de Energía (Mexico’s Energy Regulatory Commission)
CRR			congestion revenue right
DA			Direct Access
DEN			Ductos y Energéticos del Norte, S. de R.L. de C.V.
DER			distributed energy resources
DOE			U.S. Department of Energy
DOT			U.S. Department of Transportation
DWR			California Department of Water Resources
ECA LNG			ECA LNG Phase 1 and ECA LNG Phase 2, collectively
ECA LNG Phase 1			ECA LNG Holdings B.V.
ECA LNG Phase 2			ECA LNG II Holdings B.V.
ECA Regas Facility			Energía Costa Azul, S. de R.L. de C.V. LNG regasification facility
Ecogas			Ecogas México, S. de R.L. de C.V.
Edison			Southern California Edison Company, a subsidiary of Edison International
EFH			Energy Future Holdings Corp. (renamed Sempra Texas Holdings Corp.)
Eletrans			Eletrans S.A., Eletrans II S.A. and Eletrans III S.A., collectively
Enova			Enova Corporation
EPA			U.S. Environmental Protection Agency
EPC			engineering, procurement and construction
EPS			earnings (losses) per common share
ERCOT			Electric Reliability Council of Texas, Inc., the independent system operator and the regional coordinator of various electricity systems within Texas
ERR			eligible renewable energy resource
ESJ			Energía Sierra Juárez, S. de R.L. de C.V.
ETR			effective income tax rate
Exchange Act			Securities Exchange Act of 1934, as amended
FEED			front-end engineering design
FERC			Federal Energy Regulatory Commission

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GLOSSARY (CONTINUED)

Fitch			Fitch Ratings, Inc.
FTA			Free Trade Agreement
Gazprom			Gazprom Marketing & Trading México S. de R.L. de C.V.
GCIM			Gas Cost Incentive Mechanism
GHG			greenhouse gas
GRC			General Rate Case
HMRC			His Majesty’s Revenue and Customs (United Kingdom’s Revenue and Customs Department)
HOA			Heads of Agreement
IEnova			Infraestructura Energética Nova, S.A.P.I. de C.V.
IEnova Pipelines			IEnova Pipelines, S. de R.L. de C.V.
IMG			Infraestructura Marina del Golfo
INEOS			INEOS Energy Trading Ltd., a subsidiary of INEOS Ltd.
IOU			investor-owned utility
IRA			Inflation Reduction Act of 2022
IRS			U.S. Internal Revenue Service
ISFSI			independent spent fuel storage installation
ISO			Independent System Operator
JV			joint venture
KKR			KKR Pinnacle Investor L.P. (as successor-in-interest to KKR Pinnacle Aggregator L.P.), an affiliate of Kohlberg Kravis Roberts & Co. L.P.
kV			kilovolt
kW			kilowatt
kWh			kilowatt hour
LA Superior Court			Los Angeles County Superior Court
Leak			the leak at the SoCalGas Aliso Canyon natural gas storage facility injection-and-withdrawal well, SS25, discovered by SoCalGas on October 23, 2015
LIBOR			London Interbank Offered Rate
LNG			liquefied natural gas
LPG			liquid petroleum gas
LTIP			long-term incentive plan
Luz del Sur			Luz del Sur S.A.A. and its subsidiaries
MD&A			Management’s Discussion and Analysis of Financial Condition and Results of Operations
Mexican Stock Exchange			Bolsa Mexicana de Valores, S.A.B. de C.V., or BMV
MMBtu			million British thermal units (of natural gas)
MMcf			million cubic feet
Moody’s			Moody’s Investors Service, Inc.
MOU			Memorandum of Understanding
Mtpa			million tonnes per annum
MW			megawatt
MWh			megawatt hour
NAV			net asset value
NCI			noncontrolling interest(s)
NDT			nuclear decommissioning trusts
NEIL			Nuclear Electric Insurance Limited
NEM			net energy metering
NOL			net operating loss
NRC			Nuclear Regulatory Commission
NYSE			New York Stock Exchange
O&M			operation and maintenance expense
OCI			other comprehensive income (loss)
OEIS			Office of Energy Infrastructure Safety
OII			Order Instituting Investigation
Oncor			Oncor Electric Delivery Company LLC
Oncor Holdings			Oncor Electric Delivery Holdings Company LLC
ORLEN			Polski Koncern Naftowy Orlen S.A. (formerly Polish Oil & Gas Company)

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GLOSSARY (CONTINUED)

OSC			Order to Show Cause
PA LNG Phase 1 project			initial phase of the Port Arthur LNG liquefaction project
PA LNG Phase 2 project			second phase of the Port Arthur LNG liquefaction project
PA LNG projects			PA LNG Phase 1 project and PA LNG Phase 2 project, collectively
PBOP			postretirement benefits other than pension
PE			Pacific Enterprises
PEMEX			Petróleos Mexicanos (Mexican state-owned oil company)
PG&E			Pacific Gas and Electric Company
PHMSA			Pipeline and Hazardous Materials Safety Administration
PP&E			property, plant and equipment
PPA			power purchase agreement
PRP			Potentially Responsible Party
PUCT			Public Utility Commission of Texas
PURA			Texas Public Utility Regulatory Act
PXiSE			PXiSE Energy Solutions, LLC
Rating Agencies			Moody’s, S&P and Fitch, collectively
RBS			The Royal Bank of Scotland plc
RBS SEE			RBS Sempra Energy Europe
RBS Sempra Commodities			RBS Sempra Commodities LLP
REC			renewable energy certificate
ROE			return on equity
ROU			right-of-use
RPS			Renewables Portfolio Standard
RSU			restricted stock unit
S&P			S&P Global Ratings, a division of S&P Global Inc.
SB			California Senate Bill
SDG&E			San Diego Gas & Electric Company
SDSRA			Senior Debt Service Reserve Account
SEC			U.S. Securities and Exchange Commission
SED			Safety and Enforcement Division of the CPUC
SEDATU			Secretaría de Desarrollo Agrario, Territorial y Urbano (Mexico’s agency in charge of agriculture, land and urban development)
Sempra			Sempra Energy doing business as Sempra, together with its consolidated entities unless otherwise stated or indicated by the context
Sempra California			San Diego Gas & Electric Company and Southern California Gas Company, collectively
Sempra Global			Sempra Global, which was renamed Sempra Infrastructure Partners, LP on September 30, 2021
SENER			Secretaría de Energía de México (Mexico’s Ministry of Energy)
series A preferred stock			6% mandatory convertible preferred stock, series A
series B preferred stock			6.75% mandatory convertible preferred stock, series B
series C preferred stock			Sempra’s 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C
Sharyland Holdings			Sharyland Holdings, L.P.
Sharyland Utilities			Sharyland Utilities, L.L.C.
Shell Mexico			Shell México Gas Natural, S. de R.L. de C.V.
SI Partners			Sempra Infrastructure Partners, LP, the holding company for most of Sempra’s subsidiaries not subject to California or Texas utility regulation, which was formerly named Sempra Global before September 30, 2021
SoCalGas			Southern California Gas Company
SOFR			Secured Overnight Financing Rate
SONGS			San Onofre Nuclear Generating Station
SPA			sale and purchase agreement
Support Agreement			support agreement, dated July 28, 2020 and amended on June 29, 2021, among Sempra and Sumitomo Mitsui Banking Corporation
TAG			TAG Norte Holding, S. de R.L. de C.V.
Tangguh PSC			Tangguh PSC Contractors
TdM			Termoeléctrica de Mexicali
Technip Energies			TP Oil & Gas Mexico, S. De R.L. De C.V., an affiliate of Technip Energies N.V.
Tecnored			Tecnored S.A.

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GLOSSARY (CONTINUED)

Tecsur			Tecsur S.A.
TO5			Electric Transmission Owner Formula Rate, effective June 1, 2019
TTI			Texas Transmission Investment LLC
U.S. GAAP			generally accepted accounting principles in the United States of America
VaR			value at risk
VAT			value-added tax
Ventika			Ventika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V., collectively
VIE			variable interest entity
Wildfire Fund			the fund established pursuant to AB 1054
Wildfire Legislation			AB 1054 and AB 111

References in this report to “we,” “our,” “us,” “our company” and “Sempra” are to Sempra and its consolidated entities, collectively, unless otherwise stated or indicated by the context. All references in this report to our reportable segments are not intended to refer to any legal entity with the same or similar name.

Throughout this report, we refer to the following as Consolidated Financial Statements and Notes to Consolidated Financial Statements when discussed together or collectively:

▪the Consolidated Financial Statements and related Notes of Sempra;

▪the Financial Statements and related Notes of SDG&E; and

▪the Financial Statements and related Notes of SoCalGas.

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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this report that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions with respect to the future, involve risks and uncertainties, and are not guarantees. Future results may differ materially from those expressed or implied in any forward-looking statement. These forward-looking statements represent our estimates and assumptions only as of the filing date of this report. We assume no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise.

Forward-looking statements can be identified by words such as “believes,” “expects,” “intends,” “anticipates,” “contemplates,” “plans,” “estimates,” “projects,” “forecasts,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “construct,” “develop,” “opportunity,” “initiative,” “target,” “outlook,” “optimistic,” “maintain,” “continue,” “progress,” “advance,” “goal,” “aim,” “commit,” or similar expressions, or when we discuss our guidance, priorities, strategy, goals, vision, mission, opportunities, projections, intentions or expectations.

Factors, among others, that could cause actual results and events to differ materially from those expressed or implied in any forward-looking statement include risks and uncertainties relating to:

▪California wildfires, including that we may be found liable for damages regardless of fault and that we may not be able to recover all or a substantial portion of costs from insurance, the Wildfire Fund, rates from customers or a combination thereof

▪decisions, investigations, inquiries, regulations, issuances or revocations of permits or other authorizations, renewals of franchises, and other actions by (i) the CPUC, CRE, DOE, FERC, PUCT, and other governmental and regulatory bodies and (ii) the U.S., Mexico and states, counties, cities and other jurisdictions therein and in other countries in which we do business

▪the success of business development efforts, construction projects and acquisitions and divestitures, including risks in (i) being able to make a final investment decision, (ii) completing construction projects or other transactions on schedule and budget, (iii) realizing anticipated benefits from any of these efforts if completed, and (iv) obtaining the consent or approval of partners or other third parties, including governmental and regulatory bodies

▪litigation, arbitrations, property disputes and other proceedings, and changes to laws and regulations, including those related to the energy industry in Mexico

▪cybersecurity threats, including by state and state-sponsored actors, of ransomware or other attacks on our systems or the systems of third-parties with which we conduct business, including the energy grid or other energy infrastructure, all of which have become more pronounced due to recent geopolitical events, such as the war in Ukraine

▪our ability to borrow money on favorable terms and meet our debt service obligations, including due to (i) actions by credit rating agencies to downgrade our credit ratings or to place those ratings on negative outlook or (ii) rising interest rates and inflation

▪failure of foreign governments, state-owned entities and our counterparties to honor their contracts and commitments

▪the impact on affordability of SDG&E’s and SoCalGas’ customer rates and their cost of capital and on SDG&E’s, SoCalGas’ and Sempra Infrastructure’s ability to pass through higher costs to current and future customers due to (i) volatility in inflation, interest rates and commodity prices, (ii) with respect to SDG&E’s and SoCalGas’ businesses, the cost of the clean energy transition in California, (iii) with respect to SDG&E’s business, departing retail load resulting from additional customers transferring to CCA and DA, and (iv) with respect to Sempra Infrastructure’s business, volatility in foreign currency exchange rates

▪the impact of climate and sustainability policies, laws, rules, disclosures, and trends, including actions to reduce or eliminate reliance on natural gas, increased uncertainty in the political or regulatory environment for California natural gas distribution companies and the risk of nonrecovery for stranded assets

▪our ability to incorporate new technologies into our businesses, including those designed to support governmental and private party energy and climate goals

▪weather, natural disasters, pandemics, accidents, equipment failures, explosions, terrorism, information system outages or other events that disrupt our operations, damage our facilities or systems, cause the release of harmful materials, cause fires or subject us to liability for damages, fines and penalties, some of which may not be recoverable through regulatory mechanisms, may be disputed or not covered by insurers, or may impact our ability to obtain satisfactory levels of affordable insurance

▪the availability of electric power, natural gas and natural gas storage capacity, including disruptions caused by failures in the transmission grid, pipeline system or limitations on the withdrawal of natural gas from storage facilities

▪Oncor’s ability to eliminate or reduce its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor’s independent directors or a minority member director

▪changes in tax and trade policies, laws and regulations, including tariffs, revisions to international trade agreements and sanctions, such as those that have been imposed and that may be imposed in the future in connection with the war in Ukraine,

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which may increase our costs, reduce our competitiveness, impact our ability to do business with certain counterparties, or impair our ability to resolve trade disputes

▪other uncertainties, some of which are difficult to predict and beyond our control

We caution you not to rely unduly on any forward-looking statements. You should review and carefully consider the risks, uncertainties and other factors that affect our businesses as described herein and in other reports we file with the SEC.

SUMMARY OF RISK FACTORS

There are a number of risks you should understand before making an investment decision in our securities or the securities of our subsidiaries. This summary is not intended to be complete and should only be read together with the information set forth in “Part I – Item 1A. Risk Factors” in this report. If any of these risks occurs, Sempra’s and its subsidiaries’ results of operations, financial condition, cash flows and/or prospects could be materially adversely affected, and the trading price of Sempra’s securities and those of its subsidiaries could decline. These risks include the following:

Risks Related to Sempra

▪Sempra’s cash flows, ability to pay dividends and ability to meet its debt obligations largely depend on the performance of its subsidiaries and entities accounted for as equity method investments

▪The economic interest, voting rights and market value of our outstanding common and preferred stock may be adversely affected by any additional equity securities we may issue

Risks Related to All Sempra Businesses

▪Our businesses are subject to risks arising from their infrastructure and information systems

▪Severe weather, natural disasters and other similar events could materially adversely affect us

▪Our debt service obligations expose us to risks and could require additional equity securities issuances by Sempra and sales of equity interests in various subsidiaries or projects under development

▪The availability and cost of debt or equity financing could be negatively affected by market and economic conditions and other factors, and any such effects could materially adversely affect us

▪Credit rating agencies may downgrade our credit ratings or place those ratings on negative outlook

▪Our businesses require numerous permits, licenses, franchises and other approvals from various governmental agencies, and the failure to obtain or maintain any of them, or lengthy delays in obtaining them, could materially adversely affect us

▪Our businesses face climate change concerns and have environmental compliance and clean energy transition costs, which could have a material adverse effect on us

▪Our businesses are subject to numerous governmental regulations and complex tax and accounting requirements and may be materially adversely affected by them or any changes to them

Risks Related to Sempra California

▪Wildfires in California pose risks to Sempra California (particularly SDG&E) and Sempra

▪The electricity industry is undergoing significant change, including increased deployment of DER, technological advancements, and political and regulatory developments

▪Natural gas and natural gas storage have increasingly been the subject of political and public scrutiny, including a desire by some to reduce or eliminate reliance on natural gas as an energy source

▪SDG&E and SoCalGas are subject to extensive regulation by federal, state and local legislative and regulatory authorities, which may materially adversely affect Sempra, SDG&E and SoCalGas

Risks Related to Sempra Texas Utilities

▪Certain ring-fencing measures, governance mechanisms and commitments limit our ability to influence the management, operations and policies of Oncor

▪Changes in the regulation or operation of the electric utility industry and/or the ERCOT market, as well as the outcome of regulatory proceedings, could materially adversely affect Oncor, which could materially adversely affect us

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Risks Related to Sempra Infrastructure

▪Project development activities may not be successful, projects under construction may not be completed on schedule or within budget, and completed projects may not operate at expected levels, any of which could materially adversely affect us

▪We may not be able to enter into, maintain, extend or replace long-term supply, sales or capacity agreements

▪Our international businesses and operations expose us to increased legal, regulatory, tax, economic, geopolitical and management oversight risks and challenges

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PART I.

ITEM 1. BUSINESS

OVERVIEW

We are a California-based holding company with energy infrastructure investments in North America. Our businesses invest in, develop and operate energy infrastructure, and provide electric and gas services to customers.

Sempra was formed in 1998 through a business combination of Enova and PE, the holding companies of our regulated public utilities in California: SDG&E, which began operations in 1881, and SoCalGas, which began operations in 1867. We have since expanded our regulated public utility presence into Texas through our 80.25% interest in Oncor and 50% interest in Sharyland Utilities. Sempra Infrastructure’s assets include investments in the U.S. and Mexico with a focus on LNG and net zero solutions, energy networks and clean power.

Business Strategy

Our mission is to be North America’s premier energy infrastructure company. We are primarily focused on transmission and distribution investments, among other areas, that we believe are capable of producing stable cash flows and earnings visibility, with the goal of delivering safe, reliable and increasingly clean forms of energy to customers and increasing shareholder value.

DESCRIPTION OF BUSINESS BY SEGMENT

Our business activities are organized under the following reportable segments:

▪SDG&E

▪SoCalGas

▪Sempra Texas Utilities

▪Sempra Infrastructure

SDG&E

SDG&E is a regulated public utility that provides electric services to a population of, at December 31, 2022, approximately 3.6 million and natural gas services to approximately 3.3 million of that population, covering a 4,100 square mile service territory in Southern California that encompasses San Diego County and an adjacent portion of Orange County.

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SDG&E’s assets at December 31, 2022 covered the following territory:

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Electric Utility Operations

Electric Transmission and Distribution System. Service to SDG&E’s customers is supported by its electric transmission and distribution system, which includes substations and overhead and underground lines. These electric facilities are primarily in the San Diego, Imperial and Orange counties of California, and in Arizona and Nevada and consisted of 1,928 miles of transmission lines, 23,928 miles of distribution lines and 157 substations at December 31, 2022. Occasionally, various areas of the service territory require expansion to accommodate customer growth and maintain reliability and safety.

SDG&E’s 500-kV Southwest Powerlink transmission line, which is shared with Arizona Public Service Company and Imperial Irrigation District, extends from Palo Verde, Arizona to San Diego, California. SDG&E’s share of the line is 1,163 MW, although it can be less under certain system conditions. SDG&E’s Sunrise Powerlink is a 500-kV transmission line constructed by SDG&E and operated by the California ISO. Both of these lines together provide SDG&E with import capability of 3,900 MW of power.

Mexico’s Baja California transmission system is connected to SDG&E’s system via two 230-kV interconnections with combined capacity of up to 600 MW in the north-to-south direction and 800 MW in the south-to-north direction. However, it can be less under certain system conditions.

Edison’s transmission system is connected to SDG&E’s system via five 230-kV transmission lines.

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Electric Resources. To meet customer demand, SDG&E supplies power from its own electric generation facilities and procures power on a long-term basis from other suppliers for resale through CPUC-approved purchased-power contracts or purchases on the spot market. SDG&E does not earn any return on commodity sales volumes. SDG&E’s electric resources at December 31, 2022 were as follows:


SDG&E – ELECTRIC RESOURCES(1)

	Contract	Net operating
	expiration date	capacity (MW)	% of total
Owned generation facilities, natural gas(2)		1,204	24	%
Purchased-power contracts:
Renewables:
Wind	2023 to 2042	1,236	24
Solar	2030 to 2042	1,390	27
Other	2023 and thereafter	37	1
Tolling and other	2024 to 2042	1,206	24
Total		5,073	100	%

(1) Excludes approximately 321 MW of energy storage owned and approximately 164 MW of energy storage contracted.

(2) SDG&E owns and operates four natural gas-fired power plants, three of which are in California and one is in Nevada.

Charges under contracts with suppliers are based on the amount of energy received or are tolls based on available capacity. Tolling contracts are purchased-power contracts under which SDG&E provides natural gas to the energy supplier.

SDG&E procures natural gas under short-term contracts for its owned generation facilities and for certain tolling contracts associated with purchased-power arrangements. Purchases from various southwestern U.S. suppliers are primarily priced based on published monthly bid-week indices, which can be subject to volatility.

SDG&E participates in the Western Systems Power Pool, which includes an electric-power and transmission-rate agreement that allows access to power trading with more than 300 member utilities, power agencies, energy brokers and power marketers throughout the U.S. and Canada. Participants can make power transactions on standardized terms, including market-based rates, preapproved by the FERC. Participation in the Western Systems Power Pool is intended to assist members in managing power delivery and price risk.

Customers and Demand. SDG&E provides electric services through the generation, transmission and distribution of electricity to the following customer classes:


SDG&E – ELECTRIC CUSTOMER METERS AND VOLUMES

	Customer meter count	Volumes(1) (millions of kWh)
	December 31,	Years ended December 31,
	2022	2022	2021	2020
Residential	615,126	3,940	5,657	6,606
Commercial	71,661	2,850	4,128	5,873
Industrial	471	909	1,398	1,842
Street and highway lighting	3,323	101	115	77
	690,581	7,800	11,298	14,398
CCA and DA	813,304	9,900	5,916	3,482
Total	1,503,885	17,700	17,214	17,880

(1) Includes intercompany sales.

SDG&E currently provides procurement service for a portion of its customer load. Most customers receive procurement service from a load-serving entity other than SDG&E through programs such as CCA and DA. In such cases, SDG&E no longer procures energy for this departing load. Accordingly, SDG&E’s CCA and DA customers receive primarily transportation and distribution services from SDG&E.

CCA is only available if the customer’s local jurisdiction (city or county) offers such a program and DA is currently limited by a cap based on gigawatt hours. Several jurisdictions in SDG&E's territory have implemented CCA, including the City of San Diego in 2022. Additional jurisdictions are in the process of implementing or considering CCA.

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SDG&E’s historical energy procurement for future deliveries exceeds the needs of its remaining bundled customers as customers have elected CCA and DA services. To help achieve the goal of ratepayer indifference (as to whether or not customers’ energy is procured by SDG&E or by CCA or DA), the CPUC revised the Power Charge Indifference Adjustment framework. The purpose of the framework is to help ensure SDG&E’s procurement cost obligations are more equitably shared among customers served by SDG&E and customers now served by CCA or DA. SDG&E implemented the framework on January 1, 2019.

San Diego’s mild climate and SDG&E’s robust energy efficiency programs contribute to lower consumption by our customers. Rooftop solar installations continue to reduce residential and commercial volumes sold by SDG&E. At December 31, 2022, 2021 and 2020, the residential and commercial rooftop solar capacity in SDG&E’s territory totaled 1,864 MW, 1,620 MW and 1,423 MW, respectively.

Electricity demand is dependent on the health and expansion of the Southern California economy, prices of alternative energy products, consumer preference, environmental regulations, legislation, renewable power generation, the effectiveness of energy efficiency programs, demand-side management impact and distributed generation resources. California’s energy policy supports increased electrification, particularly electrification of vehicles, which could significantly increase sales volumes in the coming years. Other external factors, such as the price of purchased power, the use of hydroelectric power, the use of and further development of renewable energy resources and energy storage, the development of or requirements for new natural gas supply sources, demand for and supply of natural gas and general economic conditions, can also result in significant shifts in the market price of electricity, which may in turn impact demand. Electricity demand is also impacted by seasonal weather patterns (or “seasonality”), tending to increase in the summer months to meet the cooling load and in the winter months to meet the heating load.

Competition. SDG&E faces competition to serve its customer load from distributed and local power generation growth, including solar installations. In addition, the electric industry is undergoing rapid technological change, and third-party energy storage alternatives and other technologies may increasingly compete with SDG&E’s traditional transmission and distribution infrastructure in delivering electricity to consumers.

Natural Gas Utility Operations

We describe SDG&E’s natural gas utility operations below in “Sempra California’s Natural Gas Utility Operations.”

SoCalGas

SoCalGas is a regulated public utility that owns and operates a natural gas distribution, transmission and storage system that delivers natural gas to a population of, at December 31, 2022, approximately 21.1 million, covering a 24,000 square mile service territory that encompasses Southern California and portions of central California (excluding San Diego County, the City of Long Beach and the desert area of San Bernardino County).

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SoCalGas’ assets at December 31, 2022 covered the following territory:

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Natural Gas Utility Operations

We describe SoCalGas’ natural gas utility operations below in “Sempra California’s Natural Gas Utility Operations.”

Sempra California’s Natural Gas Utility Operations

Natural Gas Procurement and Transportation

At December 31, 2022, SoCalGas’ natural gas facilities included 3,046 miles of transmission and storage pipelines, 52,020 miles of distribution pipelines, 48,918 miles of service pipelines and nine transmission compressor stations, and SDG&E’s natural gas facilities consisted of 168 miles of transmission pipelines, 9,112 miles of distribution pipelines, 6,718 miles of service pipelines and one compressor station.

SoCalGas’ and SDG&E’s gas transmission pipelines interconnect with four major interstate pipeline systems: El Paso Natural Gas, Transwestern Pipeline, Kern River Pipeline Company, and Mojave Pipeline Company, allowing customers to bring gas supplies into the SoCalGas gas transmission pipeline system from the various out-of-state gas producing basins. Additionally, an interconnection with PG&E’s intrastate gas transmission pipeline system allows gas to flow into SoCalGas’ gas transmission pipeline system. SoCalGas’ gas transmission pipeline system also has an interconnect with a Mexican gas pipeline company at Otay Mesa on the California/Mexico border that allows gas to not only flow south from the gas producing basins in the southwestern U.S., but to also flow north into SoCalGas’ gas transmission pipeline system from LNG-sourced supplies in Mexico. There are also several in-state gas interconnections allowing for delivery of California-produced gas, including a number of direct connections from renewable natural gas producers.

SoCalGas purchases natural gas under short-term and long-term contracts and on the spot market for SDG&E’s and SoCalGas’ core customers. SoCalGas purchases natural gas from various sources, including from Canada, the U.S. Rockies and the southwestern regions of the U.S. Purchases of natural gas are primarily priced based on published monthly bid week indices,

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which can be subject to volatility. The cost of purchases of natural gas for SDG&E’s and SoCalGas’ core customers is billed to those customers without markup.

To support the delivery of natural gas supplies to its distribution system and to meet the needs of customers, SoCalGas has firm and variable interstate pipeline capacity contracts that require the payment of fixed and variable tariffed and negotiated reservation charges to reserve firm transportation rights. Energy companies, primarily El Paso Natural Gas Company, Transwestern Pipeline Company and Kern River Gas Transmission Company, provide transportation services into SoCalGas’ intrastate transmission system for supplies purchased by SoCalGas.

Natural Gas Storage

SoCalGas owns four natural gas storage facilities with a combined working gas capacity of 137 Bcf and 126 injection, withdrawal and observation wells that provide natural gas storage service. SoCalGas’ and SDG&E’s core customers, along with certain third-party market participants, are allocated a portion of SoCalGas’ storage capacity. SoCalGas uses the remaining storage capacity for load balancing services for all customers. Natural gas withdrawn from storage is important to help maintain service reliability during peak demand periods, including consumer heating needs in the winter, as well as peak electric generation needs in the summer. The Aliso Canyon natural gas storage facility has a storage capacity of 86 Bcf and, subject to the CPUC limitations described below, represents 63% of SoCalGas’ natural gas storage capacity. SoCalGas discovered a natural gas leak at one of its wells at the Aliso Canyon natural gas storage facility in October 2015 and permanently sealed the well in February 2016. SoCalGas was subsequently authorized to make limited withdrawals and injections of natural gas at the Aliso Canyon natural gas storage facility and, on an interim basis, has been directed by the CPUC to maintain up to 41.16 Bcf of working gas at the facility to help achieve reliability for the region as determined by the CPUC. To help maintain system reliability, the CPUC issued a protocol authorizing withdrawals of natural gas from the facility if available gas supply reaches defined thresholds for SoCalGas’ system, or public health and safety is at risk, as determined by the protocol. We discuss the Leak in Note 16 of the Notes to Consolidated Financial Statements, in “Part I – Item 1A. Risk Factors” and in “Part II – Item 7. MD&A – Capital Resources and Liquidity – SoCalGas.”

Customers and Demand

SoCalGas and SDG&E sell, distribute and transport natural gas. SoCalGas purchases and stores natural gas for its core customers in its territory and SDG&E’s territory on a combined portfolio basis. SoCalGas also offers natural gas transportation and storage services for others.


SEMPRA CALIFORNIA – NATURAL GAS CUSTOMER METERS AND VOLUMES

	Customer meter count	Volumes (Bcf)(1)
	December 31,	Years ended December 31,
	2022	2022	2021	2020
SDG&E:
Residential	878,220
Commercial	29,180
Electric generation and transportation	2,540
Natural gas sales		45	46	43
Transportation		39	38	40
Total	909,940	84	84	83
SoCalGas:
Residential	5,857,280
Commercial	248,800
Industrial	24,390
Electric generation and wholesale	40
Natural gas sales		304	314	312
Transportation		586	568	572
Total	6,130,510	890	882	884

(1) Includes intercompany sales.

For regulatory purposes, end-use customers are classified as either core or noncore customers. Core customers are primarily residential and small commercial and industrial customers.

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Most core customers purchase natural gas directly from SoCalGas or SDG&E. While core customers are permitted to purchase their natural gas supplies from producers, marketers or brokers, SoCalGas and SDG&E are obligated to maintain adequate delivery capacity to serve the requirements of all their core customers.

Noncore customers at SoCalGas consist primarily of electric generation, wholesale, and large commercial and industrial customers. A portion of SoCalGas’ noncore customers are non-end-users, which include wholesale customers consisting primarily of other utilities, including SDG&E, or municipally owned natural gas distribution systems. Noncore customers at SDG&E consist primarily of electric generation and large commercial customers.

Noncore customers are responsible for procuring their natural gas requirements, as the regulatory framework does not allow SoCalGas and SDG&E to recover the cost of natural gas procured and delivered to noncore customers.

Natural gas demand largely depends on the health and expansion of the Southern California economy, prices of alternative energy products, consumer preference, environmental regulations, legislation, California’s energy policy supporting increased electrification and renewable power generation, and the effectiveness of energy efficiency programs. Other external factors such as weather, the price of, demand for, and supply sources of electricity, the use of and further development of renewable energy resources and energy storage, development of or requirements for new natural gas supply sources, demand for natural gas outside California, storage levels, transport capacity and availability of supply into California and general economic conditions can also result in significant shifts in the market price of natural gas, which may in turn impact demand.

One of the larger sources for natural gas demand is electric generation. Natural gas-fired electric generation within Southern California (and demand for natural gas supplied to such plants) competes with electric power generated throughout the western U.S. Natural gas transported for electric generating plant customers may be affected by the overall demand for electricity, growth in self-generation from rooftop solar, the addition of more efficient gas technologies, new energy efficiency initiatives, and the degree to which regulatory changes in electric transmission infrastructure investment divert electric generation from SoCalGas’ and SDG&E’s service areas. The demand for natural gas may also fluctuate due to volatility in the demand for electricity due to seasonality, weather conditions and other impacts, and the availability of competing supplies of electricity, such as hydroelectric generation and other renewable energy sources. Given the significant quantity of natural gas-fired generation, we believe natural gas is a dispatchable fuel that can continue to help provide electric reliability in our California service territories.

The natural gas distribution business is subject to seasonality, and cash provided by operating activities generally is greater during and immediately following the winter heating months. As is prevalent in the industry, but subject to current regulatory limitations, SoCalGas typically injects natural gas into storage during the months of April through October, and usually withdraws natural gas from storage during the months of November through March.

Sempra Texas Utilities

Sempra Texas Utilities is comprised of our equity method investments in Oncor Holdings and Sharyland Holdings. Oncor Holdings is an indirect, wholly owned entity of Sempra that owns an 80.25% interest in Oncor. TTI owns the remaining 19.75% interest in Oncor. Sempra owns an indirect, 50% interest in Sharyland Holdings, which owns a 100% interest in Sharyland Utilities.

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Sempra Texas Utilities’ assets at December 31, 2022 covered the following territory:

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Oncor

Oncor is a regulated electricity transmission and distribution utility that operates in the north-central, eastern, western and panhandle regions of Texas. Oncor delivers electricity to end-use consumers through its electrical systems, and also provides transmission grid connections to merchant generation facilities and interconnections to other transmission grids in Texas. Oncor’s transmission and distribution assets are located in over 120 counties and more than 400 incorporated municipalities, including the cities of Dallas and Fort Worth and surrounding suburbs, as well as Waco, Wichita Falls, Odessa, Midland, Tyler, Temple, Killeen and Round Rock, among others. Most of Oncor’s power lines have been constructed over lands of others pursuant to easements or along public highways, streets and rights-of-way pursuant to permits, public utility easements, franchise or other agreements or as otherwise permitted by law.

At December 31, 2022, Oncor had 4,561 employees, including 764 employees covered under a collective bargaining agreement.

Certain ring-fencing measures, governance mechanisms and commitments, which we describe in “Part I – Item 1A. Risk Factors,” are in effect and are intended to enhance Oncor Holdings’ and Oncor’s separateness from their owners and to mitigate the risk that these entities would be negatively impacted by the bankruptcy of, or other adverse financial developments affecting, their owners. Sempra does not control Oncor Holdings or Oncor, and the ring-fencing measures, governance mechanisms and commitments limit our ability to direct the management, policies and operations of Oncor Holdings and Oncor, including the deployment or disposition of their assets, declarations of dividends, strategic planning and other important corporate issues and actions, including limited representation on the Oncor Holdings and Oncor boards of directors. Because Oncor Holdings and Oncor are managed independently (i.e., ring-fenced), we account for our 100% ownership interest in Oncor Holdings as an equity method investment.

Electricity Transmission. Oncor’s electricity transmission business is responsible for the safe and reliable operations of its transmission network and substations. These responsibilities consist of the construction, maintenance and security of transmission

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facilities and substations and the monitoring, controlling and dispatching of high-voltage electricity over its transmission facilities in coordination with ERCOT, which we discuss below in “Regulation – Utility Regulation – ERCOT Market.”

At December 31, 2022, Oncor’s transmission system included approximately 18,268 circuit miles of transmission lines, a total of 1,207 transmission and distribution substations, and interconnection to 146 third-party generation facilities totaling 48,430 MW.

Transmission revenues are provided under tariffs approved by either the PUCT or, to a small degree related to limited interconnection to other markets, the FERC. Network transmission revenues compensate Oncor for delivery of electricity over transmission facilities operating at 60 kV and above. Other services offered by Oncor through its transmission business include system impact studies, facilities studies, transformation service and maintenance of transformer equipment, substations and transmission lines owned by other parties.

Electricity Distribution. Oncor’s electricity distribution business is responsible for the overall safe and reliable operation of distribution facilities, including electricity delivery, power quality, security and system reliability. These responsibilities consist of the ownership, management, construction, maintenance and operation of the electricity distribution system within its certificated service area. Oncor’s distribution system receives electricity from the transmission system through substations and distributes electricity to end-users and wholesale customers through 3,681 distribution feeders.

Oncor’s distribution system included nearly 3.9 million points of delivery at December 31, 2022 and consisted of 123,500 miles of overhead and underground lines.

Distribution revenues from residential and small business users are based on actual monthly consumption (kWh) and distribution revenues from large commercial and industrial users are based on, depending on size and annual load factor, either actual monthly demand (kW) or the greater of actual monthly demand (kW) or 80% of peak monthly demand during the prior eleven months.

Customers and Demand. Oncor operates the largest transmission and distribution system in Texas based on the number of end-use customers and miles of transmission and distribution lines, delivering electricity to nearly 3.9 million homes and businesses, operating more than 141,000 miles of transmission and distribution lines as of December 31, 2022 in a territory with an estimated population of approximately 13 million. The consumers of the electricity Oncor delivers (other than ultimate end-use customers served by an electric cooperative or a municipally owned utility) are free to choose their electricity supplier from retail electric providers who compete for their business. Oncor is not a seller of electricity, nor does it purchase electricity for resale. Rather, Oncor provides transmission services to its electricity distribution business as well as non-affiliated electricity distribution companies, cooperatives and municipally owned utilities. Oncor also provides distribution services, consisting of retail delivery services to retail electric providers that sell electricity to end-use customers, as well as wholesale delivery services to cooperatives and municipally owned utilities. At December 31, 2022, Oncor’s distribution business customers primarily consisted of over 100 retail electric providers that sell the electricity it distributes to consumers in its certificated service areas.

Oncor’s revenues and results of operations are subject to seasonality, weather conditions and other electricity usage drivers, with revenues being highest in the summer.

Competition. Oncor operates in certificated areas designated by the PUCT. The majority of Oncor’s service territory is single certificated, with Oncor as the only certificated electric transmission and distribution provider. However, in multi-certificated areas of Texas, Oncor competes with certain other utilities and rural electric cooperatives for the right to serve end-use customers. In addition, the electric industry is undergoing rapid technological change, and third-party distributed energy resources and other technologies may increasingly compete with Oncor’s traditional transmission and distribution infrastructure in delivering electricity to consumers.

Sharyland Utilities

Sharyland Utilities is a regulated electric transmission utility that owns and operates, at December 31, 2022, approximately 64 miles of electric transmission lines in south Texas, including a direct current line connecting Mexico and assets in McAllen, Texas. Sharyland Utilities is responsible for providing safe, reliable and efficient transmission and substation services and investing to support infrastructure needs in its service territory, which we discuss below in “Regulation – Utility Regulation – ERCOT Market.” Transmission revenues are provided under tariffs approved by the PUCT.

Sempra Infrastructure

Our Sempra Infrastructure segment includes the operating companies of our subsidiary, SI Partners, as well as a holding company and certain services companies. SI Partners is included within our Sempra Infrastructure reportable segment, but is not the same in its entirety as the reportable segment. Sempra Infrastructure develops, builds, operates and invests in energy infrastructure to help enable the energy transition in North American markets and globally.

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Sempra Infrastructure owned a 70% interest in SI Partners at December 31, 2022, following its sale of a 20% NCI in SI Partners to KKR in October 2021 and sale of a 10% NCI in SI Partners to ADIA in June 2022. SI Partners has two authorized classes of limited partnership interests designated as “Class A Units” (which are common voting units) and “Sole Risk Interests” (which are only owned by Sempra, are non-voting and are not considered in the calculation of each limited partner’s respective ownership interests, subject to certain restrictions). We discuss KKR’s and ADIA’s purchases of NCI in SI Partners, as well as SI Partners’ limited partnership agreement that governs the partners’ respective rights and obligations in respect of their ownership interests in SI Partners in Note 1 of the Notes to Consolidated Financial Statements.

SI Partners held a 100% ownership interest in Sempra LNG Holding, LP and a 99.9% ownership interest in IEnova at December 31, 2022, which consolidates Sempra’s ownership and management of its non-utility, energy infrastructure assets in North America under a single platform. These assets include LNG and natural gas infrastructure in the U.S. and Mexico and renewable energy, LPG and refined products infrastructure in Mexico, which are managed through three business lines: LNG and Net-Zero Solutions, Energy Networks and Clean Power.

At December 31, 2022, Sempra Infrastructure owned or held interests in the following assets:

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LNG and Net-Zero Solutions

Sempra Infrastructure’s LNG and Net-Zero Solutions business line is comprised of a natural gas liquefaction portfolio in operation, construction or development, and is focused on energy diversification and the clean energy transition in markets that our customers serve.

Cameron LNG Phase 1 Facility. SI Partners owns 50.2% of Cameron LNG JV, while an affiliate of TotalEnergies SE, an affiliate of Mitsui & Co., Ltd., and Japan LNG Investment, LLC (a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha) each own 16.6% of Cameron LNG JV. We account for our ownership interest in Cameron LNG JV under the equity method. No single owner controls or can unilaterally direct significant activities of Cameron LNG JV.

Cameron LNG JV owns and operates the Cameron LNG Phase 1 facility, a natural gas liquefaction, export, regasification and import facility with three natural gas pre-treatment, processing and liquefaction trains. The Cameron LNG Phase 1 facility is located in Hackberry, Louisiana, along the Calcasieu Ship Channel, which handles significant industrial shipping, including large

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oil and LNG tankers, and is well positioned to supply the Atlantic and Pacific markets. The three liquefaction trains have a combined nameplate capacity of 13.9 Mtpa of LNG with an export capacity of 12 Mtpa of LNG, or approximately 1.7 Bcf of natural gas per day. The Cameron LNG Phase 1 facility has 20-year liquefaction and regasification tolling capacity agreements in place with affiliates of TotalEnergies SE, Mitsubishi Corporation and Mitsui & Co., Ltd., which collectively subscribe for the full nameplate capacity of the three trains at the facility.

ECA Regas Facility. Sempra Infrastructure owns and operates the ECA Regas Facility in Baja California, Mexico, which is capable of processing one Bcf of natural gas per day and has a storage capacity of 320,000 cubic meters in two tanks of 160,000 cubic meters each.

The ECA Regas Facility generates revenues from firm storage service fees under firm storage service agreements and nitrogen injection service agreements with Shell Mexico and Gazprom that expire in 2028, which permit them to collectively use 50% of the terminal’s capacity, with the remaining 50% of the capacity available for Sempra Infrastructure’s use. The land on which the ECA Regas Facility and the ECA LNG liquefaction projects under construction and in development are expected to be situated, as well as land adjacent to those properties, are the subject of litigation. We discuss the ECA Regas Facility arbitration and land litigation in Note 16 of the Notes to Consolidated Financial Statements and “Part I – Item 1A. Risk Factors.”

Sempra Infrastructure uses its 50% capacity at the ECA Regas Facility to satisfy its obligation under an LNG SPA with Tangguh PSC through 2029, which we discuss below, and ECA LNG Phase 1 will be the sole user of this capacity thereafter.

Asset and Supply Optimization. Sempra Infrastructure has an LNG SPA through 2029 with Tangguh PSC for the supply of the equivalent of 500 MMcf of natural gas per day at a price based on the SoCal Border index for natural gas. The LNG SPA allows Tangguh PSC to divert certain LNG volumes to other global markets in exchange for payments of diversion fees. Sempra Infrastructure may also enter into short-term supply agreements to purchase LNG to be received, stored and regasified at the ECA Regas Facility for sale to other parties. Sempra Infrastructure uses the natural gas produced from this LNG to supply a contract for the sale of natural gas to the CFE at prices that are based on the SoCal Border index. If LNG volumes received from Tangguh PSC are not sufficient to satisfy the commitment to the CFE, Sempra Infrastructure may purchase natural gas in the market to satisfy such commitment.

Sempra Infrastructure purchases, transports and sells natural gas, and has customers in both the U.S. and Mexico, including the CFE. Sempra Infrastructure may also purchase natural gas from other Sempra affiliates. Natural gas purchases and transportation arrangements are substantially backed by long-term, U.S. dollar-based contracts for the sale of natural gas to third parties (both U.S. sourced and derived from imported LNG), LNG offtake and natural gas storage and pipeline capacity.

ECA LNG Phase 1 has definitive 20-year SPAs with an affiliate of TotalEnergies SE for approximately 1.7 Mtpa of LNG and Mitsui & Co., Ltd. for approximately 0.8 Mtpa of LNG.

The construction of the ECA LNG Phase 1 project is subject to numerous risks and uncertainties. For a discussion of these risks and uncertainties, see “Part I – Item 1A. Risk Factors” and “Part II – Item 7. MD&A – Capital Resources and Liquidity – Sempra Infrastructure.”

Additional Potential LNG and Net-Zero Solutions’ Projects. Sempra Infrastructure is evaluating the following development opportunities:

▪Cameron LNG Phase 2 project, an expansion of the Cameron LNG Phase 1 facility

▪ECA LNG Phase 2 project, a large-scale natural gas liquefaction project to be located at the site of Sempra Infrastructure’s existing ECA Regas Facility in Baja California, Mexico

▪PA LNG projects, a large-scale natural gas liquefaction project, to be developed in two phases, and associated infrastructure on a greenfield site in the vicinity of Port Arthur, Texas located along the Sabine-Neches waterway

▪Vista Pacifico LNG project, a mid-scale natural gas liquefaction project and associated infrastructure in the vicinity of Topolobampo in Sinaloa, Mexico

▪Hackberry Carbon Sequestration project, a carbon capture and sequestration project that is intended to reduce emissions at the Cameron LNG Phase 1 facility and proposed Cameron LNG Phase 2 project

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No final investment decision has been reached for any of these potential projects. The development of these projects is subject to numerous risks and uncertainties. For a discussion of these proposed projects and their risks, see “Part I – Item 1A. Risk Factors” and “Part II – Item 7. MD&A – Capital Resources and Liquidity – Sempra Infrastructure.”

Demand and Competition. North America benefits from numerous competitive advantages as a potential supplier of LNG to world markets, including the following:

▪high levels of developed and undeveloped natural gas resources, including unconventional natural gas and tight oil relative to domestic consumption levels

▪flexible and elastic markets in gas and oil drilling and production resulting in efficient unit costs of gas production

▪availability of extensive pre-existing natural gas pipeline transmission systems and natural gas storage capacity with proximity to production locations

Brownfield liquefaction projects also benefit from the particular competitive advantage of the proximity of pre-existing infrastructure, such as LNG tankage and berths.

Global LNG competition may limit North American LNG exports, as international liquefaction projects attempt to match North American LNG production costs and customer contractual rights such as volume and destination flexibility. It is expected that North American LNG exports will increase competition for current and future global natural gas demand, and thereby facilitate additional growth of a global commodity market for natural gas and LNG.

Cameron LNG JV co-owners and customers compete globally to market and sell LNG to end users, including gas and electric utilities located in LNG-importing countries around the world. By providing liquefaction services, Cameron LNG JV and future LNG export development projects compete indirectly with liquefaction projects currently operating and those under development in the global LNG market. In addition to the U.S., these competitors are located in the Middle East, Southeast Asia, Africa, South America, Australia and Europe. The competitive environment shifted in favor of North American LNG development projects in 2022 in the wake of the war in Ukraine and the resulting focus by European markets on alternative supplies. This shift in demand underscores the attractiveness of long-term contracts from North American LNG projects.

The LNG regasification business is impacted by global LNG market prices. High LNG prices in markets outside the market in which Sempra Infrastructure’s ECA Regas Facility operates have resulted and could continue to result in lower-than-expected deliveries of LNG cargoes to the ECA Regas Facility, which could increase costs if Sempra Infrastructure is instead required to obtain LNG in the open market at prevailing prices. Any inability to obtain expected LNG cargoes could also impact Sempra Infrastructure’s ability to maintain the minimum level of LNG required to keep the ECA Regas Facility in operation at the proper temperature. Prices in international LNG markets through which Sempra Infrastructure must purchase natural gas to meet its contractual obligations to deliver natural gas to customers may also affect how Sempra Infrastructure optimizes its assets and supply, which could have an adverse impact on its earnings.

Energy Networks

Sempra Infrastructure’s Energy Networks business line is comprised of a natural gas transportation and distribution network.

Cross-Border Interconnections and In-Country Pipelines. Sempra Infrastructure develops, builds, operates and invests in systems for the receipt, transportation, compression and delivery of natural gas and ethane. At December 31, 2022, these systems consisted of 1,850 miles of natural gas transmission pipelines plus 124 miles under construction, 16 natural gas compression stations plus one under construction, and 139 miles of ethane pipelines in Mexico. The design capacity of these pipeline assets is over 16,400 MMcf per day of natural gas, 204 MMcf per day of ethane gas and 106,000 barrels per day of ethane liquid. Capacity on Sempra Infrastructure’s pipelines and related assets is substantially contracted under long-term, U.S. dollar-based agreements with major industry participants such as the CFE, Centro Nacional de Control de Gas, PEMEX, Gazprom and other similar counterparties. Some of these pipeline assets are affected by disputes related to the property on which the pipelines are located, which we discuss in Note 16 of the Notes to Consolidated Financial Statements and “Part I – Item 1A. Risk Factors.”

Sempra Infrastructure owns a 40-mile natural gas pipeline in south Louisiana, the Cameron Interstate Pipeline, which links the Cameron LNG Phase 1 facility in Cameron Parish in Louisiana, to five interstate pipelines that offer access to major feed gas supply basins in Texas and the northeast, midcontinent and southeast regions of the U.S. The majority of transportation capacity on the Cameron Interstate Pipeline is under long-term transportation service agreements with shippers for delivery to the Cameron LNG Phase 1 facility.

Natural Gas Distribution. Sempra Infrastructure’s natural gas distribution regulated utility, Ecogas, operates in three separate distribution zones in Mexicali, Chihuahua and La Laguna-Durango, Mexico. At December 31, 2022, Ecogas had approximately 2,952 miles of distribution pipeline, and approximately 150,000 customer meters serving more than 525,000 residential,

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commercial and industrial consumers with sales volume of approximately 10 MMcf per day in 2022. Ecogas relies on supply and transportation services from Sempra Infrastructure, SoCalGas and PEMEX for the natural gas it distributes to its customers.

LPG Storage and Associated Systems. Sempra Infrastructure owns and operates the TDF, S. de R. L. de C. V. (TDF) pipeline system and the Guadalajara LPG terminal. At December 31, 2022, the TDF pipeline system consisted of approximately 118 miles of 12-inch diameter LPG pipeline with a design capacity of 34,000 barrels per day and associated storage and dispatch facilities. The TDF pipeline system runs from PEMEX’s Burgos facility in the Mexican State of Tamaulipas, Mexico to Sempra Infrastructure’s delivery facility near the city of Monterrey, Mexico and is fully contracted to PEMEX on a firm basis through 2027. Sempra Infrastructure’s Guadalajara LPG terminal is an 80,000-barrel LPG storage facility near Guadalajara, Mexico, with associated loading and dispatch facilities, and serves the LPG needs of Guadalajara. The Guadalajara LPG terminal is fully contracted to PEMEX on a firm basis through 2028. Both contracts are U.S. dollar-denominated or referenced and are periodically adjusted for inflation.

Refined Products Storage. Sempra Infrastructure’s refined products storage business develops, constructs and operates systems for the receipt, storage and delivery of refined products, principally gasoline, diesel and jet fuel, throughout the Mexican states of Baja California, Colima, Puebla, Sinaloa, Veracruz and Valle de México for private companies, with a combined storage capacity of 4.6 million barrels fully operating or under construction/commissioning as of December 31, 2022. The inland terminal in the vicinity of Puebla reached commercial operations in October 2022. Construction of the Topolobampo marine terminal was substantially completed in May 2022, at which time commissioning activities commenced. Subject to the receipt of pending permits, we expect the Topolobampo terminal will commence commercial operations in the first half of 2023. Our customer contracts for our refined products storage business are structured as long-term, U.S. dollar-denominated, firm capacity storage agreements with counterparties including Chevron Corporation, Marathon Petroleum Corporation and Valero Energy Corporation. The contracted rate under these contracts is independent from each terminal’s regulated rate as determined by the CRE.

Demand and Competition. Ecogas faces competition from other distributors of natural gas in each of its three distribution zones in Mexicali, Chihuahua and La Laguna-Durango, Mexico as other distributors of natural gas build or consider building natural gas distribution systems. Sempra Infrastructure’s pipeline and storage facilities businesses compete with other regulated and unregulated pipeline and storage facilities. They compete primarily on the basis of price (in terms of storage and transportation fees), available capacity and interconnections to downstream markets. The overall demand for natural gas distribution services increases during the winter months, while the overall demand for power increases during the summer months.

Clean Power

Sempra Infrastructure’s Clean Power business line consists of a renewable energy infrastructure portfolio and a natural gas-fired power plant in Mexico.

Renewable Power Generation. Sempra Infrastructure develops, builds, invests in and operates renewable energy generation facilities that have long-term PPAs to sell the electricity they generate to their customers, which are generally load serving entities, as well as industrial and other customers. Load serving entities sell electric service to their end-users and wholesale customers upon receipt of power delivery from these energy generation facilities, while industrial and other customers consume the electricity to run their facilities. At December 31, 2022, Sempra Infrastructure had a fully contracted, total nameplate capacity of 1,044 MW related to its fully operating wind and solar power generation facilities. Some of these facilities are impacted by regulatory actions by the Mexican government and related litigation, which we discuss in Note 16 of the Notes to Consolidated Financial Statements, “Part I – Item 1A. Risk Factors” and “Part II – Item 7. MD&A – Capital Resources and Liquidity – Sempra Infrastructure.”

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SEMPRA INFRASTRUCTURE – RENEWABLE POWER GENERATION

	Location	Contract expiration date	Nameplate capacity (MW)
Wind power generation facilities:
ESJ – first phase	Tecate, Baja California	2035	155
ESJ – second phase(1)	Tecate, Baja California	2042	108
Ventika	Nuevo León, Mexico	2036	252
Solar power generation facilities:
Border Solar	Ciudad Juarez, Chihuahua	2032 and 2037	150
Don Diego Solar	Benjamin Hill, Sonora	2034 and 2037	125
Pima Solar	Caborca, Sonora	2038	110
Rumorosa Solar	Tecate, Baja California	2034	44
Tepezalá Solar	Aguascalientes	2034	100
Total			1,044

(1) Commenced commercial operations in January 2022.

Natural Gas-Fired Generation. Sempra Infrastructure owns and operates the TdM power plant in the vicinity of Mexicali, Baja California, adjacent to the Mexico-U.S. border. TdM is a 625-MW natural gas-fired, combined-cycle power plant that is connected to our Gasoducto Rosarito pipeline system, which enables it to receive regasified LNG from the ECA Regas Facility as well as continental gas supplied from the U.S. on the North Baja pipeline. TdM generates revenue from selling electricity and resource adequacy to the California ISO and to governmental, public utility and wholesale power marketing entities.

Demand and Competition. Sempra Infrastructure competes with Mexican and foreign companies for new energy infrastructure projects in Mexico. Some of its competitors (including public or state-operated companies and their affiliates) may have better access to capital and greater financial and other resources, which could give them a competitive advantage for such projects.

Generation from Sempra Infrastructure’s renewable energy assets is susceptible to fluctuations in naturally occurring conditions such as wind, inclement weather and hours of sunlight. Because Sempra Infrastructure sells power that it generates at its ESJ wind power generation facility into California, Sempra Infrastructure’s future performance and the demand for renewable energy may be impacted by U.S. state mandated requirements to deliver a portion of total energy load from renewable energy sources. The rules governing these requirements in California are generally known as the RPS Program. In California, certification of a generation project by the CEC as an ERR allows the purchase of output from such generation facility to be counted towards fulfillment of the RPS Program requirements, if such purchase meets the provisions of SB X1-2, the California Renewable Energy Resources Act. The RPS Program may affect the demand for output from renewable energy projects developed by Sempra Infrastructure, particularly the demand from California’s utilities. The first phase of ESJ, a wind power generation facility that delivers energy into California, has been certified by the CEC and is in compliance with the RPS Program as of December 31, 2022. Sempra Infrastructure is pursuing ERR certification for the second phase of ESJ.

TdM competes daily with other generating plants that supply power into the California electricity market. Sempra Infrastructure manages commodity price risk at TdM by using a mix of day ahead sales of energy, energy spreads hedging, ancillary services, and short-term to medium-term capacity sales.

Discontinued Operations

We completed the sales of our equity interests in our Peruvian businesses in April 2020 and our Chilean businesses in June 2020. These South American businesses included our former 100% interest in Chilquinta Energía (an electric distribution utility in Chile), our former 83.6% interest in Luz del Sur (an electric distribution utility in Peru) and our former interests in two energy-services companies, Tecnored and Tecsur, which provide electric construction and infrastructure services to Chilquinta Energía and Luz del Sur, respectively, as well as third parties. These businesses and certain activities associated with these businesses are presented as discontinued operations in this report. We provide further information about discontinued operations in Note 5 of the Notes to Consolidated Financial Statements.

REGULATION

We discuss the material effects of compliance with all government regulations, including environmental regulations, on our capital expenditures, earnings and competitive position in “Part II – Item 7. MD&A” and Note 16 of the Notes to Consolidated Financial Statements.

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Utility Regulation

California

SDG&E and SoCalGas are principally regulated at the state level by the CPUC, CEC and CARB.

The CPUC:

▪consists of five commissioners appointed by the Governor of California for staggered, six-year terms;

▪regulates, among other things, SDG&E’s and SoCalGas’ customer rates and conditions of service, sales of securities, rates of return, capital structure, rates of depreciation, and long-term resource procurement, except as described below in “U.S. Federal;”

▪has jurisdiction over the proposed construction of major new electric generation, transmission and distribution, and natural gas storage, transmission and distribution facilities in California;

▪conducts reviews and audits of utility performance and compliance with regulatory guidelines and conducts investigations related to various matters, such as safety, reliability and planning, deregulation, competition and the environment; and

▪regulates the interactions and transactions of SDG&E and SoCalGas with Sempra and its other affiliates.

The CPUC also oversees and regulates other energy-related products and services, including solar and wind energy, bioenergy, alternative energy storage and other forms of renewable energy. In addition, the CPUC’s safety and enforcement role includes inspections, investigations and penalty and citation processes for safety and other violations.

The CEC publishes electric demand forecasts for the state and specific service territories. Based on these forecasts, the CEC:

▪determines the need for additional energy sources and conservation programs;

▪sponsors alternative-energy research and development projects;

▪promotes energy conservation programs to reduce demand for natural gas and electricity within California;

▪maintains a statewide plan of action in case of energy shortages; and

▪certifies power-plant sites and related facilities within California.

The CEC conducts a 20-year forecast of available supplies and prices for every market sector that consumes natural gas in California. This forecast includes resource evaluation, pipeline capacity needs, natural gas demand and wellhead prices, and transportation and distribution costs. This analysis is one of many resource materials used to support SDG&E’s and SoCalGas’ long-term investment decisions.

California requires certain electric retail sellers, including SDG&E, to deliver a significant percentage of their retail energy sales from renewable energy sources. The rules governing this requirement, administered by the CPUC and the CEC, are generally known as the RPS Program. California has implemented a program whereby IOUs providing gas service in California will procure a portion of the natural gas they deliver from biomethane. The proportion of biomethane procured will be phased-in with a state-wide, short-term target in 2025 of 17.6 Bcf per year and a medium-term target in 2030 of 72.8 Bcf per year. SDG&E and SoCalGas are allocated 6.77% and 49.26%, respectively, of the 2025 target, and 7.60% and 52.02%, respectively, of the 2030 target. The rules governing this program are administered by the CPUC under SB 1440.

AB 32, the California Global Warming Solutions Act of 2006, assigns responsibility to CARB for monitoring and establishing policies for reducing GHG emissions. The law requires CARB to develop and adopt a comprehensive plan for achieving real, quantifiable and cost-effective GHG emissions reductions, including a statewide GHG emissions cap, mandatory reporting rules, and regulatory and market mechanisms to achieve reductions of GHG emissions. CARB is a department within the California Environmental Protection Agency, an organization that reports directly to the Governor’s Office. Sempra Infrastructure is also subject to the rules and regulations of CARB.

The California Geologic Energy Management Division, the CPUC, and various other state and local agencies regulate the operation and maintenance of SoCalGas’ natural gas storage facilities.

Texas

Oncor’s and Sharyland Utilities’ rates are regulated at the state level by the PUCT and, in the case of Oncor, at the city level by certain cities. The PUCT has original jurisdiction over wholesale transmission rates and services and retail rates and services in unincorporated areas and in those municipalities that have ceded original jurisdiction to the PUCT, and has exclusive appellate jurisdiction to review the retail rate and service orders and ordinances of municipalities. Generally, the Texas PURA prohibits the collection of any rates or charges by a public utility (as defined by PURA) that do not have the prior approval of the appropriate regulatory authority (i.e., the PUCT or the municipality with original jurisdiction).

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At the state level, PURA requires utility owners or operators of electric transmission facilities to provide open-access wholesale transmission services to third parties at rates and terms that are nondiscriminatory and comparable to the rates and terms of the utility’s own use of its system. The PUCT has adopted rules implementing the state open-access requirements for all utilities that are subject to the PUCT’s jurisdiction over electric transmission services, including Oncor.

U.S. Federal

SDG&E and SoCalGas are also regulated at the federal level by the FERC, the EPA, the DOE and the DOT, and for SDG&E the NRC.

The FERC regulates SDG&E’s and SoCalGas’ interstate sale and transportation of natural gas. The FERC also regulates SDG&E’s transmission and wholesale sales of electricity in interstate commerce, transmission access, rates of return on transmission investment, rates of depreciation, electric rates involving sales for resale and the application of the uniform system of accounts. The U.S. Energy Policy Act governs procedures for requests for electric transmission service. The California IOUs’ electric transmission facilities are under the operational control of the California ISO. As member utilities, Oncor and Sharyland Utilities operate within the ERCOT market, which we discuss below. To a small degree related to limited interconnections to other markets, Oncor’s electric transmission revenues are provided under tariffs approved by the FERC.

The NRC oversees the licensing, construction, operation and decommissioning of nuclear facilities in the U.S., including SONGS, in which SDG&E owns a 20% interest and which was permanently retired in 2013. The NRC and various state regulations require extensive review of these facilities’ safety, radiological and environmental aspects. We provide further discussion of SONGS matters, including the closure and decommissioning of the facility, in Note 15 of the Notes to Consolidated Financial Statements.

The EPA implements federal laws to protect human health and the environment, including federal laws on air quality, water quality, wastewater discharge, solid waste management, and hazardous waste disposal and remediation. The EPA also sets national environmental standards that state and tribal governments implement through their regulations. As a result, SDG&E, SoCalGas, Oncor and Sharyland Utilities are subject to an interrelated framework of environmental laws and regulations.

The DOT, through PHMSA, has established regulations regarding engineering standards and operating procedures, including procedures intended to manage cybersecurity risks, applicable to SDG&E’s and SoCalGas’ natural gas transmission and distribution pipelines, as well as natural gas storage facilities. The DOT has certified the CPUC to administer oversight and compliance with these regulations for the entities they regulate in California.

ERCOT Market

As member utilities, Oncor and Sharyland Utilities operate within the ERCOT market, which represents approximately 90% of the electricity consumption in Texas. ERCOT is the regional reliability coordinating organization for member electricity systems in Texas and the ISO of the interconnected transmission grid for those systems. ERCOT is subject to oversight by the PUCT and the Texas Legislature. ERCOT is responsible for ensuring reliability, adequacy and security of the electric systems, as well as nondiscriminatory access to transmission service by all wholesale market participants, in the ERCOT region. ERCOT’s membership consists of corporate and associate members, including electric cooperatives, municipal power agencies, independent generators, independent power marketers, transmission service providers, distribution service providers, independent retail electric providers and consumers.

The PUCT has primary jurisdiction over the ERCOT market to ensure the adequacy and reliability of power supply across Texas’ main interconnected electric transmission grid. Oncor and Sharyland Utilities, along with other owners of electric transmission and distribution facilities in Texas, participate with the ERCOT ISO and other member utilities in its operations. Each of these Texas utilities has planning, design, construction, operation, maintenance and security responsibility for the portion of the transmission grid and the load-serving substations it owns, primarily within its certificated distribution service area. Each participates with the ERCOT ISO and other ERCOT utilities in obtaining regulatory approvals and planning, designing, constructing and upgrading transmission lines in order to remove any existing constraints and interconnect energy generation on the ERCOT transmission grid. These transmission line projects are necessary to meet reliability needs, support energy production and increase bulk power transfer capability.

Oncor and Sharyland Utilities are subject to reliability standards adopted and enforced by the Texas Reliability Entity, Inc., an independent organization that develops reliability standards for the ERCOT region and monitors and enforces compliance with the standards of the North American Electric Reliability Corporation, including critical infrastructure protection, and ERCOT protocols.

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Other U.S. State and Local Territories Regulation

The South Coast Air Quality Management District is the air pollution control agency responsible for regulating stationary sources of air pollution in the South Coast Air Basin in Southern California. The district’s territory covers all of Orange County and the urban portions of Los Angeles, San Bernardino and Riverside counties.

SDG&E has electric franchise agreements with the two counties and the 27 cities in its electric service territory, and natural gas franchise agreements with the one county and the 18 cities in its natural gas service territory. These franchise agreements allow SDG&E to locate, operate and maintain facilities for the transmission and distribution of electricity or natural gas. Most of the franchise agreements have no expiration dates, while some have expiration dates that range from 2028 to 2041. In June 2021, the City of San Diego approved ordinances granting SDG&E the electric and natural gas franchises for the City of San Diego. These franchise agreements provide SDG&E the opportunity to serve the City of San Diego for the next 20 years, consisting of 10-year agreements that will automatically renew for an additional 10 years unless the City Council voids the automatic renewal with a supermajority vote. These franchise agreements went into effect in July 2021.

SoCalGas has natural gas franchise agreements with the 12 counties and the 232 cities in its service territory. These franchise agreements allow SoCalGas to locate, operate and maintain facilities for the transmission and distribution of natural gas. Most of the franchise agreements have no expiration dates, while some have expiration dates that range from 2023 to 2069, including the Los Angeles County franchise, which is scheduled to expire in June 2023.

Other U.S. Regulation

The FERC regulates certain Sempra Infrastructure assets pursuant to the U.S. Federal Power Act and Natural Gas Act, which provide for FERC jurisdiction over, among other things, sales of wholesale power in interstate commerce, transportation of natural gas in interstate commerce, and siting and permitting of LNG facilities.

The FERC may regulate rates and terms of service based on a cost-of-service approach or, in geographic and product markets determined by the FERC to be sufficiently competitive, rates may be market-based. FERC-regulated rates at Sempra Infrastructure are market-based for wholesale electricity sales, cost-based for the transportation of natural gas, and market-based for the purchase and sale of LNG and natural gas.

Sempra Infrastructure’s investment in Cameron LNG JV is subject to regulations of the DOE regarding the export of LNG. Sempra Infrastructure’s other potential natural gas liquefaction projects would, if completed, be subject to similar regulations.

SDG&E, SoCalGas and businesses in which Sempra Infrastructure invests are subject to the DOT rules and regulations regarding pipeline safety. PHMSA, acting through the Office of Pipeline Safety, is responsible for administering the DOT’s national regulatory program to help ensure the safe transportation of natural gas, petroleum and other hazardous materials by pipelines, including pipelines associated with natural gas storage, and develops regulations and other approaches to risk management to help ensure safety in design, construction, testing, operation, maintenance and emergency response of pipeline facilities. SDG&E, SoCalGas and Sempra Infrastructure are also subject to regulation by the U.S. Commodity Futures Trading Commission.

Foreign Regulation

Operations and projects in our Sempra Infrastructure segment are subject to regulation by the CRE, ASEA, SENER, the Mexican Ministry of Environment and Natural Resources of Mexico (Secretaría del Medio Ambiente y Recursos Naturales), and other labor and environmental agencies of city, state and federal governments in Mexico. New energy infrastructure projects may also require a favorable opinion from Comisión Federal de Competencia Económica (Mexico’s Competition Commission) in order to be constructed and operated.

Licenses and Permits

Our utilities in California and Texas obtain numerous permits, authorizations and licenses for, as applicable, the transmission and distribution of natural gas and electricity and the operation and construction of related assets, including electric generation and natural gas storage facilities, some of which may require periodic renewal.

Sempra Infrastructure obtains numerous permits, authorizations and licenses for its electric and natural gas distribution, generation and transmission systems from the local governments where these services are provided. The permits for generation, transportation, storage and distribution operations at Sempra Infrastructure are generally for 30-year terms, with options for renewal under certain regulatory conditions.

Sempra Infrastructure obtains licenses and permits for the construction, operation and expansion of LNG facilities and for the import and export of LNG and natural gas. Sempra Infrastructure also obtains licenses and permits for the construction and operation of facilities for the receipt, storage and delivery of refined products.

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Sempra Infrastructure obtains permits, authorizations and licenses for the construction and operation of natural gas storage facilities and pipelines, and in connection with participation in the wholesale electricity market.

Most of the permits and licenses associated with Sempra Infrastructure’s construction and operations are for periods generally in alignment with the construction cycle or expected useful life of the asset and in many cases are greater than 20 years.

RATEMAKING MECHANISMS

Sempra California

General Rate Case Proceedings

A CPUC GRC proceeding is designed to set sufficient base rates to allow SDG&E and SoCalGas to recover their reasonable forecasted operating costs and to provide the opportunity to realize their authorized rates of return on their investments. The proceeding generally establishes the test year revenue requirements, which authorizes how much SDG&E and SoCalGas can collect from their customers, and provides for attrition, or annual increases in revenue requirements, for each year following the test year.

We discuss the GRC in Note 4 of the Notes to Consolidated Financial Statements.

Cost of Capital Proceedings

A CPUC cost of capital proceeding every three years determines a utility’s authorized capital structure and authorized return on rate base, which is a weighted-average of the authorized returns on debt, preferred equity and common equity (referred to as return on equity or ROE), weighted on a basis consistent with the authorized capital structure. The authorized return on rate base approved by the CPUC is the rate that SDG&E and SoCalGas use to establish customer rates to finance investments in CPUC-regulated electric distribution and generation, natural gas distribution, transmission and storage assets, as well as general plant and information technology systems investments to support operations.

A cost of capital proceeding also addresses the CCM, which applies in the interim years between required cost of capital applications and considers changes in the cost of capital based on changes in interest rates based on the applicable utility bond index published by Moody’s (the CCM benchmark rate) for each 12-month period ending September 30 (the measurement period). The index applicable to SDG&E and SoCalGas is based on each utility’s credit rating. The CCM benchmark rate is the basis of comparison to determine if the CCM is triggered in each measurement period, which occurs if the change in the applicable Moody’s utility bond index relative to the CCM benchmark rate is larger than plus or minus 1.000% at the end of the measurement period. The CCM, if triggered, would automatically update the authorized cost of debt based on actual costs and update the authorized ROE upward or downward by one-half of the difference between the CCM benchmark rate and the applicable Moody’s utility bond index. Alternatively, each of SDG&E and SoCalGas are permitted to file a cost of capital application in an interim year in which an extraordinary or catastrophic event materially impacts its cost of capital and affects utilities differently than the market as a whole to have its cost of capital determined in lieu of the CCM.

We discuss the cost of capital and CCM in Note 4 of the Notes to Consolidated Financial Statements and in “Part I – Item 1A. Risk Factors.”

Transmission Rate Cases

SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets. The proceeding establishes a ROE and a formulaic rate whereby rates are determined using (i) a base period of historical costs and a forecast of capital investments, and (ii) a true-up period, similar to balancing account treatment, that is designed to provide earnings equal to SDG&E’s actual cost of service including its authorized return on investment. SDG&E makes annual information filings with the FERC in December to update rates for the following calendar year. SDG&E may also file for ROE incentives that might apply under FERC rules. SDG&E’s debt-to-equity ratio is set annually based on the actual ratio at the end of each year.

Incentive Mechanisms

The CPUC applies certain performance-based measures and incentive mechanisms to all California IOUs, under which SDG&E and SoCalGas have earnings potential above the authorized CPUC base operating margin if they achieve or exceed specific performance and operating goals. Generally, for performance-based measures, if performance is above or below specific benchmarks, the utility is eligible for financial awards or subject to financial penalties.

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Other Cost-Based Recovery

The CPUC, and the FERC as it relates to SDG&E, authorize SDG&E and SoCalGas to collect revenue requirements from customers for operating and capital-related costs (depreciation, taxes and return on rate base), including:

▪costs to purchase natural gas and electricity;

▪costs associated with administering public purpose, demand response, and customer energy efficiency programs;

▪other programmatic activities, such as gas distribution, gas transmission, gas storage integrity management and wildfire mitigation; and

▪costs associated with third-party liability insurance premiums.

Authorized costs are recovered as the commodity or service is delivered. To the extent authorized amounts collected vary from actual costs, the differences are generally recovered or refunded in a subsequent period based on the nature of the balancing account mechanism. Generally, the revenue recognition criteria for balanced costs billed to customers are met when the costs are incurred. Because these costs are substantially recovered in rates through a balancing account mechanism, changes in these costs are reflected as changes in revenues. The CPUC and the FERC may impose various review procedures before authorizing recovery or refund of amounts accumulated for authorized programs, including limitations on the program’s total cost, revenue requirement limits or reviews of costs for reasonableness. These procedures could result in delays or disallowances of recovery from ratepayers.

Sempra Texas Utilities

Rates and Cost Recovery

Oncor’s and Sharyland Utilities’ rates are each regulated at the state level by the PUCT and, in the case of Oncor, at the city level by certain cities, and are subject to regulatory rate-setting processes and earnings oversight. This regulatory treatment does not provide assurance as to achievement of earnings levels or recovery of actual costs. Instead, their rates are based on an analysis of each utility’s costs and capital structure in a designated test year, as reviewed and approved in regulatory proceedings. Rate regulation is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. However, there is no assurance that the PUCT will judge all of the Texas utilities’ costs to have been prudently incurred and therefore fully recoverable. The approved levels of recovery could be significantly less than requested levels. There can also be no assurance that the PUCT will approve other items proposed in any rate proceeding or that the regulatory process in which rates are determined will necessarily result in rates that produce full recovery of the Texas utilities’ actual post-test year costs and/or the return on invested capital allowed by the PUCT.

PUCT rules allow Texas electric utilities providing wholesale or retail distribution service to file applications, under certain circumstances, once per year to recover distribution-related investments placed into service between base rate review proceedings. PUCT rules also allow the Texas utilities to update their transmission rates twice a year between base rate review proceedings to reflect changes in transmission-related invested capital. These applications for interim rate adjustments between base rate reviews, known as “capital tracker” provisions, are intended to encourage investment in the electric system to help ensure reliability and efficiency by helping to shorten the time period between a utility’s investment in transmission and distribution infrastructure and its ability to start recovering and earning a return on such investments. However, all investments included in a capital tracker are ultimately subject to prudence review by the PUCT in the next base rate review, after such assets are put into service.

Capital Structure and Return on Equity

Oncor currently has a PUCT-authorized ROE of 9.8% and an authorized regulatory capital structure of 57.5% debt to 42.5% equity. Oncor filed its base rate review request with the PUCT in May 2022. Resolution of the base rate review requires issuance of a final order by the PUCT, which Oncor expects to receive around the end of the first quarter of 2023. Once the final order is issued, the approved rates will be in effect until the next base rate review is finalized. In accordance with PUCT rules, Oncor must file a comprehensive base rate review within four years of the order setting rates in Oncor’s most recent comprehensive base rate proceeding, unless an extension is otherwise approved by the PUCT. However, the PUCT or any city retaining original jurisdiction over rates may direct Oncor to file a base rate review, or Oncor may voluntarily file a base rate review, any time prior to that filing deadline.

Sharyland Utilities’ 2020 rate case became effective in July 2021 and remains effective until the next rate case is finalized, which we expect could be in late 2025. Sharyland Utilities’ PUCT-authorized ROE is 9.38% and its authorized regulatory capital structure is 60% debt to 40% equity.

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Sempra Infrastructure

Ecogas’ revenues are derived from service and distribution fees charged to its customers in Mexican pesos. The price Ecogas pays to purchase natural gas, which is based on international price indices, is passed through directly to its customers. The service and distribution fees charged by Ecogas are regulated by the CRE, which performs a review of rates every five years and monitors prices charged to end-users. In the fourth quarter of 2020, Ecogas filed its rate case for 2021 through 2025 and is awaiting CRE approval. The tariffs operate under a return-on-asset-base model. In the annual tariff adjustment, rates are adjusted to account for inflation or fluctuations in exchange rates, and inflation indexing includes separate U.S. and Mexican cost components so that U.S. costs can be included in the final distribution rates.

ENVIRONMENTAL MATTERS

We discuss environmental issues affecting us in Note 16 of the Notes to Consolidated Financial Statements and “Part I – Item 1A. Risk Factors.” You should read the following additional information in conjunction with those discussions.

Hazardous Substances

The CPUC’s Hazardous Waste Collaborative mechanism allows California’s IOUs to recover hazardous waste cleanup costs for certain sites, including those related to certain Superfund sites. For sites that are covered by this mechanism, SDG&E and SoCalGas are permitted to recover in rates 90% of hazardous waste cleanup costs and related third-party litigation costs, and 70% of related insurance-litigation expenses. In addition, SDG&E and SoCalGas can retain a percentage of any recoveries from insurance carriers and other third parties to offset the cleanup and associated litigation costs not recovered in rates.

We record estimated liabilities for environmental remediation when amounts are probable and estimable. In addition, we record amounts authorized to be recovered in rates under the Hazardous Waste Collaborative mechanism as regulatory assets.

Air and Water Quality

The natural gas and electric industries are subject to increasingly stringent air quality and GHG emissions standards, such as those established by CARB and the South Coast Air Quality Management District. SDG&E and SoCalGas generally recover the costs to comply with these standards in rates. We discuss GHG emissions standards and credits further in Note 1 of the Notes to Consolidated Financial Statements.

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OTHER MATTERS

Information About Our Executive Officers


INFORMATION ABOUT EXECUTIVE OFFICERS AT SEMPRA

Name	Age(1)	Positions held over last five years	Time in position
Jeffrey W. Martin	61	Chairman	December 2018 to present
		Chief Executive Officer	May 2018 to present
		President	March 2020 to present
		Executive Vice President and Chief Financial Officer	January 2017 to May 2018

Kevin C. Sagara	61	Executive Vice President and Group President	June 2020 to present
		Chief Executive Officer, SDG&E	September 2018 to June 2020
		President, Sempra Renewables	October 2013 to September 2018

Trevor I. Mihalik	56	Executive Vice President and Chief Financial Officer	May 2018 to present
		Senior Vice President	December 2013 to April 2018
		Controller and Chief Accounting Officer	July 2012 to April 2018

Peter R. Wall	51	Senior Vice President	April 2020 to present
		Controller and Chief Accounting Officer	May 2018 to present
		Vice President	May 2018 to April 2020
		Vice President and Chief Financial Officer, Sempra Infrastructure	January 2017 to April 2018

Karen L. Sedgwick	56	Chief Administrative Officer and Chief Human Resources Officer	December 2021 to present
		Senior Vice President and Chief Human Resources Officer	September 2020 to December 2021
		Chief Human Resources Officer and Chief Administrative Officer, SDG&E	April 2019 to September 2020
		Vice President and Treasurer	August 2018 to April 2019
		Vice President, Audit Services	January 2014 to August 2018

(1) Ages are as of February 28, 2023.

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INFORMATION ABOUT EXECUTIVE OFFICERS AT SDG&E

Name	Age(1)	Positions held over last five years	Time in position
Caroline A. Winn	59	Chief Executive Officer	August 2020 to present
		Chief Operating Officer	January 2017 to July 2020

Bruce A. Folkmann	55	President	August 2020 to present
		Chief Financial Officer	March 2015 to present
		Senior Vice President	August 2019 to July 2020
		Controller, Chief Accounting Officer and Treasurer	March 2015 to August 2020
		Vice President	March 2015 to August 2019
		Vice President, Controller, Chief Financial Officer, Chief Accounting Officer and Treasurer, SoCalGas	March 2015 to June 2019

Kevin Geraghty	57	Chief Operating Officer and Chief Safety Officer	June 2022 - Present
		Chief Safety Officer	January 2021 - June 2022
		Senior Vice President - Electric Operations	July 2020 - June 2022
		Chief Operating Officer and Senior Vice President, Operations, Nevada Energy, an electric and natural gas public utility in Nevada	October 2017 - May 2020

Valerie A. Bille	44	Vice President, Controller, Chief Accounting Officer and Treasurer	August 2020 to present
		Assistant Controller, Sempra	June 2019 to August 2020
		Assistant Controller	June 2018 to June 2019
		Director, Utility Financial Reporting	June 2017 to June 2018

Erbin B. Keith	62	Senior Vice President, General Counsel, Chief Risk Officer	October 2022 to present
		Deputy General Counsel, Sempra	March 2019 to October 2022
		Chief Regulatory Officer and Special Counsel, Sempra	September 2017 to March 2019

(1) Ages are as of February 28, 2023.


INFORMATION ABOUT EXECUTIVE OFFICERS AT SOCALGAS

Name	Age(1)	Positions held over last five years	Time in position
Scott D. Drury	57	Chief Executive Officer	August 2020 to present
		President, SDG&E	January 2017 to July 2020

Maryam S. Brown	47	President	March 2019 to present
		Vice President of Federal Government Affairs, Sempra	September 2016 to March 2019

Jimmie I. Cho	58	Chief Operating Officer	January 2019 to present
		Senior Vice President of Customer Services and Gas Distribution Operations	April 2018 to January 2019
		Senior Vice President of Gas Distribution Operations, SDG&E	April 2018 to January 2019
		Senior Vice President of Gas Engineering and Distribution Operations, SoCalGas and SDG&E	October 2017 to April 2018

Mia L. DeMontigny	50	Senior Vice President	July 2022 to present
		Chief Financial Officer, Chief Accounting Officer and Treasurer	June 2019 to present
		Controller	June 2019 to July 2022
		Vice President	June 2019 to August 2021
		Assistant Controller, Sempra	August 2015 to June 2019

David J. Barrett	58	Senior Vice President	July 2022 to present
		General Counsel	January 2019 to present
		Vice President	January 2019 to July 2022
		Associate General Counsel of Gas Infrastructure, Sempra	June 2018 to January 2019
		Assistant General Counsel of Gas Infrastructure, Sempra	February 2017 to June 2018

(1) Ages are as of February 28, 2023.

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Human Capital

Our ability to advance our mission to be North America’s premier energy infrastructure company largely depends on the safety, engagement, and responsible actions of our employees.

Safety is foundational at Sempra and its subsidiaries. We strive to foster a strong safety culture and reinforce this culture through training programs, benchmarking, review and analysis of safety trends, and sharing lessons learned from safety incidents across our businesses. Our businesses also engage in safety-related scenario planning and simulation, develop and implement operational contingency plans, and review safety plans and procedures with work crews regularly. We also participate in emergency planning and preparedness in the communities we serve and train critical employees in emergency management and response each year. The Safety, Sustainability and Technology committee of the Sempra board of directors assists the board in overseeing the corporation’s oversight programs and performance related to safety, and our executives’ annual incentive compensation is based in part on safety metrics established by the Compensation and Talent Development Committee of the Sempra board of directors.

Our overall culture is another important aspect of our ability to advance our mission. We embrace diversity in our workforce and strive to create a high-performing, inclusive and supportive workplace where employees of all backgrounds and experiences feel valued and respected. We invest in recruiting, developing and retaining high-potential employees who represent the communities we serve, and we provide a range of programs to advance those objectives, including internal and external mentoring and leadership training and workshops, employee resource groups, and a benefits package including wellness benefits and a tuition reimbursement program. We also invest in internal communications programs, including in-person and virtual learning and networking opportunities as well as regular executive communications to employees on topics of interest. In addition, we offer a variety of employee community service opportunities and, at our U.S. operations, we support employees’ personal volunteering and charitable giving through Sempra’s charitable matching program. Employees participate in annual ethics and compliance training, which includes a review of Sempra’s Code of Business Conduct as well as information about resources such as Sempra’s ethics and compliance helpline. We measure culture and employee engagement through a variety of channels including pulse surveys, suggestion boxes and a biannual engagement survey administered by a third party.

The table below shows the number of employees for each of our registrants at December 31, 2022, as well as the percentage of those employees represented by labor unions under various collective bargaining agreements that generally cover wages, benefits, working conditions and other terms and conditions of employment. We did not experience any major work stoppages in 2022 and we maintain constructive relations with our labor unions.


NUMBER OF EMPLOYEES

	Number of employees	% of employees covered under collective bargaining agreements		% of employees covered under collective bargaining agreements expiring within one year
Sempra(1)	15,785	37	%	—	%
SDG&E	4,633	30	%	—	%
SoCalGas	8,460	53	%	—	%

(1) Excludes employees of equity method investees.

COMPANY WEBSITES

Company website addresses are:

▪Sempra – www.sempra.com

▪SDG&E – www.sdge.com

▪SoCalGas – www.socalgas.com

We make available free of charge on the Sempra website, and for SDG&E and SoCalGas, via a hyperlink on their websites, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

The references to our websites in this report are not active hyperlinks and the information contained on, or that can be accessed through, the websites of Sempra, SDG&E and SoCalGas or any other website referenced herein is not a part of or incorporated by reference in this report or any other document that we file with or furnish to the SEC.

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ITEM 1A. RISK FACTORS

When evaluating our company and its subsidiaries and any investment in our or their securities, you should carefully consider the following risk factors and all other information contained in this report and the other documents we file with the SEC (including those filed subsequent to this report). We also may be materially harmed by risks and uncertainties not currently known to us or that we currently consider immaterial. If any of these risks occurs, our results of operations, financial condition, cash flows and/or prospects could be materially adversely affected, our actual results could differ materially from those expressed in any forward-looking statements made by us or on our behalf, and the trading price of our securities and those of our subsidiaries could decline. These risk factors are not prioritized in order of importance or materiality, and they should be read in conjunction with the other information in this report, including the information set forth in the Consolidated Financial Statements and in “Part II – Item 7. MD&A.”

RISKS RELATED TO SEMPRA

Operational and Structural Risks

Sempra’s cash flows, ability to pay dividends and ability to meet its debt obligations largely depend on the performance of its subsidiaries and entities accounted for as equity method investments.

We are a holding company and substantially all our assets are owned by our subsidiaries or entities we do not control, including equity method investments. Our ability to pay dividends and meet our debt and other obligations largely depends on cash flows from our subsidiaries and equity method investments, which in turn depend on their ability to execute their business strategies and generate cash flows in excess of their own expenditures, dividend payments to third-party owners (if any) and debt and other obligations. In addition, entities accounted for as equity method investments, which we do not control, and our subsidiaries are all separate and distinct legal entities that are not obligated to pay dividends or make loans or distributions to us and could be precluded from doing so by legislation, regulation, court order or contractual restrictions, in times of financial distress or in other circumstances. The inability to access capital from our subsidiaries and entities accounted for as equity method investments could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Sempra’s rights to the assets of its subsidiaries and equity method investments are structurally subordinated to the claims of each entity’s trade and other creditors. If Sempra is a creditor of any such entity, its rights as a creditor would be effectively subordinated to any security interest in the entity’s assets and any indebtedness of the entity senior to that held by Sempra. In addition, Sempra may elect to make capital contributions to its subsidiaries, which are not required to be repaid and generally are structurally subordinated to claims by creditors of the applicable subsidiary.

Sempra has substantial investments in and obligations arising from businesses it does not control or manage or in which it shares control.

We have investments in businesses we do not control or manage or in which we share control. In some cases, we engage in arrangements with or for these businesses that could expose us to risks in addition to our investment, including guarantees, indemnities and loans. For businesses we do not control, we are subject to the decisions of others, which may not always be in our interest and could negatively affect us. When we share control of a business with other owners, any disagreements among the owners about strategy, financial, operational, transactional or other important matters could hinder the business from moving forward with key initiatives or taking other actions and could negatively affect the relationships among the owners and the efficient functioning of the business. In addition, irrespective of whether or not we control these businesses, we could be responsible for liabilities or losses related to these businesses or elect to make capital contributions to these businesses. Any such circumstance could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. We discuss these investments in Note 6 of the Notes to Consolidated Financial Statements.

Our business could be negatively affected by activist shareholders.

Activist shareholders may engage in proxy solicitations, advance shareholder proposals or otherwise attempt to effect changes in or assert influence on our board of directors and management. In taking these steps, activist shareholders could seek to acquire our capital stock, which at certain ownership levels could threaten our ability to use some or all our NOL carryforwards if our corporation experiences an “ownership change” under applicable tax rules. Responding to activist shareholders could require us to

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incur legal and advisory fees, proxy solicitation expenses and administrative and associated costs and require time and attention by our board of directors and management, diverting their attention from the pursuit of our business strategies.

Any perceived uncertainties about our future direction or control, our ability to execute our strategies, or the composition of our board of directors or management team arising from activist shareholder attention or other action could lead to a perception of instability or a change in the direction of our business, which could be exploited by our competitors and/or other activist shareholders, result in the loss of business opportunities, and make it more difficult to pursue our strategic initiatives or attract and retain qualified personnel and business partners, any of which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. Further, any such actions could cause fluctuations in the trading prices of our securities based on temporary or speculative market perceptions or other factors.

Financial and Capital Stock-Related Risks

Any impairment of our assets or investments could negatively impact us.

We could experience a reduction in the fair value of our assets, including our long-lived assets, intangible assets or goodwill, and/or our investments that we account for under the equity method upon the occurrence of many of the risks discussed in these risk factors and elsewhere in this report, including any closure of the Aliso Canyon natural gas storage facility without adequate cost recovery, any inability to operate our existing facilities or develop new projects in Mexico due to proposed changes to existing laws or regulations or other circumstances affecting the energy sector or our assets in that country, and more generally any loss of permits or approvals that requires us to adjust or cease certain operations and any investment in capital projects that do not receive required approvals or are changed, abandoned or otherwise not completed. Any such reduction in the fair value of our assets or investments could result in an impairment loss that could materially adversely affect our results of operations for the period in which the charge is recorded. We discuss our impairment testing of long-lived assets and goodwill and the factors considered in such testing in “Part II – Item 7. MD&A – Critical Accounting Estimates” and in Note 1 of the Notes to Consolidated Financial Statements.

The economic interest, voting rights and market value of our outstanding common and preferred stock may be adversely affected by any additional equity securities we may issue.

At February 21, 2023, we had 314,569,519 shares of our common stock and 900,000 shares of our non-convertible series C preferred stock outstanding. We may seek to raise capital by issuing additional equity or convertible debt securities, which may materially dilute the voting rights and economic interests of holders of our outstanding common and preferred stock and materially adversely affect the trading price of our common and preferred stock.

Dividend requirements associated with our preferred stock subject us to risks.

Any failure to pay scheduled dividends on our series C preferred stock when due would have a material adverse impact on the market price of our securities and would prohibit us, under the terms of the series C preferred stock, from paying cash dividends on or repurchasing shares of our common stock (subject to limited exceptions) until we have paid all accumulated and unpaid dividends on the series C preferred stock. Additionally, the terms of the series C preferred stock generally provide that if dividends on any shares of the preferred stock have not been declared and paid or have been declared but not paid for three or more semi-annual dividend periods, whether or not consecutive, the holders of the preferred stock would be entitled to elect two additional members to our board of directors, subject to certain terms and limitations.

Our common stock is listed on the Mexican Stock Exchange and registered with the CNBV, which subjects us to additional regulation and liability in Mexico.

In addition to being listed for trading on the NYSE, our common stock is listed for trading on the Mexican Stock Exchange and registered with the CNBV. Such listing and registration subjects us to filing and other requirements in Mexico that could increase costs and increase performance risk of personnel given additional responsibilities. In addition, the CNBV, as the Mexican securities market regulator, has the authority to make inspections of Sempra’s business, primarily in the form of requests for information and documents; impose fines or other penalties on Sempra and its directors and officers for violations of Mexican securities laws and regulations; and seek criminal liability for certain actions conducted or with effects in Mexico. The occurrence of any of these risks could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

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RISKS RELATED TO ALL SEMPRA BUSINESSES

Operational Risks

Our businesses are subject to risks arising from their infrastructure and information systems.

Our businesses’ facilities and the information systems that interconnect and/or manage them are subject to risks of, among other things, potential breakdown or failure of equipment or processes due to aging infrastructure and systems; human error; shortages of or delays in obtaining equipment, materials, commodities or labor, which may be exacerbated by current or future supply chain constraints and tight labor market conditions, and increases to the costs of these items due to inflationary pressures or otherwise, which may not be recoverable in a timely manner or at all; operational restrictions resulting from environmental requirements or governmental interventions; inability to enter into, maintain, extend or replace long-term supply or transportation contracts; and performance below expected levels. Even though our businesses undertake capital investment projects to construct, replace, maintain, improve and upgrade facilities and systems, such projects may not be effective at managing the aforementioned risks, and may involve significant costs that may not be recoverable and challenges in achieving completion. We often rely on third parties, including contractors, to perform work related to these projects and other maintenance activities, which may subject us to increased risks because we manage the safety and quality of work performed by third parties and may retain liability for their work. Because our facilities are interconnected with those of third parties, including receiving natural gas supply from third party pipelines and power generation facilities that produce most of the power that we distribute to customers, the operation of our facilities could also be adversely affected by these or similar risks to the systems of such third parties, many of which may be unanticipated or uncontrollable by us.

Additional risks associated with our businesses’ ability to safely and reliably construct, replace, operate, maintain, improve and upgrade their respective facilities and systems, many of which are beyond our control, include:

▪failure to meet customer demand for electricity and/or natural gas, including electrical blackouts or curtailments or gas outages

▪natural gas surges into homes or other properties

▪the release of hazardous or toxic substances, including gas leaks

▪inadequate emergency preparedness plans and the failure to respond effectively to catastrophic events

The occurrence of any of these events could affect supply and demand for electricity, natural gas or other forms of energy, cause unplanned outages, damage our businesses’ assets and/or operations, damage the assets and/or operations of third parties on which our businesses rely, damage property owned by customers or others, and cause personal injury or death. In addition, if we are unable to defend and retain title to the properties we own or if we are unable to obtain or retain rights to construct and operate on the properties we do not own in a timely manner, on reasonable terms or at all, we could lose our rights to occupy and use these properties and the related facilities, which could result in modification, delay or curtailment of existing or proposed operations or projects, increase our costs, and result in breaches of one or more permits or contracts related to the affected facilities that could lead to legal costs, impairments or fines or penalties. Any such outcome could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Severe weather, natural disasters and other similar events could materially adversely affect us.

Our facilities and infrastructure, including projects in development and under construction, may be damaged by severe weather, natural disasters, accidents, explosions or acts of terrorism, war or criminality. Because we are in the business of using, storing, transporting and disposing of highly flammable, explosive and radioactive materials and operating highly energized equipment, the risks such incidents may pose to our facilities and infrastructure, as well as the risks to the surrounding communities for which we could be held responsible, are substantially greater than the risks such incidents pose to a typical business.

Such incidents could result in business and project development disruptions, power or gas outages, property damage, injuries and loss of life for which we could be liable and could cause secondary incidents that also may have these or other negative effects, such as fires; leaks of natural gas, natural gas odorant, propane, ethane, other GHG emissions or radioactive material; spills or other damage to natural resources; or other nuisances to affected communities. Any of these occurrences could decrease revenues and earnings and/or increase costs, including maintenance costs or restoration expenses, amounts associated with claims against us, and regulatory fines, penalties and disallowances. In some cases, we may be liable for damages even though we are not at fault, such as when the doctrine of inverse condemnation applies, which we discuss below under “Risks Related to Sempra California – Operational Risks.” For our regulated utilities, these costs may not be recoverable in rates. Insurance coverage for these costs may increase or become prohibitively expensive, be disputed by insurers, or become unavailable for certain of these risks or at sufficient levels, and any insurance proceeds may be insufficient to cover our losses or liabilities due to limitations, exclusions, high deductibles, failure to comply with procedural requirements or other factors. Such incidents that do not directly

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affect our facilities may impact our business partners, supply chains and transportation channels, which could negatively impact construction projects and our ability to provide electricity and natural gas to customers. Moreover, weather-related incidents have become more prevalent, unpredictable and severe as a result of climate change or other factors, which could have a greater impact on our businesses than currently anticipated and, for our regulated utilities, rates may not be adequately or timely adjusted to reflect any such increased impact. Any such outcome could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

In addition to general information and cyber risks that all large corporations face, we face evolving cybersecurity risks associated with the energy grid, natural gas pipelines, storage and other infrastructure and protecting sensitive and confidential customer and employee information.

Our use of complex technologies and systems in our operations, including deployment of any new technologies, and our collection and retention of sensitive information, represent large-scale opportunities for attacks on or other failures to protect our information systems, confidential information and energy grid and natural gas infrastructure. In particular, cyber-attacks targeting utility systems and other energy infrastructure, as well as the impacts of these attacks on companies and their communities, are increasing in sophistication, magnitude and frequency and may further increase in connection with certain geopolitical events, such as the war in Ukraine. Additionally, SDG&E and SoCalGas are increasingly required to disclose large amounts of data (including customer personal information and energy use data) to support changes to California’s electricity and gas markets related to grid modernization and customer choice as well as energy efficiency, demand response and conservation, increasing the risks of inadvertent disclosure or other unauthorized access of sensitive information. Further, the virtualization of many business activities increases cyber risk, and generally there has been an associated increase in targeted cyber-attacks. Moreover, all our businesses operating in California (and any other states and countries where we do business that adopt similar laws) are subject to enhanced state privacy laws, which require companies that collect information about California residents to, among other things, make disclosures to consumers about their data collection, use and sharing practices; allow consumers to opt out of certain data sharing with third parties; and assume liability under a new cause of action for unauthorized disclosure of certain highly sensitive personal information.

Although we invest in risk management and information security measures for the protection of our systems and information, these measures could be insufficient or otherwise fail. The costs and operational consequences of implementing, maintaining and enhancing these protection measures are significant, and they could materially increase to address increasingly intense and complex cyber risks. We often rely on third-party vendors to deploy new business technologies and maintain, modify and update our systems, and these third parties may not have adequate risk management and information security measures with respect to their systems. Any cyber-attack, including ransomware attacks, on our or our vendors’ information systems or the integrity of the energy grid, our pipelines or our distribution, storage and other infrastructure, or unauthorized access, damage or improper disclosure of confidential information, could result in disruptions to our business operations, regulatory compliance failures, inabilities to produce accurate and timely financial statements, energy delivery failures, financial and reputational loss, customer dissatisfaction, litigation, violation of privacy laws and fines or penalties, any of which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. Although Sempra currently maintains cyber liability insurance, this insurance is limited in scope and subject to exceptions, conditions and coverage limitations and may not cover any or even a substantial portion of the costs associated with any compromise of our information systems or confidential information, and there is no guarantee that the insurance we currently maintain will continue to be available at rates we believe are commercially reasonable.

We seek growth opportunities in the market organically and inorganically, including through the acquisition of, or partnerships in, operating companies.

We diligently analyze the financial viability of each acquisition, partnership and JV we pursue. However, our diligence may prove to be insufficient and there could be latent, unforeseen defects. In addition, we may not realize all the anticipated benefits from future acquisitions, partnerships or JVs for various reasons, including difficulties integrating operations and personnel to our standards or in a timely manner, higher and unexpected acquisition and operating costs, unknown liabilities, and fluctuations in markets. Any of these outcomes could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Increasing activities and projects intended to advance new energy technologies could introduce new risks to our businesses.

We regularly undertake or become involved in research and development projects and other activities designed to develop new technologies in the energy space, including those related to hydrogen, energy storage, carbon sequestration, grid modernization and others. These activities and projects can involve significant employee time, as well as substantial capital resources that may

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not be recoverable in rates or, with respect to our non-regulated utility businesses, may not be able to be passed through to customers. We may also seek a variety of federal and state funding opportunities for these activities and projects (such as loans and grants, including in conjunction with third-party commercial or governmental entities), which may involve significant employee time and effort and increased compliance requirements with no guarantee that any such funding would be received. In addition, the timing to complete these activities and projects is inherently uncertain and may require significantly more time and funding than we initially anticipate. Moreover, many of these technologies are in the early stage of development, and the applicable activities and projects may not be completed or the applicable technologies may not prove economically and technically feasible. If any of these circumstances occurs, we may not receive an adequate or any return on our investment and other resources invested in these activities and our results of operations, financial condition, cash flows and/or prospects could be materially adversely affected.

The operation of our facilities depends on good labor relations with our employees.

Several of our businesses have in place collective bargaining agreements with different labor unions, which are generally negotiated on a company-by-company basis. Any failure to negotiate and reach an agreement on these labor contracts as they are up for renewal could result in strikes, boycotts or other labor disruptions. Any such labor disruption or negotiated wage or benefit increases, whether due to union activities, employee turnover or otherwise, 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 counterparties, and any performance failures by these counterparties could materially adversely affect us.

Our businesses depend on the performance of business partners, customers, suppliers and other counterparties who owe money or commodities as a result of market transactions or other long-term arrangements. If they fail to perform their obligations in accordance with these arrangements, we may need to enter into alternative arrangements or honor our underlying commitments at then-current market prices, which may result in additional losses to us to the extent of amounts already paid to such counterparties. Any efforts to enforce the terms of these arrangements through legal or other means could involve significant time and costs and would be unpredictable and may not be successful. In addition, many of these arrangements, including our relationships with the applicable counterparties, are important for the conduct and growth of our businesses. We also may not be able to secure replacement agreements with other counterparties on favorable terms, in a timely manner or at all if any of these arrangements terminate. Further, we often extend credit to customers and other counterparties and, although we perform credit analyses prior to extending credit, we may not be able to collect the amounts owed to us, which presents an increased risk for our long-term supply, sales and capacity contracts. The failure of any of our counterparties to perform in accordance with their arrangements with us could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure’s obligations and those of its LNG suppliers are contractually subject to suspension or termination for force majeure events, which generally are beyond the control of the parties, and limitations of remedies for other failures to perform, including limitations on damages that may prohibit recovery of costs incurred for any breach of an agreement. Any such occurrence could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure engages in JVs and invests in companies in which other equity partners may have or share with us control over the applicable project or investment. Sempra Texas Utilities also invests in companies that it does not control or manage. We discuss the risks related to these arrangements above under “Risks Related to Sempra – Operational and Structural Risks.”

Our businesses face risks related to the COVID-19 pandemic.

The COVID-19 pandemic has materially impacted communities, supply chains, economies and markets around the world since March 2020. To date, the COVID-19 pandemic has not had a material impact on our results of operations. However, Sempra and some or all its businesses have been and could continue to be impacted by this pandemic or any future pandemic in a number of ways, including:

▪Disruption in supply chains and the capital markets, which has affected and could further affect liquidity, strategic initiatives and prospects, including in some cases a slowdown of planned capital spending

▪Customer-protection measures implemented by SDG&E and SoCalGas, including suspending service disconnections due to nonpayment for all customers early in the pandemic (except for SoCalGas’ noncore customers and, since the second half of 2022, SDG&E’s and SoCalGas’ commercial and industrial customers), waiving late payment fees, offering flexible payment plans and automatically enrolling residential and small business customers with past-due balances in long-term repayment plans, which have collectively resulted in a reduction in payments from SDG&E and SoCalGas’ customers and an increase in uncollectible accounts that could become material and may not be fully recoverable

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▪Precautionary, preemptive and responsive actions taken by our current and prospective counterparties, customers and partners, as well as regulators and other governing bodies that affect our businesses, which have affected and could further affect our operations, results, liquidity and ability to pursue capital projects and strategic initiatives

Any of these impacts could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. We will continue to actively monitor the effects of the COVID-19 pandemic and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are necessary for the safety of our employees, customers, partners and suppliers and, generally, the communities we serve. However, we cannot at this time predict the extent to which the COVID-19 pandemic may further impact our businesses.

Financial Risks

Our debt service obligations expose us to risks and could require additional equity securities issuances by Sempra and sales of equity interests in various subsidiaries or projects under development.

Our businesses have debt service obligations, which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects by, among other things:

▪making it more difficult and costly for each of these businesses to service, pay or refinance their debts as they come due, particularly during adverse economic or industry conditions or in periods of significant increases in interest rates

▪limiting flexibility to pursue strategic opportunities or react to business developments or changes in the industry sectors in which they operate

▪requiring cash to be used for debt service payments, thereby reducing the cash available for other purposes

▪causing lenders to require materially adverse terms in the instruments for new debt, such as restrictions on uses of proceeds or other assets or limitations on incurring additional debt, creating liens, paying dividends, repurchasing stock, making investments or receiving distributions from subsidiaries or equity method investments

Sempra’s goal is to maintain or improve its credit ratings, but it may not be able to do so. To maintain these credit ratings, we may seek to reduce our outstanding indebtedness or our need for additional indebtedness with the proceeds from issuances of equity securities by Sempra or the sale of equity interests in our subsidiaries or development projects. We may not be able to complete any such equity sales on terms we consider acceptable or at all, and any new equity issued by Sempra may dilute the voting rights and economic interests of existing holders of Sempra’s common and preferred stock. Any such outcome could have a material adverse effect on Sempra’s results of operations, financial condition, cash flows and/or prospects.

The availability and cost of debt or equity financing could be negatively affected by market and economic conditions and other factors, and any such effects could materially adversely affect us.

Our businesses are capital-intensive, with significant capital spending expected in future periods. In general, we rely on long-term debt to fund a significant portion of our capital expenditures and repay outstanding debt and we rely on short-term borrowings to fund a significant portion of day-to-day business operations. Sempra may also seek to raise capital by issuing equity or selling equity interests in our subsidiaries or investments.

Limitations on the availability of credit, increases in interest rates or credit spreads due to inflationary pressures 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 funding, 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, including recent and proposed changes to the regulation of the energy market in Mexico

▪the overall health of the energy industry

▪volatility in electricity or natural gas prices

▪for Sempra, SDG&E and SoCalGas, risks related to California wildfires

▪for Sempra, SDG&E and SoCalGas, any deterioration of or uncertainty in the political or regulatory environment for local natural gas distribution companies operating in California

▪credit ratings downgrades

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We are subject to risks due to uncertainty relating to the calculation of LIBOR and its scheduled discontinuance.

Certain of our financial and commercial agreements, including those for variable rate indebtedness, as well as interest rate derivatives, incorporate LIBOR as a benchmark for establishing certain rates. As directed by the U.S. Federal Reserve, banks ceased making new LIBOR-based issuances at the end of 2021, and publication of certain key U.S. dollar LIBOR tenors for existing loans is expected to cease in mid-2023. These events could cause LIBOR to perform differently than it has performed historically. Use of the SOFR, which has been identified as the replacement benchmark rate for LIBOR, may result in interest payments that are higher than expected or that do not otherwise correlate over time with the payments that would have been made using LIBOR. Changes to or the discontinuance of LIBOR, any uncertainty regarding such changes or discontinuance, and the performance and characteristics of alternative benchmark rates, could negatively affect our existing and future variable rate indebtedness and interest rate hedges and the cost of doing business under our commercial agreements that incorporate LIBOR, SOFR or other alternative benchmark rates, and could require us to seek to amend the terms of the relevant indebtedness or agreements, which may not be possible and/or may require us to accept terms that are materially worse than existing terms. 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.

Credit rating agencies may downgrade our credit ratings or place those ratings on negative outlook.

Credit rating agencies routinely evaluate Sempra, SDG&E, SoCalGas and SI Partners and certain of our other businesses, and their ratings are based on a number of factors, including the factors described below and the ability to generate cash flows; level of indebtedness; overall financial strength; specific transactions or events, such as share repurchases and significant litigation; the status of certain capital projects; and the state of the economy and our industry generally. These credit ratings could be downgraded or other negative credit rating actions could occur at any time. We discuss these credit ratings in “Part II – Item 7. MD&A – Capital Resources and Liquidity.”

For Sempra, the Rating Agencies have noted that the following events, among others, could lead to negative ratings actions:

▪expansion of natural gas liquefaction projects or other unregulated businesses in a manner inconsistent with its present level of credit quality

▪Sempra’s consolidated financial measures do not improve, or it fails to meet certain financial credit metrics

▪catastrophic wildfires caused by SDG&E or by any California electric IOUs that participate in the Wildfire Fund, which could exhaust the fund considerably earlier than expected

For SDG&E, the Rating Agencies have noted that the following events, among others, could lead to negative ratings actions:

▪catastrophic wildfires caused by SDG&E or by any California electric IOUs that participate in the Wildfire Fund, which could exhaust the fund considerably earlier than expected

▪a consistent weakening of SDG&E’s financial metrics or a deterioration in the regulatory environment

▪a ratings downgrade at Sempra

For SoCalGas, the Rating Agencies have noted that the following events, among others, could lead to negative ratings actions:

▪SoCalGas’ financial measures consistently weaken, or it fails to meet certain financial credit metrics

▪SoCalGas experiences increased business risk, including a deterioration in the regulatory environment, leading to weakening of its stand-alone business risk profile

▪a ratings downgrade at Sempra

For SI Partners, the Rating Agencies have noted that the following events, among others, could lead to negative ratings actions:

▪SI Partners’ failure to meet certain financial credit metrics

▪a deterioration in SI Partners’ business risk profile, including incremental construction risk or adverse changes in the operating environment in Mexico

▪a ratings downgrade at Sempra, IEnova and/or Cameron LNG, LLC

A downgrade of any of our businesses’ credit ratings or ratings outlooks, as well as the reasons for such downgrades, may materially adversely affect the market prices of our securities, the interest rates at which borrowings can be made and debt securities issued, and the various fees on our credit facilities. This could make it more costly for the affected businesses to borrow money, issue securities and/or raise other types of capital, any of which could materially adversely affect our ability to meet our debt obligations and contractual commitments, and our results of operations, financial condition, cash flows and/or prospects.

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We do not fully hedge our assets or contract positions against changes in commodity prices or interest rates, and for those positions that are hedged, our hedging procedures may not mitigate our risk as expected or prevent us from experiencing losses.

We have used and may continue to use forward contracts, futures, financial swaps and/or options, among other mechanisms, to hedge our known or anticipated purchase and sale commitments, inventories of natural gas and LNG, natural gas storage and pipeline capacity and electric generation capacity in an effort to reduce our financial exposure related to commodity price fluctuations. We do not hedge the entire exposure to market price volatility of our assets or our contract positions, and the extent of the coverage to these exposures varies over time. In addition, we have used and may continue to use similar financial instruments to hedge against changes in interest rates. Certain derivative securities we use to hedge are recorded at fair value through earnings to reflect movements in the price of the security, which has in the past and could in the future create volatility in our earnings (such as the significantly higher unrealized losses on commodity derivatives that we recognized in 2022 compared to 2021 as we discuss in “Part II – Item 7. MD&A – Results of Operations”). To the extent we have unhedged positions, or if our hedging strategies do not work as expected, fluctuating commodity prices could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. Certain of the contracts we may use for hedging purposes are subject to fair value accounting, which may result in gains or losses in earnings for those contracts that may not reflect the associated gains or losses of the underlying position being hedged and could result in fluctuations of our results from period to period.

Risk management procedures may not prevent or mitigate losses.

Although we have in place risk management and control systems designed to quantify and manage risk, these systems may not prevent material losses. Risk management procedures may not always be followed as intended or function as expected. In addition, daily VaR and loss limits, which are primarily based on historic price movements and which we discuss in “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” may not protect us from losses if prices significantly or persistently deviate from historic prices. As a result of these and other factors, our risk management procedures and systems may not prevent or mitigate losses that could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Market performance or changes in other assumptions could require unplanned contributions to pension and PBOP plans.

Sempra, SDG&E and SoCalGas provide defined benefit pension and PBOP plans to eligible employees and retirees. The cost of providing these benefits is affected by many factors, including the market value of plan assets and the other factors described in Note 9 of the Notes to Consolidated Financial Statements. A decline in the market value of plan assets or an adverse change in any of these other factors could cause a material increase in our funding obligations for these plans, which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Legal and Regulatory Risks

Our businesses require numerous permits, licenses, franchises and other approvals from various governmental agencies, and the failure to obtain or maintain any of them, or lengthy delays in obtaining them, could materially adversely affect us.

Our businesses require numerous permits, licenses, rights-of-way, franchises, certificates and other approvals from federal, state, local and foreign governmental agencies. These approvals may not be granted in a timely manner or at all or may be modified, rescinded or fail to be extended for a variety of reasons. Obtaining or maintaining these approvals could result in higher costs or the imposition of conditions or restrictions on our operations. For example, SoCalGas’ franchise agreement with Los Angeles County is scheduled to expire in June 2023. Further, these approvals require compliance by us and may require compliance by our customers, which could result in modification, suspension or rescission and subject us to fines and penalties in the event of noncompliance. If one or more of these approvals were to be suspended, rescinded or otherwise terminated, including due to expiration or legal or regulatory changes, or modified in a manner that makes our continued operation of the applicable business prohibitively expensive or otherwise undesirable or impossible, we may be required to adjust or temporarily or permanently cease certain of our operations, sell the associated assets or remove them from service and/or construct new assets intended to bypass the impacted area, in which case we may lose some of our rate base or revenue-generating assets, our development projects may be negatively affected and we may incur impairment charges or other costs that may not be recoverable. The occurrence of any of these events could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

We may invest funds in capital projects prior to receiving all regulatory approvals. If there is a delay in obtaining these approvals; if any approval is conditioned on changes or other requirements that increase costs or impose restrictions on our existing or

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planned operations; if we fail to obtain or maintain these approvals or comply with them or other applicable laws or regulations; if we are involved in litigation that adversely impacts any approval or rights to the applicable property or assets; or if management decides not to proceed with a project, we may be unable to recover any or all amounts invested in that project. Any such occurrence could cause our costs to materially increase, result in material impairments, and otherwise materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Our businesses face climate change concerns and have environmental compliance and clean energy transition costs, which could have a material adverse effect on us.

Climate change and the costs associated with its impacts and mitigation may have the potential to adversely affect our businesses, including by increasing the costs we incur to transmit energy and provide other services, impacting the demand for and consumption of the natural gas we distribute and the energy we transmit (due to changes in costs, weather patterns, the type of energy transmitted as a result of increasing customer preference for carbon-neutral and renewable sources of energy, and other factors), and affecting the economic health of the regions in which we operate.

Our businesses are subject to extensive federal, state, local and foreign statutes, orders, rules and regulations relating to climate change and environmental protection. To comply with these requirements, we must expend significant capital and employee resources on (i) environmental monitoring, surveillance and other measures to track performance; (ii) acquisitions of pollution control equipment; (iii) mitigation efforts; and (iv) emissions fees, which could increase as a result of various factors we may not control, including changing laws and regulations, increased enforcement activities, delays in the renewal and issuance of permits, and changes to the mix of energy we are required to supply. In addition, we are generally responsible for hazardous substances and other contamination on and the conditions of our projects and properties, regardless of when these conditions arose and whether they are known or unknown. In addition, we could be liable for contamination at our former facilities and off-site waste disposal sites that have been used in our operations. For our regulated utilities, some of these costs may not be recoverable in rates. Failure to comply with environmental laws and regulations may subject our businesses to fines and penalties, including criminal penalties in some cases, and/or curtailment of our operations. Any of these outcomes could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Increasing international, national, regional, state and local-level environmental concerns and related new or proposed legislation and regulation or changes to existing legislation or regulation, such as increased requirements for monitoring and surveillance, disclosures on environmental performance and targets, pollution monitoring and control equipment, safety practices, emissions fees, taxes, penalties or other obligations or restrictions, may have material negative effects on our operations, operating costs, corporate planning, and the scope and economics of proposed expansions, infrastructure projects or other capital expenditures.

In addition, existing and potential new or amended legislation and regulation relating to the control and reduction of GHG emissions and mitigating climate change may materially restrict our operations, negatively impact demand for our services, the natural gas we distribute and/or the energy we transmit, limit development opportunities, force costly or otherwise burdensome changes to our operations or otherwise materially adversely affect us. For example, SB 100 (enacted in 2018) and SB 1020 (enacted in 2022) requires each California electric utility, including SDG&E, to procure at least 50% of its annual electric energy requirements from renewable energy sources by 2026, 60% by 2030, 90% by 2035, and 95% by 2040. State law also creates the policy of meeting all of California’s retail electricity supply with a mix of RPS Program-eligible and zero-carbon resources by 2045. The law also includes stipulations that this policy not increase carbon emissions elsewhere in the western grid and not allow resource shuffling, and requires that the CPUC, CEC, CARB and other state agencies incorporate this policy into all relevant planning. In addition, the Governor of California signed an executive order establishing a new statewide goal to achieve carbon neutrality as soon as possible, and no later than 2045, and achieve and maintain net negative emissions thereafter. The executive order calls on CARB to address this goal in future scoping plans, which affect several major sectors of California’s economy, including transportation, agriculture, development, industrial and others. California has issued new climate initiatives in line with this statewide goal, including two executive orders requiring sales of all passenger vehicles to be zero-emission by 2035.

Moreover, the energy transition in California and elsewhere, including decarbonization goals, has introduced uncertainty in investor support over the long term, leading some to reduce investment in or divest from the energy sector. Maintaining investor confidence and attracting capital at a competitive cost will depend in part on successfully demonstrating our ability to reduce emissions associated with our operations and the energy we transmit, consistent with Sempra’s aim to have net-zero emissions by 2050 and SDG&E’s and SoCalGas’ aim to have net-zero emissions by 2045. Our ability to achieve this aim depends on many factors, some of which we do not control, including supportive energy laws and policies, development, availability and adoption of alternative fuels, successful research and development efforts focused on low-carbon technologies that are economically and technically feasible, cooperation from our partners, financing sources and commercial counterparties, customer participation in conservation and energy efficiency programs, and our ability to execute our planned investments in and advancement of our

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infrastructure. Although we have developed interim targets and various plans designed to support California in reaching its GHG emissions and renewable energy mandates and our own energy goals, we may not be successful.

We will need to continue to expend capital and employee resources to develop and deploy new technologies and modernize grid systems in our efforts to support the clean energy transition in California and elsewhere and achieve our climate targets and those mandated by applicable authorities, which may not be recoverable in rates or, with respect to our non-regulated utility businesses, may not be able to be passed through to customers. Even if such costs are recoverable, the costs of these efforts and complying with these mandates, coupled with the necessary costs of investing for safety and reliability, may negatively impact the affordability of SDG&E’s and SoCalGas’ customer rates and, for our non-regulated utility businesses, may cause costs to increase to levels that reduce customer demand and growth. SDG&E and SoCalGas, as well as any of our other businesses affected by GHG emissions mandates, may also be subject to fines and penalties if mandated renewable energy goals are not met, and all our businesses could suffer difficulties attracting investors and business partners, reputational harm and other negative effects if we do not meet or if we scale back our GHG emissions goals or there are negative views about our environmental disclosures or practices generally. Any of these outcomes could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Our businesses are subject to numerous governmental regulations and complex tax and accounting requirements and may be materially adversely affected by them or any changes to them.

The electric power and natural gas industries are subject to numerous governmental regulations, and our businesses are also subject to complex tax and accounting requirements. These regulations and requirements may undergo changes at the federal, state, local and foreign levels, including in response to economic or political conditions. Compliance with these regulations and requirements, including in the event of 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, regulations or interpretations or changes in tax policies in the U.S. or other countries in which we operate or do business could negatively affect our tax expense and/or tax balances and our businesses generally. Any failure to comply with these regulations and requirements could subject us to fines and penalties, including criminal penalties in some cases, and result in the temporary or permanent shutdown of certain facilities or operations. 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 operations are subject to rules relating to transactions among SDG&E, SoCalGas and other Sempra businesses. These rules are commonly referred to as “affiliate rules,” and they primarily impact transmission supply, capacity and marketing activities, including restricting our ability to sell natural gas or electricity to, or trade with, SDG&E and SoCalGas and their ability to complete these transactions with each other. These rules, as well as any changes to these rules or their interpretations or additional more restrictive CPUC or FERC rules related to transactions with affiliates, could materially adversely affect our operations and, in turn, our results of operations, financial condition, cash flows and/or prospects.

We may be materially adversely affected by the outcome of litigation or other proceedings in which we are involved.

Our businesses are involved in a number of lawsuits, binding arbitrations, regulatory investigations and other proceedings. We discuss material pending proceedings in Note 16 of the Notes to Consolidated Financial Statements. We have spent, and continue to spend, substantial money, time and employee and management focus on these lawsuits and other proceedings. The uncertainties inherent in lawsuits and other proceedings make it difficult to estimate with any degree of certainty the timing, costs and ranges of costs or effects of resolving these matters. In addition, juries have demonstrated a willingness to grant large awards, including punitive damages, in response to personal injury, product liability, property damage and other claims. Accordingly, actual costs incurred have and may continue to differ materially from insured or reserved amounts and may not be recoverable, in whole or in part, from insurance or in customer rates. Any of the foregoing could cause reputational damage and materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

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RISKS RELATED TO SEMPRA CALIFORNIA

Operational Risks

Wildfires in California pose risks to Sempra California (particularly SDG&E) and Sempra.

Potential for Increased and More Severe Wildfires

Over the past few years, California has been experiencing some of the largest wildfires (measured by acres burned) 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 prevention and containment of wildfires in California, including in SDG&E’s and SoCalGas’ service territories. Changing weather patterns, including as a result of climate change, could cause these conditions to become even more extreme and unpredictable. These wildfires could jeopardize SDG&E’s and SoCalGas’ electric and natural gas infrastructure and third-party property and result in temporary power shortages in SDG&E’s and SoCalGas’ service territories. Certain of California’s local land use policies and forestry management practices have been relaxed to allow for the construction and development of residential and commercial projects in high-risk fire areas, which could lead to increased third-party claims and greater losses in the event of fires in these areas for which SDG&E or SoCalGas may be liable. Any such wildfires in SDG&E’s and SoCalGas’ territories (or outside of these territories in the event the Wildfire Fund described below is materially diminished) could materially adversely affect SDG&E’s, SoCalGas’ and Sempra’s results of operations, financial condition, cash flows and/or prospects, which we discuss in this risk factor below and above under “Risks Related to All Sempra Businesses – Operational Risks.”

The Wildfire Legislation

In July 2019, the Wildfire Legislation was signed into law, which we discuss in Note 1 of the Notes to Consolidated Financial Statements. The Wildfire Legislation’s revised legal standard for the recovery of wildfire costs may not be implemented effectively or applied consistently, we may not be eligible for the Wildfire Legislation’s cap on wildfire-related liability if SDG&E fails to maintain a valid annual safety certification from the OEIS or meet other requirements of the legislation, and/or the Wildfire Fund could be exhausted due to claims against the fund by SDG&E or other participating IOUs as a result of fires in their respective service territories, 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. PG&E has indicated that it will seek reimbursement from the Wildfire Fund for losses associated with the Dixie fire, which burned from July 2021 through October 2021 and was reported to be the largest single wildfire (measured by acres burned) in California history. In addition, the Wildfire Legislation did not change the doctrine of inverse condemnation, which imposes strict liability (meaning that liability is imposed regardless of fault) on a utility whose equipment, such as its electric distribution and transmission lines, is determined to be a cause of a fire. In such an event, the utility would be responsible for the costs of damages, including potential business interruption losses, and interest and attorneys’ fees, even if the utility has not been found negligent. The doctrine of inverse condemnation also is not exclusive of other theories of liability, including if the utility were found negligent, in which case 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 in the event that SDG&E’s equipment is determined to be a cause of a fire, and specifically in the context of the application of inverse condemnation.

Cost Recovery Through Insurance or Rates

As a result of the strict liability standard applied to electric IOU-caused wildfires in California, substantial losses recently recorded by insurance companies, and the risk of an increase in the number and size of wildfires, obtaining insurance coverage for wildfires that could be caused by SDG&E (or, to a lesser extent, SoCalGas) has become increasingly difficult and costly. If these conditions continue or worsen, insurance for wildfire liabilities may become unavailable or may become prohibitively expensive and we may be challenged or unsuccessful when we seek 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 in sufficient amounts to meet the $1.0 billion of primary insurance required by the Wildfire Legislation. We are unable to predict whether we would be able to recover in rates or from the Wildfire Fund the amount of any uninsured losses. A loss that is not fully insured, is not sufficiently covered by the Wildfire Fund 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.

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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 applicable California law to submit annual wildfire mitigation plans for approval by the OEIS and could be subject to increased risks if these plans are not approved in a timely manner or the measures set forth in the plans are not implemented effectively, as well as fines or penalties for any failure to comply with the approved plans. One of our wildfire mitigation and safety tools is to de-energize certain of our facilities when weather conditions become extreme and there is elevated 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 liability for damages associated with these events. Such costs may not be recoverable in rates. Unrecoverable costs, adverse legislation or rulemaking, scrutiny by key stakeholders, 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.

The electricity industry is undergoing significant change, including increased deployment of DER, technological advancements, and political and regulatory developments.

Electric utilities in California are experiencing increasing deployment of DER, such as solar generation, energy storage and energy efficiency and demand management technologies, and California’s environmental policy objectives are accelerating the pace and scope of these changes. This growth of DER and demand management will require further modernization of the electric distribution grid to, among other things, accommodate increasing two-way flows of electricity and increase the grid’s capacity to interconnect these resources. In addition, enabling California’s clean energy goals will require sustained investments in grid modernization, renewable integration projects, energy efficiency programs, energy storage options, operational and data management systems, and electric vehicle infrastructure. The growth of third-party energy storage alternatives and other technologies also may increasingly compete with SDG&E’s traditional transmission and distribution infrastructure in delivering electricity to consumers. The CPUC is conducting several proceedings regarding DER and demand management, including the evaluation of various projects and pilots; changes to the planning and operation of the electric distribution grid to prepare for higher penetration of DER; future grid modernization and grid investments; the deferral of traditional grid investments by DER; and the role of the electric distribution grid operator. These proceedings and the broader changes in California’s electricity industry could result in new regulations, policies and/or operational changes that could materially adversely affect SDG&E’s and Sempra’s results of operations, financial condition, cash flows and/or prospects.

SDG&E provides bundled electric procurement service through various resources that are typically procured on a long-term basis. Although SDG&E currently provides such procurement service for a portion of its customer load, most customers receive procurement service from a load-serving entity other than SDG&E through programs such as CCA and DA, in which case SDG&E no longer procures energy for this departing load. CCA is only available if a customer’s local jurisdiction (city or county) offers such a program and DA is currently limited by a cap based on gigawatt hours. Several jurisdictions in SDG&E’s territory, including the City of San Diego, have implemented CCA, and additional jurisdictions are in the process of implementing or considering CCA. SDG&E’s historical energy procurement for future deliveries exceeds the needs of its remaining bundled customers as customers have elected CCA and DA services. To help achieve the goal of ratepayer indifference (as to whether or not customers’ energy is procured by SDG&E or by CCA or DA), the CPUC revised the Power Charge Indifference Adjustment framework. The purpose of the framework is to help ensure SDG&E’s procurement cost obligations are more equitably shared among customers served by SDG&E and customers now served by CCA and DA. SDG&E implemented the framework on January 1, 2019. If the framework or other mechanisms designed to achieve ratepayer indifference do not perform as intended, if the law changes, or if the law is not interpreted or enforced as expected, SDG&E’s remaining bundled customers could experience large increases in rates for commodity costs under commitments made on behalf of CCA and DA customers prior to their departure or, if all such costs are not recoverable in rates, SDG&E could experience material increases in its unrecoverable commodity costs. Any of these outcomes could have a material adverse effect on SDG&E’s and Sempra’s results of operations, financial condition, cash flows and/or prospects.

Natural gas and natural gas storage have increasingly been the subject of political and public scrutiny, including a desire by some to reduce or eliminate reliance on natural gas as an energy source.

Certain California legislators, as well as stakeholder, advocacy and activist groups, have expressed a desire to limit or eliminate reliance on natural gas as an energy source by advocating increased use of renewable electricity and electrification in lieu of the use of natural gas. Reducing methane emissions also has become a major focus of certain local and state agencies and the U.S. Administration, as well as the CPUC, resulting in passed or proposed legislation, regulation, policies and ordinances to prohibit or restrict the use and consumption of natural gas in new buildings, appliances and other applications. These actions could have the effect of reducing natural gas use over time.

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CARB, California’s primary regulator for GHG emissions reduction programs, continues to pursue plans for reducing GHG emissions in line with California’s climate goals that include proposals to reduce natural gas demand through proposed building decarbonization measures (for example, zero-emission standards for space and water heaters), or through promoting legislation for increased renewable electricity generation. Additionally, the CEC’s Title 24 requirements mandate that new construction include electric-ready buildings and heat pump technologies beginning in 2023.

The CPUC has an ongoing proceeding that seeks to establish a state-wide process to help utilities plan appropriate gas infrastructure portfolios as natural gas usage in the state is expected to decline. This includes a new gas infrastructure General Order (GO 177) requiring site-specific approvals for certain gas infrastructure projects as well as issuance of a CPUC staff proposal to develop a gas distribution infrastructure decommissioning framework. The CPUC may similarly enact measures to reduce natural gas demand (such as more aggressive energy efficiency programs), promote fuel substitution (such as replacement of natural gas appliances with electric appliances), and order changes (such as its recent decision to eliminate gas line extension allowances for new applications submitted on or after July 1, 2023).

A substantial reduction in or the elimination of natural gas as an energy source in California without adequate and appropriate recovery of investments could result in impairment of some or all of SoCalGas’ and SDG&E’s natural gas infrastructure assets if they were not permitted to be repurposed for alternative fuels, were required to be depreciated on an accelerated basis or were to become stranded, which could have a material adverse effect on SoCalGas’, SDG&E’s and Sempra’s results of operations, financial conditions, cash flows and/or prospects.

SDG&E may incur significant costs and liabilities from its partial ownership of a nuclear facility being decommissioned.

SDG&E has a 20% ownership interest in SONGS, which we discuss in Note 15 of the Notes to Consolidated Financial Statements. SDG&E and each of the other owners of SONGS is responsible for financing its share of the facility’s expenses and capital expenditures, including those related to decommissioning activities. Although the facility is being decommissioned, SDG&E’s ownership interest in SONGS continues to subject it to risks, including:

▪the potential release of radioactive material

▪the potential harmful effects from the former operation of the facility

▪limitations on the insurance commercially available to cover losses associated with operating and decommissioning the facility

▪uncertainties with respect to the technological and financial aspects of decommissioning the facility

SDG&E maintains the SONGS NDT to provide funds for nuclear decommissioning. Trust assets have been generally invested in equity and debt securities, which are subject to market fluctuations. A decline in the market value of trust assets, an adverse change in the law regarding funding requirements for decommissioning trusts, or changes in assumptions or forecasts related to decommissioning dates, technology and the cost of labor, materials and equipment due to inflationary pressures or otherwise could increase the funding requirements for these trusts, which costs may not be fully recoverable in rates. In addition, CPUC approval is required to make withdrawals from the NDT, and CPUC approval for certain expenditures may be denied if the CPUC determines the expenditures are unreasonable. In addition, decommissioning may be materially more expensive than we currently anticipate and therefore decommissioning costs may exceed the amounts in the NDT. Rate recovery for overruns would require CPUC approval, which may not occur.

The occurrence of any of these events could result in a reduction in our expected recovery and have a material adverse effect on SDG&E’s and Sempra’s results of operations, financial condition, cash flows and/or prospects.

Legal and Regulatory Risks

SDG&E and SoCalGas are subject to extensive regulation by federal, state and local legislative and regulatory authorities, which may materially adversely affect Sempra, SDG&E and SoCalGas.

Rates and Other Financial Matters

The CPUC regulates SDG&E’s and SoCalGas’ customer rates, except for SDG&E’s electric transmission rates that are regulated by the FERC, and conditions of service. The CPUC also regulates SDG&E’s and SoCalGas’ sales of securities, rates of return, capital structure, rates of depreciation, long-term resource procurement and other financial matters in various ratemaking proceedings. The CPUC periodically approves SDG&E’s and SoCalGas’ customer rates based on authorized capital expenditures, operating costs, including income taxes, and an authorized rate of return on investments while incorporating a risk-based decision-making framework, as well as settlements with third parties. The outcome of ratemaking proceedings can be affected by various

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factors, many of which are not in our control, including the level of opposition by intervening parties; any rejection by the CPUC of settlements with third parties; potential rate impacts; increasing levels of regulatory review; changes in the political, regulatory, or legislative environments; and the opinions of regulators, consumer and other stakeholder groups and customers. These ratemaking proceedings include decisions about major programs in which SDG&E and SoCalGas make investments under an approved CPUC framework, such as wildfire mitigation and pipeline and storage integrity and safety enhancement programs, but which investments may remain subject to a CPUC filing or reasonableness review with potentially unclear standards or other factors as described above that may result in the disallowance of incurred costs. SDG&E and SoCalGas also may be required to incur costs and make investments to comply with proposed legislative and regulatory requirements and initiatives, including those related to California’s climate goals and policies, and their ability to recover these costs and investments may depend on the final form of the legislative or regulatory requirements and the ratemaking mechanisms associated with them. Recovery can also be affected by the timing and process of the ratemaking mechanism, in which there can be a significant time lag between when costs are incurred and when those costs are recovered in customers’ rates and material differences between the forecasted and authorized costs embedded in rates (which are set on a prospective basis) and the actual costs incurred. The CPUC may also experience delays in its decisions on recovery or may deny recovery altogether on the basis that costs were not reasonably or prudently incurred or for other reasons. Even if recoverable, the cost of investments to support the clean energy transition in California while also investing in necessary safety and reliability may negatively impact the affordability of SDG&E’s and SoCalGas’ customer rates and their and Sempra’s results of operations, financial condition, cash flows and/or prospects.

In addition, a CPUC cost of capital proceeding every three years determines a utility’s authorized capital structure and authorized return on rate base, and the CCM applies in the interim years and considers changes in the cost of capital based on changes in interest rates for each 12-month period ending September 30 (the measurement period). Alternatively, each of SDG&E and SoCalGas are permitted to file a cost of capital application in an interim year in which an extraordinary or catastrophic event materially impacts its cost of capital and affects utilities differently than the market as a whole to have its cost of capital determined in lieu of the CCM. Any such rate change due to a downward trigger of the CCM could have a material adverse effect on Sempra’s and the applicable utility’s results of operations, financial condition, cash flows and/or prospects. We discuss the CCM in “Part I – Item 1. Business - Ratemaking Mechanisms – Sempra California – Cost of Capital Proceedings,” and in Note 4 of the Notes to Consolidated Financial Statements.

The FERC regulates electric transmission rates, the transmission and wholesale sales of electricity in interstate commerce, transmission access, the rates of return on investments in electric transmission assets, and other similar matters involving SDG&E. These ratemaking mechanisms are subject to many risks similar to those described above regarding the CPUC ratemaking proceedings.

CPUC Authority Over Operational Matters

The CPUC has regulatory authority related to safety standards and practices, competitive conditions, reliability and planning, affiliate relationships and a wide range of other operational matters, including citation programs concerning matters such as safety activity, disconnection and billing practices, resource adequacy and environmental compliance. Many of these standards and citation programs are becoming more stringent and could impose significant penalties, including enforcement programs under which the CPUC staff can issue citations that in some cases can impose substantial fines. The CPUC also continues to explore expansion of its programs to provide additional oversight. The CPUC conducts reviews and audits of the matters under its authority and could launch investigations or open proceedings at any time on any such matter it deems appropriate, the results of which could lead to citations, disallowances, fines and penalties, as well as corrective or mitigation actions required to address any noncompliance that may not be sufficiently funded by customer rates or at all. Any such occurrence 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 various CPUC proceedings relating to SDG&E and SoCalGas in Notes 4 and 16 of the Notes to Consolidated Financial Statements.

Potential Regulatory Changes and Influence of Other Organizations

SDG&E, SoCalGas and Sempra may be materially adversely affected by revisions or reinterpretations of existing or new legislation, regulations, decisions, orders or interpretations of the CPUC, the FERC or other regulatory bodies, any of which could change how SDG&E and SoCalGas operate, affect their ability to recover various costs through rates or adjustment mechanisms, require them to incur additional expenses or otherwise materially adversely affect their and Sempra’s results of operations, financial condition, cash flows and/or prospects.

SDG&E and SoCalGas are also affected by numerous advocacy groups, including California Public Advocates Office, The Utility Reform Network, Utility Consumers’ Action Network and the Sierra Club. Any success by any of these groups in directly or

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indirectly influencing regulatory bodies with authority over their operations could have a material adverse effect on SDG&E’s, SoCalGas’ and Sempra’s results of operations, financial condition, cash flows and/or prospects.

SoCalGas has incurred and may continue to incur significant costs, expenses and other liabilities related to the Leak.

From October 23, 2015 through February 11, 2016, SoCalGas experienced the Leak, which we describe in Note 16 of the Notes to Consolidated Financial Statements.

Litigation

In September 2021, SoCalGas and Sempra entered into an agreement with counsel to resolve lawsuits filed by approximately 36,000 plaintiffs (the Individual Plaintiffs) against SoCalGas and Sempra related to the Leak resulting in a payment of approximately $1.8 billion. The Individual Plaintiffs who do not participate in that settlement (the Remaining Individual Plaintiffs) will be able to continue to pursue their claims. As of February 21, 2023, lawsuits filed by the Remaining Individual Plaintiffs and several shareholder derivative actions are pending against SoCalGas related to the Leak, some of which have also named Sempra and/or certain officers and directors of SoCalGas and Sempra. Additional litigation may be filed against us related to the Leak or our responses to it. The costs of defending against, settling or otherwise resolving the pending lawsuits or any new litigation could materially adversely affect SoCalGas’ and Sempra’s results of operations, financial condition, cash flows and/or prospects. We discuss these risks above under “Risks Related to All Sempra Businesses – Legal and Regulatory Risks” and in this risk factor below under “Estimated Costs, Insurance and Accounting and Other Impacts.”

Regulatory Proceedings

SoCalGas has been subject to an OII to investigate and consider, among other things, what damages, fines or other penalties, if any, should be imposed against SoCalGas in connection with the Leak (the Leak OII). In October 2022, SoCalGas executed a settlement agreement with SED and the Public Advocates Office at the CPUC to resolve all aspects of the Leak OII, which is subject to CPUC approval. The settlement agreement provides for financial penalties, certain costs that SoCalGas will reimburse, a violation of California Public Utilities Code section 451, and costs previously incurred by SoCalGas for which it will not seek recovery from ratepayers, among other provisions. Other investigations related to the Leak could result in additional findings of violations of laws, orders, rules or regulations as well as fines and penalties, any of which could involve substantial costs and cause reputational damage. In addition, SoCalGas may incur higher operating costs and additional capital expenditures as a result of new investigations or new laws, orders, rules and regulations arising out of this incident, or our responses thereto, which may not be recoverable through insurance or in customer rates. The occurrence of any of these risks could materially adversely affect SoCalGas’ and Sempra’s results of operations, financial condition, cash flows and/or prospects.

Natural Gas Storage Operations and Reliability

In February 2017, the CPUC opened a proceeding pursuant to SB 380 OII to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy and electric reliability for the region, including analyzing alternative means for meeting or avoiding the demand for the facility’s services if it were eliminated.

If the Aliso Canyon natural gas storage facility were to be permanently closed or if future cash flows from its operation were otherwise insufficient to recover its carrying value, we may record an impairment of the facility, which could be material, incur materially higher than expected operating costs and/or be required to make material additional capital expenditures (any or all of which may not be recoverable in rates), and natural gas reliability and electric generation could be jeopardized. Any such outcome could have a material adverse effect on SoCalGas’ and Sempra’s results of operations, financial condition, cash flows and/or prospects.

Cost Estimate, Insurance and Accounting and Other Impacts

At December 31, 2022, SoCalGas estimates certain costs related to the Leak are $3,486 million (the cost estimate), including $1,279 million of costs recovered from insurance. Other than insurance for directors’ and officers’ liability, we have exhausted all of our insurance for this matter. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. At December 31, 2022, $129 million of the cost estimate is accrued in Reserve for Aliso Canyon Costs and $4 million of the cost estimate is accrued in Deferred Credits and Other on SoCalGas’ and Sempra’s Consolidated Balance Sheets.

The civil litigation that remains pending against us related to the Leak seeks compensatory, statutory and punitive damages, restitution, and civil and administrative fines, penalties and other costs. We also could be subject to damages, fines or other penalties as a result of the pending regulatory investigation related to the Leak. Except for the amounts paid or estimated to settle

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certain pending legal and regulatory matters as we describe in Note 16 of the Notes to Consolidated Financial Statements, the cost estimate does not include any amounts necessary to resolve pending litigation or regulatory proceedings, other potential litigation or other costs, in each case to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the possible costs or a range of possible costs. Further, we are not able to reasonably estimate the possible loss or a range of possible losses in excess of the amounts accrued. The costs or losses not included in the cost estimate could be significant and could have a material adverse effect on SoCalGas’ and Sempra’s results of operations, financial condition, cash flows and/or prospects.

Any failure by the CPUC to adequately reform SDG&E’s rate structure could have a material adverse effect on SDG&E and Sempra.

The NEM program is an electric billing tariff mechanism designed to promote the installation of on-site renewable generation (primarily solar installations) for residential and business customers. Depending on when the on-site generation was 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.

The current electric residential rate structure in California is primarily based on consumption volume, which places a higher rate burden on customers with higher electric use while subsidizing lower-use customers. In August 2020, the CPUC initiated a rulemaking to further develop a successor to the existing NEM tariff. In November 2022, a previous proposed decision was withdrawn and a new proposed decision was issued, recommending substantial reform of the NEM program through the establishment of a new Net Billing Tariff that would apply to new net metered customers. The new Net Billing Tariff revises the current 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 December 2022, the CPUC approved the new Net Billing Tariff for customers who interconnect their qualifying on-site renewable generation after April 14, 2023. Additionally, in response to California legislation adopted in 2022, the CPUC has initiated a rulemaking to broadly restructure the way fixed costs are collected, moving from volumetric charges to an income-graduated fixed charge for default residential rates by July 1, 2024. The intent of such a fixed charge would be to further help reduce cost shifts through an equitable approach to the distribution of electric costs. Depending on the effectiveness of the new Net Billing Tariff and any new rules related to fixed charges, which are uncertain, the risks associated with the existing NEM tariff could continue or increase.

SDG&E believes the establishment of a charge independent of consumption volume for residential customers is critical to help distribute rates among all customers that rely on the electric transmission and distribution system, including those participating in the NEM program. The absence of a charge independent of consumption volume coupled with the continuing increase of solar installation and other forms of self-generation, as well as the progression of DER and energy efficiency initiatives that could also reduce delivered volumes, could adversely impact electricity rates and the reliability of the electric transmission and distribution system. Any such impact could subject SDG&E to increased customer dissatisfaction, increased likelihood of noncompliance with CPUC or other safety or operational standards and increased risks attendant to any such noncompliance, as we discuss above, as well as increased costs, including power procurement, operating and capital costs, and potential disallowance of recovery for these costs.

If the CPUC does not continue to adequately reform SDG&E’s residential rate structure for all customers to better achieve reasonable, cost-based electric rates that are competitive with alternative sources of power and adequate to maintain the reliability of the electric transmission and distribution system, such failure could have a material adverse effect on SDG&E’s and Sempra’s results of operations, financial condition, cash flows and/or prospects.

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RISKS RELATED TO SEMPRA TEXAS UTILITIES

Operational and Structural Risks

Certain ring-fencing measures, governance mechanisms and commitments limit our ability to influence the management, operations and policies of Oncor.

Various “ring-fencing” measures, governance mechanisms and commitments are in place that create legal and financial separation between Oncor Holdings, Oncor and their subsidiaries, on the one hand, and Sempra and its affiliates and subsidiaries, on the other hand. These measures are designed to enhance Oncor’s separateness from its owners and mitigate the risk that Oncor would be negatively impacted by a bankruptcy or other adverse financial development affecting its owners. These measures subject us and Oncor to various restrictions, including:

▪seven members of Oncor’s 13-person board of directors must be independent directors in all material respects under the rules of the NYSE in relation to Sempra and its affiliates and any other owners of Oncor, and also must have no material relationship with Sempra or its affiliates or any other owners of Oncor currently or within the previous 10 years; of the six remaining directors, two must be designated by Sempra, two must be designated by Oncor’s minority owner, TTI, and two must be current or former Oncor officers

▪Oncor will not pay dividends or other distributions (except for contractual tax payments) if (i) a majority of Oncor’s independent directors or any of the directors appointed by TTI determines that it is in the best interest of Oncor to retain such amounts to meet expected future requirements, (ii) the payment would cause Oncor’s debt-to-equity ratio to exceed the debt-to-equity ratio approved by the PUCT, or (iii) unless otherwise allowed by the PUCT, Oncor’s senior secured debt credit rating by any of the Rating Agencies falls below BBB (or Baa2 for Moody’s)

▪there must be certain “separateness measures” maintained to reinforce the legal and financial separation of Oncor from Sempra, including a requirement that dealings between Oncor and Sempra or Sempra’s affiliates (other than Oncor Holdings and its subsidiaries) must be on an arm’s-length basis, limitations on affiliate transactions and a prohibition on pledging Oncor assets or membership interests for any entity other than Oncor

▪a majority of Oncor’s independent directors and the directors designated by TTI that are present and voting (with at least one required to be present and voting) must approve any annual or multi-year budget if the aggregate amount of capital expenditures or O&M in the budget differs by more than 10% from the corresponding amounts in the budget for the preceding fiscal year or multi-year period, as applicable

As a result of these measures, we do not control Oncor Holdings or Oncor, and we have limited ability to direct the management, policies and operations of Oncor Holdings and Oncor, including the deployment or disposition of their assets, declarations of dividends, strategic planning and other important matters. We have limited representation on the Oncor Holdings and Oncor boards of directors, which are each controlled by independent directors. Moreover, all directors of Oncor, including the directors we have appointed, have considerable autonomy and have a duty to act in the best interest of Oncor consistent with the approved ring-fence and Delaware law, which may in some cases be contrary to our interests. To the extent the directors approve or Oncor otherwise pursues actions that are not in our interest, our results of operations, financial condition, cash flows and/or prospects may be materially adversely affected.

Industry-Related Risks

Changes in the regulation or operation of the electric utility industry and/or the ERCOT market, as well as the outcome of regulatory proceedings, could materially adversely affect Oncor, which could materially adversely affect us.

Oncor operates in the electric utility industry and, as a result, it is subject to many of the same or similar risks as Sempra California as we describe above under “Risks Related to Sempra California,” particularly with respect to regulation by federal, state, and local legislative and regulatory authorities regarding rates and other financial matters as well as operational matters. Oncor operates in the ERCOT market. In ERCOT, rates are set by the PUCT based on a historical test year, and as a result, the rates Oncor is allowed to charge generally will not exactly match its costs at any given point in time and there is no assurance that it will be able to earn its full return on invested capital. Further, the PUCT may not approve all items requested by Oncor in any rate proceeding, such as Oncor’s base rate review currently pending with the PUCT, including, among other things, recovery of all costs in rates, capital structure and authorized ROE. Failure to receive approval of its requests in any rate proceeding could adversely impact Oncor, which could adversely impact us, and those impacts could potentially be material.

The costs and burdens associated with complying with the various legislative and regulatory requirements to which Oncor is subject at the federal, state, and local levels and adjusting Oncor’s business and operations in response to legislative and

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regulatory developments, including changes in ERCOT, and any fines or penalties that could result from any noncompliance, may have a material adverse effect on Oncor. In addition, any economic weakness in the ERCOT market or slowing growth in Oncor’s service territory could lead to reduced electricity demand, which could materially adversely affect Oncor. Moreover, legislative, regulatory, market or industry activities could adversely impact Oncor’s collections and cash flows and jeopardize the predictability of utility earnings. For instance, the PUCT has instituted various projects reviewing the regulatory framework regarding DER and other non-traditional technologies. As DER usage continues to grow, regulatory decisions made with respect to DER, including with respect to ERCOT market rules and transmission and distribution utilities’ ability to invest in non-traditional electricity delivery solutions, could adversely impact Oncor’s revenues and operations. If Oncor does not successfully respond to any legislative, regulatory, market or industry changes applicable to it, Oncor could suffer a deterioration in its results of operations, financial condition, cash flows and/or prospects, which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Financial Risks

Oncor could have liquidity needs that necessitate additional investments.

Oncor’s business is capital-intensive, with significant capital spending expected in future periods, and it relies on external financing as a significant source of liquidity for its capital requirements. In the past, Oncor has financed much of its cash needs from operations and with proceeds from indebtedness, but these sources of capital may not be adequate or available on reasonable terms or at reasonable prices in the future. Because our commitments to the PUCT prohibit us from making loans to Oncor, we may elect to make capital contributions to Oncor if it fails to meet its capital requirements or is unable to access sufficient capital from other sources to finance its ongoing needs. Any such investments could be substantial, would reduce the cash available to us for other purposes, and could increase our indebtedness, any of which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Sempra could incur substantial tax liabilities if EFH’s 2016 spin-off of Vistra is deemed to be taxable.

As part of its ongoing bankruptcy proceedings, in 2016, EFH distributed all the outstanding shares of common stock of its subsidiary Vistra Energy Corp. (formerly TCEH Corp. and referred to herein as Vistra) to certain creditors of TCEH LLC (the spin-off), and Vistra became an independent, publicly traded company. Vistra’s spin-off from EFH was intended to qualify for partially tax-free treatment to EFH and its shareholders under Sections 368(a)(1)(G), 355 and 356 of the U.S. Internal Revenue Code of 1986 (as amended) (collectively referred to as the Intended Tax Treatment). In connection with and as a condition to the spin-off, EFH received a private letter ruling from the IRS regarding certain issues relating to the Intended Tax Treatment, as well as tax opinions from counsel to EFH and Vistra regarding certain aspects of the spin-off not covered by the private letter ruling.

In connection with the signing and closing of the merger of EFH (now Sempra Texas Holdings Corp. and a subsidiary of Sempra) with an indirect subsidiary of Sempra (the Merger), EFH sought and received a supplemental private letter ruling from the IRS and Sempra and EFH received tax opinions from their respective counsels that generally provide that the Merger will not affect the conclusions reached in, respectively, the IRS private letter ruling and tax opinions issued with respect to the spin-off described above. Similar to the IRS private letter ruling and opinions issued with respect to the spin-off, the supplemental private letter ruling is generally binding on the IRS and any opinions issued with respect to the Merger are based on factual representations and assumptions, as well as certain undertakings, made by Sempra and EFH. If such representations and assumptions are untrue or incomplete, any such undertakings are not complied with, or the facts upon which the IRS supplemental private letter ruling or tax opinions (which will not impact the IRS position on the transactions) are based are different from the actual facts relating to the Merger, the tax opinions and/or supplemental private letter ruling may not be valid and could be challenged by the IRS. Even though Sempra Texas Holdings Corp. would have administrative appeal rights if the IRS were to invalidate its private letter ruling and/or supplemental private letter ruling, including the right to challenge any adverse IRS position in court, any such appeal would be subject to uncertainties and could fail. If it is ultimately determined that the Merger caused the spin-off not to qualify for the Intended Tax Treatment, Sempra, through its ownership of Sempra Texas Holdings Corp., could incur substantial tax liabilities, which would materially reduce the value associated with our indirect investment in Oncor and could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

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RISKS RELATED TO SEMPRA INFRASTRUCTURE

Operational Risks

Project development activities may not be successful, projects under construction may not be completed on schedule or within budget, and completed projects may not operate at expected levels, any of which could materially adversely affect us.

All 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 is contingent upon, 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 that may need to be accomplished before we can determine whether the project is feasible or economically attractive

▪project assessment and design and our ability to foresee and incorporate new and developing trends and technologies in the energy industry, such as our pursuit of projects and design solutions to help enable our and our customers’ climate goals

▪our ability to reach a final investment decision or meet other milestones, which may be influenced by external factors outside our control, including the global economy and energy and financial markets, actions by regulators, achieving necessary internal and external approvals from project partners (if applicable) and others, and many of the other factors described in this risk factor

▪negotiation of satisfactory EPC agreements, including any renegotiation that may be required in the event of delays in final investment decisions or failures to meet other specified deadlines

▪progressing relationships from MOUs, HOAs or similar arrangements, which are non-binding and generally do not impose obligations on any of the parties, to execution of definitive agreements and participation in the project

▪identification of suitable partners, customers, suppliers and other necessary counterparties, negotiation of satisfactory equity, purchase, sale, supply, transportation and other appropriate commercial agreements, and satisfaction of any conditions to effectiveness of such agreements, including reaching a positive final investment decision within agreed timelines

▪timely receipt and maintenance of required governmental permits, licenses and other authorizations that do not impose material conditions and are otherwise granted under terms we find reasonable

▪our project partners’, contractors’ and other counterparties’ willingness and financial or other ability to make their required investments or fulfill their contractual commitments on a timely basis

▪timely, satisfactory and on-budget completion of construction, which could be negatively affected by engineering problems, work stoppages, unavailability or increased costs of materials, equipment, labor and commodities due to inflation or supply chain or other issues, contractor nonperformance 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 that impact our infrastructure or the energy sector generally

▪obtaining adequate and reasonably priced financing for the project, particularly in light of rising inflation and interest rates

▪the absence of hidden defects or inherited environmental liabilities for the site of the project

▪fast and cost-effective resolution of any litigation or unsettled property rights affecting the project

▪geopolitical events and other uncertainties, such as the war in Ukraine

Any failures with respect to the above factors or other factors material 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 never recover or 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 are able to complete involves many risks, including the potential for unforeseen design flaws, engineering challenges, equipment failures or the breakdown for other reasons of facilities, equipment or processes; labor disputes; fuel interruption; environmental contamination; 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 for an extended period of time 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.

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LNG Export Projects

In addition to the risks described above that are applicable to all our energy infrastructure projects, we are exposed to additional risks in connection with our LNG export projects, including the ECA LNG Phase 1 project under construction and our potential development of additional LNG export facilities. We discuss our LNG export projects in “Part II – Item 7. MD&A – Capital Resources and Liquidity – Sempra Infrastructure.” Each of these projects faces numerous risks. Our ability to reach a final investment decision for each project and, if a positive decision is made and a project is completed, the overall success of the project are dependent on global energy markets, including natural gas and oil supply, demand and pricing, the ability to reach advantageous agreements with our counterparties, including our partners, off-takers, and EPC contractors, risks inherent in construction, and the ability to obtain and maintain government approvals, among other things. In general, depressed natural gas and LNG prices in the markets we intend to serve due to shifts in supply or other factors could reduce the pricing and cost advantages of exporting domestically produced natural gas and LNG, which could lead to decreased demand. In addition, global oil prices and their associated current and forward projections could reduce demand for natural gas and LNG in some sectors. Although demand for natural gas is currently strong due to the geopolitical consequences of the war in Ukraine and increased recognition of the importance of energy security, a reduction in natural gas demand could also occur from higher penetration of alternative fuels in new power generation, or as a result of calls by some to limit or eliminate reliance on natural gas as an energy source globally. Oil prices could also make LNG projects in other parts of the world more feasible and competitive with LNG projects in North America, thus increasing supply and competition for any available LNG demand. Moreover, because LNG projects take a number of years to develop and construct, it is difficult to match current and expected demand with the projected supply from projects under development. Any of these occurrences could impact competition and prospects for developing LNG export projects and negatively affect the performance and prospects of any of our projects that are or become operational.

Our projects may 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 financing agreements for the Cameron LNG Phase 1 facility and requires unanimous consent of all JV members, including with respect to the equity investment obligations of each partner. We may not be able to satisfy these conditions and requirements, 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 ongoing land and permit disputes that could obstruct efforts to find or maintain suitable partners, customers and financing arrangements and hinder or halt construction and, if the projects are completed, operations. We discuss these risks below and under “Risks Related to Sempra Infrastructure – Legal Risks.” In addition, the Mexican regulatory process and overlay of U.S. regulation for natural gas exports to LNG facilities in Mexico are not well developed, which, among other factors, contributed to delays 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 and lead to difficulties finding or maintaining suitable partners, customers and financing arrangements. We have entered into contracts with affiliates and third parties, subject to certain conditions, to supply and transport gas across the U.S.-Mexico border to meet the requirements of the ECA LNG Phase 1 project if and when it becomes operational. If affiliates or third parties experience delays or fail to obtain and maintain necessary permits and arrangements to provide such supply or transportation services or if we fail to maintain adequate gas supply and transportation agreements to support the project fully, it could cause additional costs or delays to the ECA LNG Phase 1 project. Finally, although we have planned measures to not disrupt operations at the ECA Regas Facility with the construction or operation of the ECA LNG Phase 1 project, these measures may not be effective. Moreover, we expect construction of the proposed ECA LNG Phase 2 project to conflict with ECA Regas Facility operations, making the decisions on whether, when and how to pursue the ECA LNG Phase 2 project dependent in part on whether the investment in this project would, over the long term, be more beneficial than continuing to provide regasification services under existing contracts for 100% of the ECA Regas Facility’s capacity through 2028.

▪The PA LNG projects in development are to be located at a greenfield site and therefore are subject to disadvantages relative to projects being developed at brownfield sites, including increased time and costs to develop and construct the project.

Development of these or any other LNG export projects will depend on the ability of our existing pipeline interconnections to be expanded 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. We and third parties may not be able to successfully develop and construct such new pipeline facilities, or we may not be able to secure such additional pipeline interconnections on commercially reasonable terms or at all.

The capital requirements for LNG export projects that we decide to pursue can be significant, even if we ultimately decide not to make a positive final investment decision. In addition, 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.

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Financing Arrangements

We may become involved in various financing arrangements with respect to any of our energy infrastructure projects, such as guarantees, indemnities or loans. These arrangements could expose us to additional risks, including exposure to losses upon the occurrence of certain events related to the development, construction, operation or financing of the applicable projects that could have a material adverse effect on our future results of operations, financial condition, cash flows and/or prospects.

We are dependent on the equipment provided by third parties to operate the Cameron LNG Phase 1 facility and the failure of such equipment may adversely impact our business and performance.

Cameron LNG JV has experienced operating issues with equipment provided by third-party vendors, which have caused reductions in operating capacity and the declaration of force majeure events by Cameron LNG JV under its tolling agreements for its Cameron LNG Phase 1 facility. Certain of Cameron LNG JV’s customers have raised objections regarding these force majeure declarations, and Cameron LNG JV’s customers may raise objections in the future regarding these declarations or other force majeure declarations for similar operating issues. Cameron LNG JV’s customers have obtained certain, and may in the future obtain additional, quantities of excess LNG production in connection with these and certain other force majeure events, and future force majeure events may also lead to the additional accrual of similar rights. The requirement to deliver excess LNG production to these customers in connection with these force majeure events has had, and in the future could have, an adverse impact on Sempra Infrastructure’s and our business and cash flows because Cameron LNG JV loses fees related to the excess production.

These and other operational issues arising from equipment or facilities provided by third-party vendors may require us to undertake remediation, repair or equipment replacement activities that could result in reductions or cessations in production from our facilities. Although we are seeking to enforce warranty and other claims against our EPC contractors and other equipment vendors and suppliers, we may face challenges in successfully enforcing these claims against these third parties. Any such occurrence could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Fixed-price long-term contracts for services or commodities expose our businesses to inflationary pressures.

Sempra Infrastructure seeks to secure long-term contracts for services and commodities in an effort to optimize the use of its facilities, reduce volatility in earnings and support the construction of new infrastructure. If these contracts are at fixed prices, their profitability may be negatively affected by inflationary pressures, including increased labor, materials, equipment, commodities and other operational costs, rising interest rates that affect financing costs and changes in applicable exchange rates. We may try to mitigate these risks by, among other things, using variable pricing tied to market indices, anticipating and providing for cost escalation when bidding on projects, 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 caused by inflationary pressures 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.

Increased competition could materially adversely affect us.

The markets in which we operate are characterized by numerous strong and capable competitors, many of which have extensive and diversified development and/or operating experience domestically and internationally and financial resources similar to or greater than ours. In particular, the natural gas pipeline, storage and LNG market segments recently have been characterized by strong and increasing competition for winning new development projects and acquiring existing assets. In addition, our Mexican natural gas distribution business faces increased competition now that its former exclusivity period with respect to its distribution zones has expired and other distributors are legally permitted to build and operate natural gas distribution systems and compete to attract customers in the locations where it operates. These competitive factors could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

We may not be able to enter into, maintain, extend or replace long-term supply, sales or capacity agreements.

The ECA Regas Facility has long-term capacity agreements with a limited number of counterparties, and also may enter into short-term and/or long-term supply agreements to purchase LNG to be received, stored and regasified for sale to other parties. In addition, Cameron LNG JV has long-term liquefaction and regasification tolling agreements with three counterparties that collectively subscribe for the full nameplate capacity of the Cameron LNG Phase 1 facility. The long-term nature of these agreements and the small number of customers at each of these facilities exposes us to risks, including increased risk if these counterparties fail to meet their contractual obligations on a timely basis, increased credit risks, and risks associated with the long-term nature of our relationships with these counterparties, including increased impacts of disputes or other similar issues which we have experienced in the past. Any such issues that arise in the future with respect to our long-term contracts, including any that may be caused by or related to the war in Ukraine, could lead to significant legal and other costs, result in cancelation of certain key contracts or otherwise adversely affect our relationships with long-term customers, suppliers or partners, and could negatively

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impact the reliability of revenues from the applicable projects and the prospects for any implicated development projects. Any such event could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure’s ability to enter into new or replace existing long-term capacity agreements for its natural gas pipeline operations is dependent on, among other factors, demand for and supply of LNG and/or natural gas from its transportation customers, which may include our LNG export facilities. A decrease in demand for or supply of LNG or natural gas from such customers or the occurrence of other events that hinder Sempra Infrastructure from maintaining such agreements or establishing new ones could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

The electric generation and wholesale power sales industries are highly competitive. As more plants are built, supplies of energy and related products may exceed demand, competitive pressures may increase and wholesale electricity prices may decline or become more volatile. Without long-term power sales agreements, our revenues may be subject to increased volatility, and we may be unable to sell the power that Sempra Infrastructure’s facilities are capable of producing or sell it at favorable prices, any of which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

We rely on transportation assets and services, much of which we do not own or control, to deliver natural gas and electricity.

We depend on electric transmission lines, natural gas pipelines and other transportation facilities and services owned and operated by third parties to, among other things:

▪deliver the natural gas, LNG, electricity and LPG we sell to customers or use for our LNG export facilities

▪supply natural gas to our gas storage and electric generation facilities

▪provide retail energy services to customers

If transportation is disrupted, if the construction of new or modified interconnecting infrastructure is not completed on schedule or if capacity is inadequate, we may not be able to move forward with our projects on schedule, we may be unable to sell and deliver our commodities, electricity and other services to our customers, we may be responsible for damages incurred by these customers, such as the cost of acquiring alternative supplies at then-current spot market rates, and we could lose customers that may be difficult to replace in competitive market conditions. Any such occurrence could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Financial Risks

Our international businesses and operations expose us to foreign currency and inflation risks.

Our operations in Mexico pose foreign currency and inflation risks. Exchange and inflation rates with respect to the Mexican peso and fluctuations in those rates may have an impact on the revenue, costs and cash flows from our international operations, which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. We may 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 before 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.”

Our businesses are exposed to market risks, including fluctuations in commodity prices, that could materially adversely affect us.

We buy energy-related commodities from time to time for pipeline operations, LNG facilities or power plants to satisfy contractual obligations with customers. The regional and other markets in which we purchase these commodities are competitive and can be subject to significant pricing volatility as a result of many factors, including adverse weather conditions, supply and demand changes, availability of competitively priced alternative energy sources, commodity production levels and storage capacity, energy and environmental legislation and regulations, and economic and financial market conditions. Our results of operations, financial condition, cash flows and/or prospects could be materially adversely affected if the prevailing market prices for natural gas, LNG, electricity or other commodities we buy change in a direction or manner not anticipated and for which we have not provided adequately through purchase or sale commitments or other hedging transactions.

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Legal and Regulatory Risks

Our international businesses and operations expose us to increased legal, regulatory, tax, economic, geopolitical and management oversight risks and challenges.

Overview

We own or have interests in a variety of energy infrastructure assets in Mexico, and we do business with companies based in foreign markets, including particularly our LNG export operations. Conducting these activities in foreign jurisdictions subjects us to complex management, security, political, legal, economic and financial risks that vary by country, many of which may differ from and potentially be greater than those associated with our wholly domestic businesses, and 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. These risks include the following and the other risks discussed in this risk factor below:

▪compliance with tax, trade, environmental and other foreign laws and regulations, including legal limitations on ownership in some foreign countries and inadequate or inconsistent enforcement of regulations

▪actions by local regulatory bodies, including setting rates and tariffs that may be earned by or charged to our businesses

▪adverse changes in social, political, economic or market conditions or the stability of foreign governments

▪adverse rulings by foreign courts or tribunals; challenges to or difficulty obtaining, maintaining and complying with permits or approvals; difficulty enforcing contractual and property rights; differing legal standards for lawsuits or other proceedings; and unsettled property rights and titles in Mexico

▪expropriation or theft of assets

▪with respect to our non-utility international business activities, changes in the priorities and budgets of international customers, which may be driven by many of the factors listed above, among others

Mexican Government Influence on Economic and Energy Matters

The Mexican government exercises significant and increasing influence over the Mexican economy and energy sector and has adopted or proposed additional changes that, in each case, could fundamentally impact private investment in this sector.

Mexican governmental actions in the past several years in the electricity market include resolutions, orders, decrees, regulations and proposed and adopted amendments to Mexican law that could, among other things, threaten the prospects for private-party renewable energy generation in the country, limit the ability to dispatch renewable energy and receive or maintain operational permits, and increase costs of electricity for legacy renewables and cogeneration energy contract holders. The President of Mexico also proposed constitutional reform in September 2021 that would have eliminated the wholesale electricity market in Mexico and significantly limited the ability of private parties to participate in electricity generation. Although the proposed constitutional reform did not reach the two-third majority required for its approval and was therefore rejected by Mexico’s Chamber of Deputies, other similar reforms to centralize and de-privatize the electricity market in Mexico could be proposed in the future.

With respect to midstream and downstream activities, amendments to Mexico’s Hydrocarbons Law that give SENER and the CRE additional powers to suspend and revoke permits became effective in May 2021. The amendments provide that suspension of permits will be determined by SENER or the CRE when a danger to national security, energy security, or the national economy is foreseen, and also provide new grounds for the revocation of permits under certain other circumstances related to a permit holder’s use of illegally imported products, failure to comply with provisions applicable to quantity, quality and measurement of products, or unauthorized modification of the technical condition of its infrastructure. Additionally, the amendments direct authorities to revoke permits that fail to comply with certain minimum storage and other requirements or violate provisions established by SENER or the amended Hydrocarbons Law, as applicable.

We discuss these Mexican governmental actions in Note 16 of the Notes to Consolidated Financial Statements. We cannot predict whether proposed governmental actions will ultimately be passed or otherwise become effective in their current forms, nor can we predict the nature or level of their impact on the various segments of the energy sector in which we participate. We also cannot predict whether pending actions to enjoin enforcement or suspend or overturn existing laws and other governmental actions will be successful. More generally, we cannot predict the impact that the political, social and judicial landscape in Mexico will have on that country’s economy and energy sector and our business in Mexico. If any of the proposed governmental actions are passed or otherwise become effective, if efforts to enjoin enforcement or suspend or overturn adopted governmental actions fail, or if other similar moves by the Mexican government are taken to curb private-party participation in the energy sector, including through further amendments to Mexican laws, rules or the constitution or increased investigative and enforcement activities, it may impact our ability to operate our facilities at existing levels or at all, may result in increased costs for Sempra Infrastructure and its customers, may adversely affect our ability to develop new projects, may result in decreased revenues and cash flows, and may

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negatively impact our ability to recover the carrying values of our investments in Mexico, any of which may have a material adverse effect on our business, results of operations, financial condition, cash flows and/or prospects.

U.S. and Mexican Laws and Foreign Policy, including Trade and Related Matters

Our international business activities are subject to U.S. and Mexican laws and regulations related to foreign operations or doing business internationally, including the U.S. Foreign Corrupt Practices Act, the Mexican Federal Anticorruption Law in Public Contracting (Ley Federal Anticorrupción en Contrataciones Públicas) and similar laws, and are sensitive to U.S. and Mexican foreign policy, trade policy and other geopolitical factors. The current and the last U.S. Administrations have taken different stances with respect to international trade agreements, tariffs, immigration policy and other matters of foreign policy that impact trade and foreign relations. Shifts in foreign policy could result in or increase adverse effects on our businesses and create uncertainty, making it difficult to predict the impact these policies could have on our businesses. Violations or alleged violations of the laws referred to above, as well as foreign policy positions that adversely affect imports and exports between the U.S., Mexican and other economies and foreign companies with whom we conduct business, could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

Our businesses are subject to various legal actions challenging our property rights and permits, and our properties in Mexico could be subject to expropriation by the Mexican government.

We are engaged in disputes regarding our title to the property in Mexico where our ECA Regas Facility is situated and our ECA LNG projects under construction and in development are expected to be situated, which we discuss in Note 16 of the Notes to Consolidated Financial Statements. In addition, we may have or seek to obtain long-term leases or rights-of-way from governmental agencies or other third parties to operate our energy infrastructure on land we do not own. In addition to the risks associated with such property ownership and use that we describe above under “Risks Related to All Sempra Businesses – Operational Risks,” disputes regarding any of these properties could lead to difficulties finding or maintaining suitable partners, customers and project financing arrangements and could hinder or halt our ability to construct and, if completed, operate the affected facilities or proposed projects. Any of these outcomes could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure’s energy infrastructure assets may be considered by the Mexican government to be a public service or essential for the provision of a public service, in which case these assets and the related businesses could be subject to expropriation or nationalization, loss of concessions, renegotiation or annulment of existing contracts, and other similar risks. Any such occurrence could materially adversely affect our results of operations, financial condition, cash flows and/or prospects.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We own or lease land, warehouses, offices, operating and maintenance centers, shops and service facilities necessary to conduct our businesses. Each of our operating segments currently has adequate space and, if we need more space, we believe it is readily available. We discuss properties related to our electric, natural gas and energy infrastructure operations in “Part I – Item 1. Business” and Note 1 of the Notes to Consolidated Financial Statements.

ITEM 3. LEGAL PROCEEDINGS

We are not party to, and our property is not the subject of, any material pending legal proceedings (other than ordinary routine litigation incidental to our businesses) except for the matters described in Notes 15 and 16 of the Notes to Consolidated Financial Statements, “Part I – Item 1A. Risk Factors” and “Part II – Item 7. MD&A.”

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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

Sempra Common Stock

Our common stock is traded on the NYSE under the trading symbol SRE and the Mexican Stock Exchange under the trading symbol SRE.MX. At February 21, 2023, there were approximately 21,229 record holders of our common stock. Information concerning dividend declarations for Sempra is included in “Part II – Item 7. MD&A – Capital Resources and Liquidity – Sources and Uses of Cash – Dividends.”

SoCalGas and SDG&E Common Stock

Information concerning dividend declarations for SoCalGas and SDG&E is included in “Part II – Item 7. MD&A – Capital Resources and Liquidity – Sources and Uses of Cash – Dividends.”

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

On July 6, 2020, our board of directors authorized the repurchase of shares of our common stock at any time and from time to time in an aggregate amount not to exceed the lesser of $2 billion or amounts spent to purchase no more than 25 million shares. This repurchase authorization was publicly announced on August 5, 2020 and has no expiration date. As of February 28, 2023, a maximum of $1.25 billion and no more than 19,632,529 shares may yet be purchased under this repurchase authorization.

We may also, from time to time, purchase shares of our common stock to which participants would otherwise be entitled from LTIP participants who elect to sell a sufficient number of shares in connection with the vesting of RSUs and stock options in order to satisfy minimum statutory tax withholding requirements.

ITEM 6. (RESERVED)

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Our 2022 operational and financial results reflect our mission to be North America’s premier energy infrastructure company. Key events in 2022 include:

▪SDG&E and SoCalGas filed their 2024 GRC applications and a CPUC proposed decision is scheduled for the second quarter of 2024

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▪SDG&E and SoCalGas received final decisions from the CPUC on their cost of capital for 2023 through 2025, and SDG&E received a final decision on its cost of capital for 2022

▪SoCalGas made significant progress to substantially resolve legal and regulatory matters pertaining to the Leak

▪Oncor filed its comprehensive base rate review and expects to receive a final order from the PUCT around the end of the first quarter of 2023

▪Sempra Infrastructure completed the sale of a 10% NCI in SI Partners to ADIA

▪Sempra Infrastructure advanced development of the PA LNG projects and Cameron LNG Phase 2 project and expects to make a final investment decision for the PA LNG Phase 1 project in the first quarter of 2023

▪We invested $5.7 billion in capital expenditures and investments

▪We completed $450 million of common stock repurchases pursuant to ASR programs

Our former South American businesses and certain activities associated with those businesses are presented as discontinued operations. Nominal activities that are not classified as discontinued operations have been subsumed into Parent and other. We completed the sales of these businesses in the second quarter of 2020.

RESULTS OF OPERATIONS

We discuss the following in Results of Operations:

▪Overall results of operations of Sempra;

▪Segment results;

▪Significant changes in revenues, costs and earnings; and

▪Impact of foreign currency and inflation rates on results of operations.

We discuss herein our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021. For a discussion of our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to “Part II – Item 7. MD&A – Results of Operations” in our 2021 annual report on Form 10-K filed with the SEC on February 25, 2022.

OVERALL RESULTS OF OPERATIONS OF SEMPRA


OVERALL RESULTS OF OPERATIONS OF SEMPRA
(Dollars and shares in millions, except per share amounts)

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Our earnings and diluted EPS were impacted by variances discussed below in “Segment Results.”

SEGMENT RESULTS

This section presents earnings (losses) by Sempra segment, as well as Parent and other and discontinued operations, and a related discussion of the changes in segment earnings (losses). Throughout the MD&A, our reference to earnings represents earnings attributable to common shares. Variance amounts presented are the after-tax earnings impact (based on applicable statutory tax rates), unless otherwise noted, and before foreign currency and inflation effects and NCI, where applicable.

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SEMPRA EARNINGS (LOSSES) BY SEGMENT
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
SDG&E	$	915	$	819	$	824
SoCalGas	599		(427)		504
Sempra Texas Utilities	736		616		579
Sempra Infrastructure	310		682		580
Parent and other(1)	(466)		(436)		(563)
Discontinued operations	—		—		1,840
Earnings attributable to common shares	$	2,094	$	1,254	$	3,764

(1) Includes intercompany eliminations recorded in consolidation and certain corporate costs.

SDG&E

The increase in earnings of $96 million (12%) in 2022 compared to 2021 was primarily due to:

▪$56 million higher CPUC base operating margin, net of operating expenses;

▪$26 million lower income tax expense primarily from flow-through items, net of lower associated regulatory revenues;

▪$20 million higher income tax benefit from the resolution of prior year income tax items;

▪$9 million higher net regulatory interest income; and

▪$7 million higher AFUDC equity; offset by

▪$26 million higher net interest expense.

SoCalGas

Earnings of $599 million in 2022 compared to losses of $427 million in 2021 was primarily due to:

▪$949 million decrease in charges relating to litigation and regulatory matters pertaining to the Leak comprised of $199 million in 2022 compared to $1,148 million in 2021;

▪$105 million higher CPUC base operating margin, net of operating expenses;

▪$7 million higher AFUDC equity; and

▪$6 million higher net regulatory interest income; offset by

▪$26 million higher net interest expense; and

▪$10 million in penalties related to the energy efficiency and advocacy OSCs, which we discuss in Note 4 of the Notes to Consolidated Financial Statements.

Sempra Texas Utilities

The increase in earnings of $120 million (19%) in 2022 compared to 2021 was primarily due to higher equity earnings from Oncor Holdings driven by:

▪higher revenues from rate updates to reflect increases in invested capital, higher customer consumption attributable primarily to weather, and customer growth; offset by

▪higher depreciation expense and interest expense attributable to invested capital; and

▪higher O&M.

Sempra Infrastructure

The decrease in earnings of $372 million in 2022 compared to 2021 was primarily due to:

▪$283 million losses in 2022 compared to $148 million earnings in 2021 from asset and supply optimization driven by higher unrealized losses on commodity derivatives due to changes in natural gas prices, offset by higher diversion revenues;

▪$169 million unfavorable impact from foreign currency and inflation effects on our monetary positions in Mexico, net of foreign currency derivative effects, comprised of a $216 million unfavorable impact in 2022 compared to a $47 million unfavorable impact in 2021; and

▪$13 million selling profit on a sales-type lease relating to the commencement of a rail facility lease at the Veracruz terminal in 2021; offset by

▪$79 million higher equity earnings from Cameron LNG JV primarily from higher revenues from excess LNG production and maintenance revenues;

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▪$50 million higher net income tax benefit primarily from the remeasurement of certain deferred income taxes and outside basis differences in JV investments;

▪$50 million lower net interest expense, including $37 million in charges associated with hedge termination costs and a write-off of unamortized debt issuance costs from the early redemptions of debt in October 2021 and $27 million net unrealized gains in 2022 on a contingent interest rate swap related to the proposed PA LNG Phase 1 project that we discuss in Note 11 of the Notes to Consolidated Financial Statements;

▪$42 million higher earnings from the transportation business in Mexico driven by higher rates and higher equity earnings at IMG excluding unfavorable impact from foreign currency and inflation;

▪$14 million higher earnings due to the start of commercial operations of the Veracruz and Mexico City terminals in March and July of 2021, respectively, and remeasurement of operating leases;

▪$12 million higher earnings from the renewables business due to Border Solar and the second phase of ESJ being placed in service in March 2021 and January 2022, respectively; and

▪$10 million higher earnings from TdM driven by higher power prices offset by lower volumes.

Parent and Other

The increase in losses of $30 million (7%) in 2022 compared to 2021 was primarily due to:

▪$120 million deferred income tax expense associated with the change in our indefinite reinvestment assertion related to our foreign subsidiaries, which we discuss in Note 8 of the Notes to Consolidated Financial Statements;

▪$50 million net investment losses in 2022 compared to $29 million net investment gains in 2021 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation obligations;

▪$50 million equity earnings in 2021 related to our investment in RBS Sempra Commodities to settle pending VAT matters and related legal costs; and

▪$26 million gain on the sale of PXiSE in December 2021; offset by

▪$92 million in charges associated with make-whole premiums and a write-off of unamortized discount and debt issuance costs from the early redemptions of debt in December 2021;

▪$72 million net income tax expense related to the utilization of a deferred income tax asset upon completing the sale of a 20% NCI in SI Partners to KKR in October 2021;

▪$49 million income tax benefit in 2022 compared to $9 million income tax expense in 2021 from changes to a valuation allowance against certain tax credit carryforwards; and

▪$19 million lower preferred dividends due to the mandatory conversion of all series B preferred stock in July 2021.

SIGNIFICANT CHANGES IN REVENUES, COSTS AND EARNINGS

This section contains a discussion of the differences between periods in the specific line items of the Consolidated Statements of Operations for Sempra, SDG&E and SoCalGas.

Utilities Revenues and Cost of Sales

Our utilities revenues include natural gas revenues at SoCalGas and SDG&E and Sempra Infrastructure’s Ecogas and electric revenues at SDG&E. Intercompany revenues included in the separate revenues of each utility are eliminated in Sempra’s Consolidated Statements of Operations.

SoCalGas and SDG&E currently operate under a regulatory framework that permits:

▪The cost of natural gas purchased for core customers (primarily residential and small commercial and industrial customers) to be passed through to customers in rates substantially as incurred and without markup. The GCIM provides for SoCalGas to share in the savings and/or costs from buying natural gas for its core customers at prices below or above monthly market-based benchmarks. This mechanism permits full recovery of costs incurred when average purchase costs are within a price range around the benchmark price. Any higher costs incurred or savings realized outside this range are shared between core customers and SoCalGas. We provide further discussion in Note 3 of the Notes to Consolidated Financial Statements.

▪SDG&E to recover the actual cost incurred to generate or procure electricity based on annual estimates of the cost of electricity supplied to customers. The differences in cost between estimates and actual are recovered or refunded in subsequent periods through rates.

▪SoCalGas and SDG&E to recover certain program expenditures and other costs authorized by the CPUC, or “refundable programs.”

Because changes in SoCalGas’ and SDG&E’s cost of natural gas and/or electricity are recovered in rates, changes in these costs

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are offset in the changes in revenues and therefore do not impact earnings, other than potential impacts related to the GCIM for SoCalGas that we describe above. In addition to the changes in cost or market prices, natural gas or electric revenues recorded during a period are impacted by the difference between customer billings and recorded or CPUC-authorized amounts. These differences are required to be balanced over time, resulting in over- and undercollected regulatory balancing accounts. We discuss balancing accounts and their effects further in Note 4 of the Notes to Consolidated Financial Statements.

The table below summarizes utilities revenues and cost of sales.


UTILITIES REVENUES AND COST OF SALES
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Natural gas revenues:
SoCalGas	$	6,840	$	5,515	$	4,748
SDG&E	1,043		838		694
Sempra Infrastructure	89		81		58
Eliminations and adjustments	(104)		(101)		(89)
Total	7,868		6,333		5,411
Electric revenues:
SDG&E	4,795		4,666		4,619
Eliminations and adjustments	(12)		(8)		(5)
Total	4,783		4,658		4,614
Total utilities revenues	$	12,651	$	10,991	$	10,025
Cost of natural gas(1):
SoCalGas	$	2,233	$	1,369	$	783
SDG&E	363		242		162
Sempra Infrastructure	37		24		12
Eliminations and adjustments	(30)		(38)		(32)
Total	2,603		1,597		925
Cost of electric fuel and purchased power(1):
SDG&E	994		1,069		1,191
Eliminations and adjustments	(57)		(59)		(4)
Total	937		1,010		1,187
Total utilities cost of sales	$	3,540	$	2,607	$	2,112

(1) Excludes depreciation and amortization, which are presented separately on the Sempra, SDG&E and SoCalGas Consolidated Statements of Operations.

Natural Gas Revenues and Cost of Natural Gas

The table below summarizes the average cost of natural gas sold by Sempra California and included in cost of natural gas. The average cost of natural gas sold at each utility is impacted by market prices, as well as transportation, tariff and other charges.


SEMPRA CALIFORNIA AVERAGE COST OF NATURAL GAS
(Dollars per thousand cubic feet)
	Years ended December 31,
	2022		2021		2020
SoCalGas	$	7.48	$	4.53	$	2.59
SDG&E	8.01		5.30		3.74

In 2022 compared to 2021, our natural gas revenues increased by $1.5 billion (24%) to $7.9 billion primarily due to:

▪$1.3 billion increase at SoCalGas, which included:

◦$864 million increase in cost of natural gas sold, which we discuss below,

◦$202 million higher recovery of costs associated with refundable programs, which revenues are offset in O&M,

◦$146 million higher CPUC-authorized revenues,

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◦$69 million higher revenues from incremental and balanced capital projects, and

◦$35 million higher revenues associated with impacts resulting from changes in tax laws tracked in the income tax expense memorandum account; and

▪$205 million increase at SDG&E, which included:

◦$121 million increase in cost of natural gas sold, which we discuss below,

◦$35 million higher recovery of costs associated with refundable programs, which revenues are offset in O&M,

◦$31 million higher revenues from balanced capital projects, and

◦$10 million higher CPUC-authorized revenues.

Our cost of natural gas increased by $1.0 billion to $2.6 billion in 2022 compared to 2021 primarily due to:

▪$864 million increase at SoCalGas primarily due to higher average natural gas prices; and

▪$121 million increase at SDG&E primarily due to higher average natural gas prices.

Electric Revenues and Cost of Electric Fuel and Purchased Power

In 2022 compared to 2021, our electric revenues, substantially all of which are at SDG&E, increased by $125 million (3%) to $4.8 billion primarily due to:

▪$70 million higher CPUC-authorized revenues;

▪$68 million higher revenues associated with SDG&E’s wildfire mitigation plan;

▪$35 million higher recovery of costs associated with refundable programs, which revenues are offset in O&M;

▪$19 million higher revenues from transmission operations; and

▪$14 million higher revenues associated with lower income tax benefits from flow-through items; offset by

▪$75 million lower cost of electric fuel and purchased power, which we discuss below.

Our utility cost of electric fuel and purchased power includes utility-owned generation, power purchased from third parties, and net power purchases and sales to the California ISO. Our cost of electric fuel and purchased power decreased by $73 million (7%) to $937 million in 2022 compared to 2021 primarily due to $75 million at SDG&E from higher sales to the California ISO due to higher market prices offset by higher purchased power from the California ISO due to higher market prices, net of lower customer demand due to departing load now served by CCAs, and higher utility-owned generation costs.

Energy-Related Businesses: Revenues and Cost of Sales

The table below shows revenues and cost of sales for our energy-related businesses.


ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
REVENUES
Sempra Infrastructure	$	1,830	$	1,916	$	1,342
Parent and other(1)	(42)		(50)		3
Total revenues	$	1,788	$	1,866	$	1,345
COST OF SALES(2)
Sempra Infrastructure	$	942	$	608	$	275
Parent and other(1)	—		3		1
Total cost of sales	$	942	$	611	$	276

(1) Includes eliminations of intercompany activity.

(2) Excludes depreciation and amortization, which are presented separately on Sempra’s Consolidated Statements of Operations.

In 2022 compared to 2021, revenues from our energy-related businesses decreased by $78 million (4%) to $1.8 billion primarily due to:

▪$344 million decrease in revenues from asset and supply optimization from contracts to sell natural gas and LNG to third parties, including:

◦$498 million lower revenues primarily driven by $639 million from higher unrealized losses on commodity derivatives offset by $148 million from higher natural gas prices and volumes, offset by

◦$83 million higher diversion fees due to higher natural gas prices, and

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◦$71 million higher LNG sales; offset by

▪$143 million higher revenues from TdM mainly due to higher power prices offset by lower volumes from scheduled major maintenance completed in March 2022, which resulted in increased plant reliability;

▪$53 million higher transportation revenues driven by higher rates;

▪$46 million higher revenues from the renewables business due to Border Solar and the second phase of ESJ being placed in service in March 2021 and January 2022, respectively, the acquisition of ESJ in March 2021 and higher transmission rates; and

▪$5 million higher revenues from the Veracruz and Mexico City terminals placed in service in March and July of 2021, respectively, offset by an $18 million selling profit on a sales-type lease relating to the commencement of a rail facility lease at the Veracruz terminal in the third quarter of 2021 and a remeasurement of an operating lease.

The cost of sales for our energy-related businesses increased by $331 million to $942 million in 2022 compared to 2021 primarily due to higher natural gas prices and higher LNG purchases related to asset and supply optimization and higher prices offset by lower volumes from scheduled major maintenance completed in March 2022 at TdM.

Operation and Maintenance

In the table below, we provide O&M by segment.


OPERATION AND MAINTENANCE
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
SDG&E	$	1,677	$	1,587	$	1,455
SoCalGas	2,402		2,180		2,029
Sempra Texas Utilities	6		6		—
Sempra Infrastructure	656		550		427
Parent and other(1)	5		18		30
Total operation and maintenance	$	4,746	$	4,341	$	3,941

(1) Includes eliminations of intercompany activity.

Our O&M increased by $405 million (9%) to $4.7 billion in 2022 compared to 2021 primarily due to:

▪$222 million increase at SoCalGas due to:

◦$202 million higher expenses associated with refundable programs, which costs incurred are recovered in revenue, and

◦$20 million higher non-refundable operating costs; and

▪$106 million increase at Sempra Infrastructure due to:

◦$28 million at the transportation business due to maintenance on pipelines and new compressor stations and higher administrative costs,

◦$28 million higher development costs and purchased services,

◦$20 million from the renewables business primarily due to construction repairs and maintenance at Ventika,

◦$19 million due to the start of commercial operations of the Veracruz and Mexico City terminals in March and July of 2021, respectively, and

◦$10 million higher operating costs at TdM from higher purchased materials and services due to scheduled major maintenance completed in March 2022, offset by

◦$16 million lower operating cost due to remeasurement of operating leases at the refined products terminals; and

▪$90 million increase at SDG&E due to:

◦$70 million higher expenses associated with refundable programs, which costs incurred are recovered in revenue, and

◦$20 million higher non-refundable operating costs; offset by

▪$13 million decrease at Parent and other primarily from deferred compensation benefit in 2022 compared to an expense in 2021.

Aliso Canyon Litigation and Regulatory Matters

SoCalGas recorded charges of $259 million and $1,593 million in 2022 and 2021, respectively, relating to litigation and regulatory matters pertaining to the Leak. We describe these charges in Note 16 of the Notes to Consolidated Financial Statements.

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Gain (Loss) on Sale of Assets

In 2021, Parent and other recognized a $36 million gain on the sale of PXiSE, which we discuss in Note 5 of the Notes to Consolidated Financial Statements.

Other Income (Expense), Net

As part of our central risk management function, we may enter into foreign currency derivatives to hedge SI Partners’ exposure to movements in the Mexican peso from its controlling interest in IEnova. The gains/losses associated with these derivatives are included in other income (expense), net, as described below, and partially mitigate the transactional effects of foreign currency and inflation included in income tax expense for SI Partners’ consolidated entities and in equity earnings for SI Partners’ equity method investments. We discuss policies governing our risk management below in “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk.”

Other income (expense), net, decreased by $34 million to $24 million compared to the same period in 2021 primarily due to:

▪$42 million investment losses in 2022 compared to $50 million investment gains in 2021 on dedicated assets in support of our executive retirement and deferred compensation plans; and

▪$10 million in penalties at SoCalGas in 2022 related to the energy efficiency and advocacy OSCs; offset by

▪$33 million lower net losses from impacts associated with interest rate and foreign exchange instruments and foreign currency transactions, including:

◦$12 million gains in 2022 on cross-currency swaps compared to $28 million losses in 2021 on foreign currency derivatives and cross-currency swaps as a result of fluctuation of the Mexican peso, and

◦$12 million lower foreign currency losses on a Mexican peso-denominated loan to IMG, which is offset in equity earnings, offset by

◦$13 million losses in 2022 compared to $5 million net gains in 2021 on other foreign currency transactional effects;

▪$20 million higher net interest income on regulatory balancing accounts at SDG&E and SoCalGas;

▪$10 million higher AFUDC equity, including $7 million at both SDG&E and SoCalGas;

▪$8 million lower non-service component of net periodic benefit cost; and

▪$5 million reversal of penalties in 2021 related to an OII related to SoCalGas’ billing practices.

We provide further details of the components of other income (expense), net, in Note 1 of the Notes to Consolidated Financial Statements.

Interest Expense

Interest expense decreased by $144 million (12%) to $1.1 billion in 2022 compared to 2021 primarily due to:

▪$121 million decrease at Parent and other primarily due to $126 million in charges associated with make-whole premiums and a write-off of unamortized discount and debt issuance costs from the early redemptions of debt in December 2021, offset by higher debt balances from debt issuances;

▪$101 million decrease at Sempra Infrastructure primarily due to:

◦$54 million in charges associated with hedge termination costs and a write-off of unamortized debt issuance costs from the early redemptions of debt in October 2021, and

◦$33 million net unrealized gains in 2022 on a contingent interest rate swap related to the proposed PA LNG Phase 1 project that we discuss in Note 11 of the Notes to Consolidated Financial Statements; offset by

▪$41 million increase at SoCalGas primarily from higher debt balances from debt issuances; and

▪$37 million increase at SDG&E from higher debt balances from debt issuances.

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Income Taxes

The table below shows the income tax expense (benefit) and ETRs for Sempra, SDG&E and SoCalGas.


INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
	Years ended December 31,
	2022			2021			2020
Sempra:
Income tax expense from continuing operations	$	556		$	99		$	249

Income from continuing operations before income taxes and equity earnings	$	1,343		$	219		$	1,489
Equity earnings, before income tax(1)	666			614			294
Pretax income	$	2,009		$	833		$	1,783

Effective income tax rate	28		%	12		%	14		%
SDG&E:
Income tax expense	$	182		$	201		$	190
Income before income taxes	$	1,097		$	1,020		$	1,014
Effective income tax rate	17		%	20		%	19		%
SoCalGas:
Income tax expense (benefit)	$	138		$	(310)		$	96
Income (loss) before income taxes	$	738		$	(736)		$	601
Effective income tax rate	19		%	42		%	16		%

(1) We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements.

Sempra

Sempra’s income tax expense increased by $457 million in 2022 compared to 2021 primarily due to:

▪$60 million income tax benefit in 2022 compared to $445 million income tax benefit in 2021 associated with charges relating to litigation and regulatory matters pertaining to the Leak;

▪$169 million income tax expense in 2022 compared to $4 million income tax expense in 2021 from foreign currency and inflation effects on our monetary positions in Mexico and associated derivatives;

▪lower income tax benefits from flow-through items; offset by

▪$72 million net income tax expense related to the utilization of a deferred income tax asset upon completing the sale of a 20% NCI in SI Partners to KKR in October 2021;

▪$49 million income tax benefit in 2022 compared to $9 million income tax expense in 2021 from changes to a valuation allowance against certain tax credit carryforwards;

▪$28 million higher net income tax benefit in 2022 from the remeasurement of certain deferred income taxes; and

▪$22 million higher income tax benefit in 2022 from the resolution of prior year income tax items.

We report as part of our pretax results the income or loss attributable to NCI. However, we do not record income taxes for a portion of this income or loss, as some of our entities with NCI are currently treated as partnerships for income tax purposes, and thus we are only liable for income taxes on the portion of the earnings that are allocated to us. Our pretax income, however, includes 100% of these entities. If our entities with NCI grow, and if we continue to invest in such entities, the impact on our ETR may become more significant.

We discuss the impact of foreign currency exchange rates and inflation on income taxes below in “Impact of Foreign Currency and Inflation Rates on Results of Operations.” See Notes 1 and 8 of the Notes to Consolidated Financial Statements for further details about our accounting for income taxes and items subject to flow-through treatment.

SDG&E

SDG&E’s income tax expense decreased by $19 million (9%) in 2022 compared to 2021 primarily due to:

▪higher income tax benefits from flow-through items; and

▪$14 million higher income tax benefit in 2022 from the resolution of prior year income tax items; offset by

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▪higher income tax expense from higher pretax income.

SoCalGas

SoCalGas’ $138 million income tax expense in 2022 compared to a $310 million income tax benefit in 2021 was primarily due to:

▪$60 million income tax benefit in 2022 compared to $445 million income tax benefit in 2021 associated with charges relating to litigation and regulatory matters pertaining to the Leak; and

▪ lower income tax benefits from flow-through items.

Equity Earnings

Equity earnings increased by $155 million (12%) to $1.5 billion in 2022 compared to 2021 primarily due to:

▪$118 million higher equity earnings at Oncor Holdings due to higher revenues from rate updates to reflect increases in invested capital, higher customer consumption attributable primarily to weather, and customer growth, offset by higher depreciation expense and interest expense attributable to invested capital and higher O&M; and

▪$100 million higher equity earnings at Cameron LNG JV primarily due to excess LNG production and maintenance revenues; offset by

▪$50 million equity earnings in 2021 related to our investment in RBS Sempra Commodities to settle pending VAT matters and related legal costs; and

▪$15 million lower equity earnings at IMG due to higher income tax expense and foreign currency effects, including $12 million lower foreign currency gains on IMG’s Mexican peso-denominated loans from its JV owners, which is fully offset in other income (expense), net, offset by lower interest expense.

Earnings Attributable to Noncontrolling Interests

Earnings attributable to NCI increased by $1 million (1%) to $146 million in 2022 compared to 2021 primarily due to:

▪$120 million increase as a result of a decrease in our ownership interest in SI Partners offset by an increase in our ownership interest in IEnova; offset by

▪$121 million decrease due to a decrease in SI Partners subsidiaries net income.

Preferred Dividends

Preferred dividends decreased by $19 million to $44 million in 2022 compared to 2021 due to the conversion of all series B preferred stock in July 2021.

IMPACT OF FOREIGN CURRENCY AND INFLATION RATES ON RESULTS OF OPERATIONS

Because our natural gas distribution utility in Mexico, Ecogas, uses its local currency as its functional currency, its revenues and expenses are translated into U.S. dollars at average exchange rates for the period for consolidation in Sempra’s results of operations. Prior to the sales of our South American businesses in 2020, our operations in South America used their local currency as their functional currency.

Foreign Currency Translation

Any difference in average exchange rates used for the translation of income statement activity from year to year can cause a variance in Sempra’s comparative results of operations. Changes in our earnings as a result of foreign currency translation rates between years were negligible in 2022 compared to 2021.

Transactional Impacts

Although the financial statements of most of our Mexican subsidiaries and JVs have the U.S. dollar as the functional currency, some transactions may be denominated in the local currency; such transactions are remeasured into U.S. dollars. This remeasurement creates transactional gains and losses that are included in other income (expense), net, for our consolidated entities and in equity earnings for our JVs.

We utilize cross-currency swaps that exchange our Mexican peso-denominated principal and interest payments into the U.S. dollar and swap Mexican fixed interest rates for U.S. fixed interest rates. The impacts of these cross-currency swaps are offset in OCI and are reclassified from AOCI into earnings through other income (expense), net and interest expense as settlements occur.

Certain of our Mexican pipelines (namely Los Ramones I at IEnova Pipelines and Los Ramones Norte at TAG) generate revenue based on tariffs that are set by government agencies in Mexico, with contracts denominated in Mexican pesos that are indexed to

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the U.S. dollar, adjusted annually for inflation and fluctuation in the exchange rate. The resultant gains and losses from remeasuring the local currency amounts into U.S. dollars and the offsetting settlement of foreign currency forwards and swaps related to these contracts are included in revenues: energy-related businesses or equity earnings.

Income statement activities at our foreign operations and their JVs are also impacted by transactional gains and losses, a summary of which is shown in the table below:


TRANSACTIONAL (LOSSES) GAINS FROM FOREIGN CURRENCY AND INFLATION EFFECTS AND ASSOCIATED DERIVATIVES
(Dollars in millions)
	Total reported amounts						Transactional (losses) gains included in reported amounts
	Years ended December 31,
	2022		2021		2020		2022		2021		2020
Other income (expense), net	$	24	$	58	$	(48)	$	(13)	$	(46)	$	(92)
Income tax expense	(556)		(99)		(249)		(169)		(4)		59
Equity earnings	1,498		1,343		1,015		(36)		2		41
Income from continuing operations, net of income tax	2,285		1,463		2,255		(218)		(48)		8
Income from discontinued operations, net of income tax	—		—		1,850		—		—		15
Earnings attributable to noncontrolling interests	(146)		(145)		(172)		54		4		(24)
Earnings attributable to common shares	2,094		1,254		3,764		(164)		(44)		(1)

Foreign Currency Exchange Rate and Inflation Impacts on Income Taxes and Related Hedging Activity

Our Mexican subsidiaries have U.S. dollar-denominated cash balances, receivables, payables and debt (monetary assets and liabilities) that are affected by Mexican currency exchange rate movements for Mexican income tax purposes. They also have deferred income tax assets and liabilities, which are significant, denominated in the Mexican peso that must be translated to U.S. dollars for financial reporting purposes. In addition, monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. As a result, fluctuations in both the currency exchange rate for the Mexican peso against the U.S. dollar and Mexican inflation may expose us to fluctuations in income tax expense, other income (expense), net, and equity earnings. We may use foreign currency derivatives as a means to help manage exposure to the currency exchange rate on our monetary assets and liabilities, and this derivative activity impacts other income (expense), net. However, we generally do not hedge our deferred income tax assets and liabilities, which makes us susceptible to volatility in income tax expense caused by exchange rate fluctuations and inflation.

We also utilized foreign currency derivatives in 2020 to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sales of our operations in Peru and Chile in discontinued operations.

CAPITAL RESOURCES AND LIQUIDITY

OVERVIEW

Sempra

Liquidity

We expect to meet our cash requirements through cash flows from operations, unrestricted cash and cash equivalents, borrowings under or supported by our credit facilities, other incurrences of debt including issuing debt securities and obtaining term loans, distributions from our equity method investments, project financing and funding from minority interest owners. We believe that these cash flow sources, combined with available funds, will be adequate to fund our operations in both the short-term and long-term, including to:

▪finance capital expenditures

▪repay debt

▪fund dividends

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▪fund contractual and other obligations and otherwise meet liquidity requirements

▪fund capital contribution requirements

▪fund new business or asset acquisitions or start-ups

Sempra, SDG&E and SoCalGas currently have reasonable access to the money markets and capital markets and are not currently constrained in their ability to borrow money at market rates from commercial banks, under existing revolving credit facilities, through public offerings registered with the SEC, or through private placements of debt supported by our revolving credit facilities in the case of commercial paper. However, our ability to access the money markets and capital markets or obtain credit from commercial banks outside of our committed revolving credit facilities could become materially constrained if changing economic conditions or disruptions to or volatility in the money markets and capital markets worsen. These sources of funding have become less attractive due to the recent rise in both short-term and long-term interest rates. In addition, our financing activities and actions by credit rating agencies, as well as many other factors, could negatively affect the availability and cost of both short-term and long-term financing. Also, cash flows from operations may be impacted by the timing of commencement and completion, and potentially cost overruns, of large projects and other material events, such as the settlement of material litigation. If cash flows from operations were to be significantly reduced or we were unable to borrow under acceptable terms, we would likely first reduce or postpone discretionary capital expenditures (not related to safety/reliability) and investments in new businesses. We monitor our ability to finance the needs of our operating, investing and financing activities in a manner consistent with our goal to maintain our investment-grade credit ratings.

Available Funds

Our committed lines of credit provide liquidity and support commercial paper. Sempra, SDG&E and SoCalGas each have five-year credit agreements expiring in 2027 and Sempra Infrastructure has a three-year credit agreement expiring in 2024, committed lines of credit expiring in 2023 and 2024, and an uncommitted revolving credit facility expiring in 2023.


AVAILABLE FUNDS AT DECEMBER 31, 2022
(Dollars in millions)
	Sempra		SDG&E		SoCalGas
Unrestricted cash and cash equivalents(1)	$	370	$	7	$	21
Available unused credit(2)	7,348		1,295		1,100

(1) Amounts at Sempra include $92 held in non-U.S. jurisdictions. We discuss repatriation in Note 8 of the Notes to Consolidated Financial Statements.

(2) Available unused credit is the total available on committed and uncommitted lines of credit that we discuss in Note 7 of the Notes to Consolidated Financial Statements. Because our commercial paper programs are supported by these lines, we reflect the amount of commercial paper outstanding as a reduction to the available unused credit.

Short-Term Borrowings

We use short-term debt primarily to meet liquidity requirements, fund shareholder dividends, and temporarily finance capital expenditures, acquisitions or start-ups. SDG&E and SoCalGas use short-term debt primarily to meet working capital needs or to help fund event-specific costs, such as payments made by SoCalGas relating to litigation and regulatory matters pertaining to the Leak. Commercial paper, lines of credit and term loans were our primary sources of short-term debt funding in 2022.

We discuss our short-term debt activities in Note 7 of the Notes to Consolidated Financial Statements and below in “Sources and Uses of Cash.”

The following table shows selected statistics for our commercial paper borrowings.


COMMERCIAL PAPER STATISTICS
(Dollars in millions)
	Sempra						SDG&E						SoCalGas
	December 31,						December 31,						December 31,
	2022			2021			2022			2021			2022			2021
Amount outstanding at period end	$	759		$	2,026		$	205		$	401		$	100		$	385
Weighted-average interest rate at period end	4.75		%	0.34		%	4.79		%	0.47		%	4.41		%	0.21		%
Daily weighted-average outstanding balance	$	905		$	1,107		$	59		$	168		$	145		$	118
Daily weighted-average yield	1.58		%	0.16		%	0.28		%	0.12		%	1.16		%	0.07		%
Maximum daily amount outstanding	$	2,364		$	2,824		$	401		$	473		$	607		$	580

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Long-Term Debt Activities

Significant issuances of and payments on long-term debt in 2022 included the following:


LONG-TERM DEBT ISSUANCES AND PAYMENTS
(Dollars in millions)
Issuances:	Amount at issuance		Maturity
Sempra 3.30% fixed rate notes	$	750	2025
Sempra 3.70% fixed rate notes	500		2029
SDG&E variable rate term loan	400		2024
SDG&E 3.00% first mortgage bonds	500		2032
SDG&E 3.70% first mortgage bonds	500		2052
SoCalGas 2.95% fixed rate notes	700		2027
SoCalGas 6.35% first mortgage bonds	600		2052
Sempra Infrastructure variable rate notes	298		2025
Sempra Infrastructure 3.25% fixed rate notes	400		2032

Payments:	Payments		Maturity
SDG&E 1.914% amortizing first mortgage bonds	$	17	2022
Sempra Infrastructure amortizing variable rate notes (5.13% after floating-to-fixed rate swaps)	162		2022-2026
Sempra Infrastructure variable rate notes	64		2025

At December 31, 2022, Sempra expects to make interest payments on long-term debt totaling $17.3 billion, of which $1.0 billion is expected to be paid in 2023 and $16.3 billion is expected to be paid in subsequent years through 2079. At December 31, 2022, SDG&E expects to make interest payments on long-term debt totaling $4.9 billion, of which $298 million is expected to be paid in 2023 and $4.6 billion is expected to be paid in subsequent years through 2052. At December 31, 2022, SoCalGas expects to make interest payments on long-term debt totaling $3.9 billion, of which $255 million is expected to be paid in 2023 and $3.6 billion is expected to be paid in subsequent years through 2052. We calculate expected interest payments using the stated interest rate for fixed-rate obligations, including floating-to-fixed interest rate swaps and cross-currency swaps. We calculated expected interest payments for variable-rate obligations based on forecasted rates in effect at December 31, 2022.

We discuss our long-term debt activities, including the use of proceeds on long-term debt issuances, and maturities in Note 7 of the Notes to Consolidated Financial Statements.

Credit Ratings

The credit ratings of Sempra, SDG&E and SoCalGas remained at investment grade levels in 2022.

CREDIT RATINGS AT DECEMBER 31, 2022

Sempra

SDG&E

SoCalGas

Moody’s

Baa2 with a stable outlook

A3 with a stable outlook

A2 with a stable outlook

S&P

BBB+ with a negative outlook

BBB+ with a stable outlook

A with a negative outlook

Fitch

BBB+ with a stable outlook

A with a stable outlook

A downgrade of Sempra’s or any of its subsidiaries’ credit ratings or rating outlooks may, depending on the severity, result in the imposition of financial or other burdensome covenants or a requirement for collateral to be posted in the case of certain financing arrangements, and may materially and adversely affect the market prices of their equity and debt securities, the rates at which borrowings are made and commercial paper is issued, and the various fees on their outstanding credit facilities. This could make it more costly for Sempra, SDG&E, SoCalGas and Sempra’s other subsidiaries to issue debt securities, to borrow under credit facilities and to raise certain other types of financing. We provide additional information about our credit ratings at Sempra, SDG&E and SoCalGas in “Part I – Item 1A. Risk Factors.”

Sempra has agreed that, if the credit rating of Oncor’s senior secured debt by any of the Rating Agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT. Oncor’s senior secured debt was rated A2, A+ and A at Moody’s, S&P and Fitch, respectively, at December 31, 2022.

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Sempra, SDG&E and SoCalGas have committed lines of credit to provide liquidity and to support commercial paper. Borrowings under these facilities bear interest at benchmark rates plus a margin that varies with market index rates and each borrower’s credit rating. Each facility also requires a commitment fee on available unused credit that may be impacted by each borrower’s credit rating. For example, assuming a one-notch downgrade:

▪If Sempra were to experience a ratings downgrade from its current level, the rate at which borrowings bear interest would increase by 25 bps. The commitment fee on available unused credit would also increase 5 bps.

▪If SDG&E were to experience a ratings downgrade from its current level, the rate at which borrowings bear interest would increase by 12.5 bps. The commitment fee on available unused credit would also increase 5 bps.

▪If SoCalGas were to experience a ratings downgrade from its current level, the rate at which borrowings bear interest would increase by 12.5 bps. The commitment fee on available unused credit would also increase 2.5 bps.

Sempra’s, SDG&E’s and SoCalGas’ credit ratings also may affect their respective credit limits related to derivative instruments, as we discuss in Note 11 of the Notes to Consolidated Financial Statements.

Loans to/from Affiliates

At December 31, 2022, Sempra had $301 million in loans due to unconsolidated affiliates. In July 2022, a $626 million loan due to Sempra from an unconsolidated affiliate was paid in full, prior to its March 2023 maturity date.

Postretirement Benefits

Sempra, SDG&E and SoCalGas have significant investments in several trusts to provide for future payments of pensions and PBOP. The trusts’ ability to make ongoing required benefit payments has not been materially adversely affected by changes in asset values, which are dependent on market fluctuations, contributions and withdrawals. However, changes in asset values or other factors in future periods, such as changes to discount rates, assumed rates of return, mortality tables and regulations, may impact funding requirements for pension and PBOP plans. Additionally, contributions to our plans are based on our funding policy, which generally limits payments from exceeding plan assets of 110% of the projected benefit obligation, which are subject to maximum income tax deduction limitations. Sempra, SDG&E and SoCalGas expect to contribute $238 million, $54 million and $154 million, respectively, to pension and PBOP plans in 2023 and $1.8 billion, $459 million and $1.1 billion, respectively, in the nine years thereafter. At SDG&E and SoCalGas, funding requirements are generally recoverable in rates. We discuss our employee benefit plans and our expected contributions to those plans in Note 9 of the Notes to Consolidated Financial Statements.

Inflation Reduction Act

The IRA was signed into law in August 2022. The IRA includes tax credits and other incentives for energy and climate initiatives and introduces a 15% corporate alternative minimum tax on adjusted financial statement income for tax years beginning after December 31, 2022. We continue to assess the impacts of the IRA as the U.S. Department of the Treasury and the IRS issue guidance on tax implementation, and the EPA and DOE issue guidance on energy and climate initiatives. We do not expect the IRA to have a material adverse impact on Sempra’s, SDG&E’s or SoCalGas’ results of operations, financial condition and/or cash flows.

Sempra California

SDG&E’s and SoCalGas’ operations have historically provided relatively stable earnings and liquidity. Their future performance and liquidity will depend primarily on the ratemaking and regulatory process, environmental regulations, economic conditions, actions by the California legislature, litigation and the changing energy marketplace, as well as other matters described in this report. SDG&E and SoCalGas expect that the available unused funds from their credit facilities described above, which also supports their commercial paper programs, cash flows from operations, and other incurrences of debt including issuing debt securities and obtaining term loans will continue to be adequate to fund their respective current operations and planned capital expenditures. Additionally, as we discuss below, Sempra elected to make equity contributions to SoCalGas of $800 million in September 2021, $150 million in June 2022 and $500 million in August 2022. These voluntary equity contributions were intended to assist SoCalGas in maintaining its authorized capital structure. SDG&E and SoCalGas manage their capital structures and pay dividends when appropriate and as approved by their respective boards of directors.

As we discuss in Note 4 of the Notes to Consolidated Financial Statements, changes in balancing accounts for significant costs at SDG&E and SoCalGas, particularly a change between over- and undercollected status, may have a significant impact on cash flows. These changes generally represent the difference between when costs are incurred and when they are ultimately recovered or refunded in rates through billings to customers.

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COVID-19 Pandemic Protections

SDG&E and SoCalGas are continuing to monitor the impacts of the COVID-19 pandemic on cash flows and results of operations. Some customers have experienced and continue to experience a diminished ability to pay their electric or gas bills, leading to slower payments and higher levels of nonpayment than has been the case historically. These impacts could become significant and could require modifications to our financing plans.

In connection with the COVID-19 pandemic and at the direction of the CPUC, SDG&E and SoCalGas implemented certain measures to assist customers, including automatically enrolling residential and small business customers with past-due balances in long-term repayment plans.

In 2021, SDG&E and SoCalGas applied, on behalf of their customers, for financial assistance from the California Department of Community Services and Development under the 2021 California Arrearage Payment Program, which provided funds of $63 million and $79 million for SDG&E and SoCalGas, respectively. In the first quarter of 2022, SDG&E and SoCalGas received and applied the amounts directly to eligible customer accounts to reduce past due balances. In June 2022, AB 205 was approved establishing, among other things, the 2022 California Arrearage Payment Program. In December 2022, SDG&E and SoCalGas received funding of $51 million and $59 million, respectively, related to this program and, in January 2023, applied the amounts directly to eligible customer accounts to reduce past due balances.

SDG&E

Wildfire Fund

The carrying value of SDG&E’s Wildfire Fund asset totaled $332 million at December 31, 2022. We describe the Wildfire Legislation and SDG&E’s commitment to make annual shareholder contributions to the Wildfire Fund through 2028 in Note 1 of the Notes to Consolidated Financial Statements.

SDG&E is exposed to the risk that the participating California electric IOUs may incur third-party wildfire costs for which they will seek recovery from the Wildfire Fund with respect to wildfires that have occurred since enactment of the Wildfire Legislation in July 2019. In such a situation, SDG&E may recognize a reduction of its Wildfire Fund asset and record an impairment charge against earnings when available coverage is reduced due to recoverable claims from any of the participating IOUs. PG&E has indicated that it will seek reimbursement from the Wildfire Fund for losses associated with the Dixie Fire, which burned from July 2021 through October 2021 and was reported to be the largest single wildfire (measured by acres burned) in California history. If any California electric IOU’s equipment is determined to be a cause of a fire, it could have a material adverse effect on SDG&E’s and Sempra’s financial condition and results of operations up to the carrying value of our Wildfire Fund asset, with additional potential material exposure if SDG&E’s equipment is determined to be a cause of a fire. In addition, the Wildfire Fund could be completely exhausted due to fires in the other California electric IOUs’ service territories, by fires in SDG&E’s service territory or by a combination thereof. In the event that the Wildfire Fund is materially diminished, exhausted or terminated, SDG&E will lose the protection afforded by the Wildfire Fund, and as a consequence, a fire in SDG&E’s service territory could have a material adverse effect on SDG&E’s and Sempra’s results of operations, financial condition, cash flows and/or prospects.

Wildfire Mitigation Cost Recovery Mechanism

In July 2021, SDG&E filed a request with the CPUC to establish an interim cost recovery mechanism that would recover 50% of its costs associated with implementation of its wildfire mitigation plan. The proposed recovery would be incremental to wildfire costs currently authorized in its GRC and subject to reasonableness review. In May 2022, the CPUC issued a final decision denying SDG&E’s request and directing SDG&E to file for the review and recovery of its wildfire mitigation plan costs through its next GRC or a separate application. SDG&E expects to submit separate requests in its GRC for review and recovery of its wildfire mitigation plan costs in mid-2023 for costs incurred from 2019 through 2022 and in mid-2024 for costs incurred in 2023.

SONGS Decommissioning

SDG&E has significant investments in the SONGS NDT to provide for future payments of nuclear decommissioning. The NDT’s ability to make ongoing required payments have not been materially or adversely affected by changes in asset values, which are dependent on market fluctuations, contributions and withdrawals. However, asset values could be materially and adversely affected by future activity in the equity and fixed income markets, and changes in the estimated decommissioning costs, or in the assumptions and judgments made by management underlying these estimates, could cause revisions to the estimated total cost associated with retiring the assets. Funding requirements are generally recoverable in rates. We discuss SDG&E’s NDT and its expected SONGS decommissioning payments in Note 15 of the Notes to Consolidated Financial Statements.

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Off-Balance Sheet Arrangements

SDG&E has entered into PPAs and tolling agreements that are variable interests in unconsolidated entities. We discuss variable interests in Note 1 of the Notes to Consolidated Financial Statements.

SoCalGas

SoCalGas’ future performance and liquidity may be impacted by the resolution of legal, regulatory and other matters pertaining to the Leak, which we discuss below, in Note 16 of the Notes to Consolidated Financial Statements and in “Part I – Item 1A. Risk Factors.”

Aliso Canyon Natural Gas Storage Facility Gas Leak

From October 23, 2015 through February 11, 2016, SoCalGas experienced the Leak.

Cost Estimate, Insurance and Accounting and Other Impacts. At December 31, 2022, SoCalGas estimates certain costs related to the Leak are $3,486 million (the cost estimate), including $1,279 million of costs recovered from insurance. Other than insurance for directors’ and officers’ liability, we have exhausted all of our insurance for this matter. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. At December 31, 2022, $129 million of the cost estimate is accrued in Reserve for Aliso Canyon Costs and $4 million of the cost estimate is accrued in Deferred Credits and Other on SoCalGas’ and Sempra’s Consolidated Balance Sheets.

Sempra elected to make equity contributions to SoCalGas of $800 million in September 2021, $150 million in June 2022 and $500 million in August 2022. These voluntary equity contributions were intended to assist SoCalGas in maintaining its authorized capital structure. SoCalGas paid $1.79 billion in 2022 related to the settlement of the Individual Plaintiff Litigation. SoCalGas funded the settlement payment using a combination of equity contributions from Sempra, short-term debt and cash on hand.

Except for the amounts paid or estimated to settle certain legal and regulatory matters, the cost estimate does not include any amounts necessary to resolve the matters that we describe in “Litigation – Unresolved” and “Regulatory Proceedings – Unresolved” in Note 16 of the Notes to Consolidated Financial Statements, threatened litigation, other potential litigation or other costs, in each case to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the possible costs or a range of possible costs. Further, we are not able to reasonably estimate the possible loss or a range of possible losses in excess of the amounts accrued. The costs or losses not included in the cost estimate could be significant.

An adverse outcome with respect to (i) the litigation described in Note 16 of the Notes to Consolidated Financial Statements under “Litigation – Unresolved,” (ii) threatened or other potential litigation related to the Leak, (iii) the Leak OII that we discuss in Note 16 of the Notes to Consolidated Financial Statements, if approval of the negotiated settlement is not obtained, or (iv) the unresolved proceeding pursuant to the SB 380 OII that we discuss below, could have a material adverse effect on SoCalGas’ and Sempra’s results of operations, financial condition, cash flows and/or prospects.

Natural Gas Storage Operations and Reliability. Natural gas withdrawn from storage is important for service reliability during peak demand periods, including peak electric generation needs in the summer and consumer heating needs in the winter. The Aliso Canyon natural gas storage facility is the largest SoCalGas storage facility and an important component of SoCalGas’ delivery system. As a result of the Leak, the CPUC has issued a series of directives to SoCalGas specifying the range of working gas to be maintained in the Aliso Canyon natural gas storage facility as well as protocols for the withdrawal of gas, to support safe and reliable natural gas service. In February 2017, the CPUC opened a proceeding pursuant to the SB 380 OII to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy and electric reliability for the region, including considering alternative means for meeting or avoiding the demand for the facility’s services if it were eliminated.

At December 31, 2022, the Aliso Canyon natural gas storage facility had a net book value of $958 million. If the Aliso Canyon natural gas storage facility were to be permanently closed or if future cash flows from its operation were otherwise insufficient to recover its carrying value, we may record an impairment of the facility, which could be material, or we could incur materially higher than expected operating costs and/or be required to make material additional capital expenditures (any or all of which may not be recoverable in rates), and natural gas reliability and electric generation could be jeopardized.

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Sempra Texas Utilities

Oncor relies on external financing as a significant source of liquidity for its capital requirements. In the event that Oncor fails to meet its capital requirements, access sufficient capital, or raise capital on favorable terms to finance its ongoing needs, we may elect to make additional capital contributions to Oncor (as our commitments to the PUCT prohibit us from making loans to Oncor), which could be substantial and reduce the cash available to us for other purposes, increase our indebtedness and ultimately materially adversely affect our results of operations, financial condition, cash flows and/or prospects. Oncor’s ability to make distributions may be limited by factors such as its credit ratings, regulatory capital requirements, increases in its capital plan, debt-to-equity ratio approved by the PUCT and other restrictions and considerations. In addition, Oncor will not make distributions if a majority of Oncor’s independent directors or any minority member director determines it is in the best interests of Oncor to retain such amounts to meet expected future requirements.

Off-Balance Sheet Arrangement

Our investment in Oncor Holdings is a variable interest in an unconsolidated entity. We discuss variable interests in Note 1 of the Notes to Consolidated Financial Statements.

Sempra Infrastructure

Sempra Infrastructure expects to fund capital expenditures, investments and operations in part with available funds, including credit facilities, and cash flows from operations of the Sempra Infrastructure businesses. We expect Sempra Infrastructure will require additional funding for the development and expansion of its portfolio of projects, which may be financed through a combination of funding from the parent and minority interest owners, bank financing, issuances of debt, project financing and partnering in JVs. We describe Sempra Infrastructure’s commitments related to construction and development projects in Note 16 of the Notes to Consolidated Financial Statements.

In June 2022, we completed the sale of a 10% NCI in SI Partners to ADIA for cash proceeds of $1.7 billion. We used a portion of the proceeds from the sale to ADIA to repay commercial paper borrowings used to repurchase $750 million in shares of our common stock ($300 million of which was completed in the fourth quarter of 2021, $200 million of which was completed in the first quarter of 2022 and $250 million of which was completed in the second quarter of 2022), and we used the remaining proceeds to help fund capital expenditures at Sempra California and Sempra Texas Utilities and to further strengthen our balance sheet.

Following the closing of the ADIA transaction, Sempra, KKR and ADIA directly or indirectly own a 70%, 20%, and 10% interest, respectively, in SI Partners. The sale of NCI in SI Partners to ADIA has reduced our ownership interest in SI Partners and requires us to involve a new minority partner in making certain business decisions. Moreover, the decrease in our ownership of SI Partners also decreases our share of the cash flows, profits and other benefits these businesses currently or may in the future produce.

In 2022, SI Partners distributed $237 million to its minority shareholders.

LNG and Net-Zero Solutions

Cameron LNG Phase 2 Project. Cameron LNG JV is developing a proposed expansion project that would add one liquefaction train with an expected maximum production capacity of approximately 6.75 Mtpa and would increase the production capacity of the existing three trains at the Cameron LNG Phase 1 facility by up to approximately 1 Mtpa through debottlenecking activities. The Cameron LNG JV site can accommodate additional trains beyond the proposed Cameron LNG Phase 2 project.

Cameron LNG JV previously received major permits and FTA and non-FTA approvals associated with the potential expansion that included up to two additional liquefaction trains and up to two additional full containment LNG storage tanks. In January 2022, Cameron LNG JV filed an amendment, subject to approval by the FERC, to modify the permits to allow the use of electric drives, instead of gas turbine drives, which would reduce overall emissions. The amendment, if approved, would also change the design from a two-train gas turbine expansion to a one-train electric drive expansion along with other design enhancements that, together, are expected to result in a more cost-effective and efficient facility, while also reducing overall GHG emissions.

Sempra Infrastructure and the other Cameron LNG JV members, namely affiliates of TotalEnergies SE, Mitsui & Co., Ltd. and Japan LNG Investment, LLC, a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha, have entered into an HOA for the potential development of the Cameron LNG Phase 2 project. The HOA provides a commercial framework for the proposed project, including the contemplated allocation to Sempra Infrastructure of 50.2% of the fourth train production capacity and 25% of the debottlenecking capacity from the project under tolling agreements. The HOA contemplates the remaining capacity to be allocated equally to the existing Cameron LNG Phase 1 facility customers. Sempra Infrastructure plans to sell the LNG corresponding to its allocated capacity from the proposed Cameron LNG Phase 2 project under long-term

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SPAs prior to making a final investment decision. The HOA is a non-binding arrangement. The ultimate participation in and offtake by Sempra Infrastructure, TotalEnergies SE, Mitsui & Co., Ltd. and Japan LNG Investment, LLC remain subject to negotiation and finalization of definitive agreements, among other factors, and the HOA does not commit any party to enter into definitive agreements with respect to the proposed Cameron LNG Phase 2 project.

Sempra Infrastructure, the other Cameron LNG JV members, and Cameron LNG JV have entered into a Phase 2 Project Development Agreement under which Sempra Infrastructure, subject to certain conditions and ongoing approvals by the Cameron LNG JV board, will manage and lead the Cameron LNG Phase 2 project development work until Cameron LNG JV makes a final investment decision.

Cameron LNG JV, upon the unanimous approval of the Cameron LNG JV board, awarded two FEED contracts, one to Bechtel and the other to a joint venture between JGC America Inc. and Zachry Industrial Inc. At the conclusion of the resulting competitive FEED process, we expect to select one contractor to be the EPC contractor for the proposed Cameron LNG Phase 2 project.

In connection with the execution of the Phase 2 Project Development Agreement and the award of the FEED contracts, the Cameron LNG JV board unanimously approved an expansion development budget to fund, subject to the terms of the Phase 2 Project Development Agreement, development work necessary to prepare for a potential final investment decision.

Cameron LNG JV has entered into an MOU with Entergy Louisiana, LLC, a subsidiary of Entergy Corporation, to negotiate the terms and conditions for a new electric service agreement intended to reduce Cameron LNG JV’s scope 2 emissions from the electricity it purchases from Entergy Louisiana, LLC. The MOU sets forth a framework for Entergy Louisiana, LLC and Cameron LNG JV to finalize and sign a minimum 20-year agreement for the procurement of new renewable generation resources in Louisiana, subject to the ultimate approval of the Louisiana Public Service Commission and Cameron LNG JV. The MOU is a non-binding arrangement. The ultimate arrangement between Cameron LNG JV and Entergy Louisiana, LLC remains subject to negotiation and finalization of definitive agreements, among other factors, and the MOU does not commit any party to enter into definitive agreements with respect to the proposed electric services agreement.

Sempra Infrastructure has entered into a non-binding HOA for the negotiation and potential finalization of a definitive 20-year SPA with ORLEN for 2 Mtpa of LNG offtake from the proposed Cameron LNG Phase 2 project. Sempra Infrastructure also entered into a non-binding HOA for the negotiation and potential finalization of definitive SPAs with Williams for two 20-year terms for approximately 3 Mtpa of LNG offtake in the aggregate from the PA LNG Phase 2 project and Cameron LNG Phase 2 project that are under development, and a separate natural gas sales agreement for approximately 0.5 Bcf per day to be delivered as feed gas supply for the proposed PA LNG projects and Cameron LNG Phase 2 project. In addition, the parties anticipate forming a strategic JV to own, expand and operate the existing Cameron Interstate Pipeline that we expect will deliver natural gas to the proposed Cameron LNG Phase 2 project and the proposed Port Arthur Pipeline Louisiana Connector that we expect will deliver natural gas to the proposed PA LNG projects. The ultimate participation in and offtake from the proposed projects remain subject to negotiation and finalization of definitive agreements, among other factors, and the HOAs do not commit any party to enter into definitive agreements with respect to any of the applicable proposed projects.

Expansion of the Cameron LNG Phase 1 facility beyond the first three trains is subject to certain restrictions and conditions under the JV project financing agreements, including among others, scope restrictions on expansion of the project unless appropriate prior consent is obtained from the existing project lenders. Under the Cameron LNG JV equity agreements, the expansion of the project requires the unanimous consent of all the partners, including with respect to the equity investment obligation of each partner. Working under the framework established in the Phase 2 Project Development Agreement, Sempra Infrastructure is targeting completing the FEED work in the summer of 2023 and expects to be in a position to make a final investment decision shortly thereafter. The timing of when or if Cameron LNG JV will receive approval from the FERC to amend its permits and from the existing project lenders to conduct the expansion under its financing agreements is uncertain, and there is no assurance that Sempra Infrastructure will complete the necessary development work or that the Cameron LNG JV members will unanimously agree in a timely manner or at all on making a final investment decision, which, if not accomplished, would materially and adversely impact the development of the Cameron LNG Phase 2 project.

The development of the proposed Cameron LNG Phase 2 project is subject to numerous other risks and uncertainties, including securing binding customer commitments; reaching unanimous agreement with our partners to proceed; obtaining and maintaining a number of permits and regulatory approvals, including approval from the FERC for amendments to existing permits; securing certain consents under the existing financing agreements and securing sufficient new financing; negotiating and completing suitable commercial agreements for the project, including a definitive EPC contract and definitive tolling and governance agreements; reaching a positive final investment decision; and other factors associated with this potential investment. For a discussion of these risks, see “Part I – Item 1A. Risk Factors.”

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ECA LNG Phase 1 Project. SI Partners owns an 83.4% interest in ECA LNG Phase 1, and an affiliate of TotalEnergies SE owns the remaining 16.6% interest. ECA LNG Phase 1 is constructing a one-train natural gas liquefaction facility at the site of Sempra Infrastructure’s existing ECA Regas Facility with a nameplate capacity of 3.25 Mtpa and an initial offtake capacity of 2.5 Mtpa. We do not expect the construction or operation of the ECA LNG Phase 1 project to disrupt operations at the ECA Regas Facility, and have planned measures to limit disruption of operations should any arise. We expect the ECA LNG Phase 1 project to commence commercial operations in the summer of 2025.

We received authorizations from the DOE to export U.S.-produced natural gas to Mexico and to re-export LNG to non-FTA countries from the ECA LNG Phase 1 project. ECA LNG Phase 1 has definitive 20-year SPAs with an affiliate of TotalEnergies SE for approximately 1.7 Mtpa of LNG and with Mitsui & Co., Ltd. for approximately 0.8 Mtpa of LNG.

In February 2020, we entered into an EPC contract with Technip Energies for the ECA LNG Phase 1 project. Since reaching a positive final investment decision with respect to the project in November 2020, Technip Energies has been working to construct the ECA LNG Phase 1 project. We estimate the total price of the EPC contract to be approximately $1.5 billion, with capital expenditures approximating $2.0 billion including capitalized interest and project contingency. The actual cost of the EPC contract and the actual amount of these capital expenditures may differ substantially from our estimates.

ECA LNG Phase 1 has a five-year loan agreement with a syndicate of seven external lenders that matures in December 2025 for an aggregate principal amount of up to $1.3 billion, of which $575 million was outstanding at December 31, 2022. Proceeds from the loan are being used to finance the cost of construction of the ECA LNG Phase 1 project. We discuss the details of this loan in Note 7 of the Notes to Consolidated Financial Statements.

The construction of the ECA LNG Phase 1 project is subject to numerous risks and uncertainties, including maintaining permits and regulatory approvals; construction delays; securing and maintaining commercial arrangements, such as gas supply and transportation agreements; the impact of recent and proposed changes to the law in Mexico; and other factors associated with the project and its construction. In addition, as we discuss in Note 16 of the Notes to Consolidated Financial Statements, an unfavorable decision on certain property disputes or permit challenges could materially adversely affect construction of this project and Sempra’s results of operations, financial condition, cash flows and/or prospects, including the impairment of all or a substantial portion of the capital costs invested in the project to date. For a discussion of these risks, see “Part I – Item 1A. Risk Factors.”

ECA LNG Phase 2 Project. Sempra Infrastructure is developing a second, large-scale natural gas liquefaction project at the site of its existing ECA Regas Facility. We expect the proposed ECA LNG Phase 2 project to be comprised of two trains and one LNG storage tank and produce approximately 12 Mtpa of export capacity. We expect that construction of the proposed ECA LNG Phase 2 project would conflict with the current operations at the ECA Regas Facility, which currently has long-term regasification contracts for 100% of the regasification facility’s capacity through 2028. This makes the decisions on whether, when and how to pursue the proposed ECA LNG Phase 2 project dependent in part on whether the investment in a large-scale liquefaction facility would, over the long term, be more beneficial financially than continuing to supply regasification services under our existing contracts.

We received authorizations from the DOE to export U.S.-produced natural gas to Mexico and to re-export LNG to non-FTA countries from the proposed ECA LNG Phase 2 project.

We have MOUs and/or HOAs with Mitsui & Co., Ltd., TotalEnergies SE, and ConocoPhillips that provide a framework for their potential offtake of LNG from the proposed ECA LNG Phase 2 project and potential acquisition of an equity interest in ECA LNG Phase 2. These MOUs and HOAs are non-binding arrangements. The ultimate participation in and offtake by these parties remains subject to negotiation and finalization of definitive agreements, among other factors, and the MOUs and HOAs do not commit any party to enter into definitive agreements with respect to the proposed ECA LNG Phase 2 project.

Development of the ECA LNG Phase 2 project is subject to numerous risks and uncertainties, including obtaining binding customer commitments; the receipt of a number of permits and regulatory approvals; obtaining financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract, equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; reaching a positive final investment decision; the impact of recent and proposed changes to the law in Mexico; the property disputes and permit challenges that we reference in the ECA LNG Phase 1 project discussion above; and other factors associated with this potential investment.

PA LNG Phase 1 Project. Sempra Infrastructure is developing a proposed natural gas liquefaction project on a greenfield site that it owns in the vicinity of Port Arthur, Texas, located along the Sabine-Neches waterway. We are developing the PA LNG Phase 1 project, which we expect will consist of two liquefaction trains, two LNG storage tanks, a marine berth and associated loading facilities and related infrastructure necessary to provide liquefaction services with a nameplate capacity of approximately 13 Mtpa and an initial offtake capacity of approximately 10.5 Mtpa.

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In April 2019, the FERC approved the siting, construction and operation of the proposed PA LNG Phase 1 project facilities, along with certain natural gas pipelines, including the Port Arthur Pipeline Louisiana Connector and Texas Connector, that could be used to supply feed gas to the liquefaction facility if and when the project is completed. Sempra Infrastructure received authorizations from the DOE in August 2015 and May 2019 that collectively permit the LNG to be produced from the proposed PA LNG Phase 1 project to be exported to all current and future FTA and non-FTA countries.

Sempra Infrastructure has entered into the following definitive SPAs, each of which is subject to making a positive final investment decision and customary closing conditions, for LNG offtake from the proposed PA LNG Phase 1 project with:

▪ConocoPhillips for a 20-year term for 5 Mtpa of LNG. In addition, the parties entered into an equity purchase and sale agreement whereby ConocoPhillips will acquire a 30% ownership interest in the proposed PA LNG Phase 1 project, and a natural gas supply management agreement whereby ConocoPhillips will manage the feed gas supply requirements for the proposed facility.

▪RWE Supply & Trading GmbH, a subsidiary of RWE AG, for a 15-year term for 2.25 Mtpa of LNG.

▪INEOS for a 20-year term for approximately 1.4 Mtpa of LNG.

▪ORLEN for a 20-year term for approximately 1 Mtpa of LNG.

▪ENGIE S.A. for a 15-year term for approximately 0.875 Mtpa of LNG.

In February 2020, we entered into an EPC contract with Bechtel for the proposed PA LNG Phase 1 project. We have no obligation to move forward under the EPC contract, and we may release Bechtel to perform portions of the work pursuant to limited notices to proceed. In October 2022, we amended and restated the EPC contract to reflect an estimated price of approximately $10.5 billion, subject to adjustments. The contract price is valid until May 8, 2023, subject to certain conditions, including timely issuances of limited notices to proceed and price escalations of up to a maximum of $149 million. Sempra Infrastructure and Bechtel must mutually agree to an adjustment to the contract price if the full notice to proceed is issued after May 8, 2023. Any agreement on such an amendment to the EPC contract by both parties or on favorable terms to Sempra Infrastructure cannot be assured. Either party may terminate the EPC contract if the full notice to proceed is not issued by May 8, 2024.

We are progressing the development of the proposed PA LNG Phase 1 project, and are targeting a final investment decision in the first quarter of 2023 taking into account market demands given the current geopolitical environment, executing definitive agreements for LNG offtake and equity investments, and obtaining financing.

Development of the PA LNG Phase 1 project is subject to a number of risks and uncertainties, including obtaining binding customer commitments; identifying suitable project and equity partners; completing the required commercial agreements, such as equity acquisition and governance agreements and gas supply and transportation agreements; maintaining all necessary permits and approvals; obtaining financing and incentives; reaching a positive final investment decision; and other factors associated with the potential investment. An unfavorable outcome with respect to any of these factors could have a material adverse effect on Sempra’s results of operations, financial condition, cash flows and/or prospects, including the impairment of all or a substantial portion of the capital costs invested in the project to date. For a discussion of these risks, see “Part I – Item 1A. Risk Factors.”

PA LNG Phase 2 Project. Sempra Infrastructure is developing a second phase of the natural gas liquefaction project that we expect will be a similar size to the proposed PA LNG Phase 1 project. We are progressing the development of the proposed PA LNG Phase 2 project, while continuing to evaluate overall opportunities to develop the entirety of the Port Arthur site as well as potential design changes that could reduce overall emissions, including a facility design utilizing renewable power sourcing and other technological solutions.

In February 2020, Sempra Infrastructure filed an application, subject to approval by the FERC, for the siting, construction and operation of the proposed PA LNG Phase 2 project, including the potential addition of up to two liquefaction trains. Also in February 2020, Sempra Infrastructure filed an application with the DOE to permit LNG produced from the proposed PA LNG Phase 2 project to be exported to all current and future FTA and non-FTA countries.

Sempra Infrastructure has entered into non-binding HOAs for the negotiation and potential finalization of definitive SPAs with INEOS for approximately 0.2 Mtpa of LNG offtake and with Williams, as we discuss above, for LNG offtake, in each case from the proposed PA LNG Phase 2 project. The ultimate participation in and offtake from the proposed project remains subject to negotiation and finalization of definitive agreements, among other factors, and the HOAs do not commit any party to enter into a definitive agreement with respect to the proposed project.

Development of the PA LNG Phase 2 project is subject to a number of risks and uncertainties, including obtaining binding customer commitments; identifying suitable project and equity partners; completing the required commercial agreements, such as equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; securing and

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maintaining all necessary permits and approvals, including approval from the FERC; obtaining financing and incentives; reaching a positive final investment decision; and other factors associated with the potential investment. An unfavorable outcome with respect to any of these factors could have a material adverse effect on Sempra’s results of operations, financial condition, cash flows and/or prospects, including the impairment of all or a substantial portion of the capital costs invested in the project to date. For a discussion of these risks, see “Part I – Item 1A. Risk Factors.”

Vista Pacifico LNG Liquefaction Project. Sempra Infrastructure is developing Vista Pacifico LNG, a potential natural gas liquefaction, storage, and mid-scale export facility proposed to be located in the vicinity of Topolobampo in Sinaloa, Mexico, under an MOU with the CFE, which was subsequently updated in July 2022, that contemplates the negotiation of definitive agreements that would cover development of Vista Pacifico LNG and the re-routing of a portion of the Guaymas-El Oro segment of the Sonora pipeline and resumption of its operations. The proposed LNG export terminal would be supplied with U.S. natural gas and would use excess natural gas and pipeline capacity on existing pipelines in Mexico with the intent of helping to meet growing demand for natural gas and LNG in the Mexican and Pacific markets.

Sempra Infrastructure received authorization from the DOE to permit the export of U.S.-produced natural gas to Mexico and for LNG produced from the proposed Vista Pacifico LNG facility to be re-exported to all current and future FTA countries in April 2021 and non-FTA countries in December 2022.

In March 2022, TotalEnergies SE and Sempra Infrastructure entered into an MOU that contemplates TotalEnergies SE potentially contracting approximately one-third of the long-term export production of the proposed Vista Pacifico LNG project and potentially participating as a minority partner in the project.

The MOUs related to the proposed Vista Pacifico LNG project are non-binding arrangements. The ultimate participation in and offtake from the proposed project remain subject to negotiation and finalization of definitive agreements, among other factors, and the MOUs do not commit any party to enter into definitive agreements with respect to the project.

The development of the potential Vista Pacifico LNG project is subject to numerous risks and uncertainties, including securing binding customer commitments; obtaining and maintaining a number of permits and regulatory approvals; securing financing; identifying suitable project partners; negotiating and completing suitable commercial agreements, including definitive EPC contracts, equity acquisition and governance agreements, LNG sales agreements and gas supply and transportation agreements; reaching a positive final investment decision; the impact of recent and proposed changes to the law in Mexico; and other factors associated with this potential investment. For a discussion of these risks, see “Part I – Item 1A. Risk Factors.”

Hackberry Carbon Sequestration Project. Sempra Infrastructure is developing the potential Hackberry Carbon Sequestration project near Hackberry, Louisiana. This proposed project under development is designed to permanently sequester carbon dioxide from the Cameron LNG Phase 1 facility and the proposed Cameron LNG Phase 2 project. In the third quarter of 2021, Sempra Infrastructure filed an application with the EPA for a Class VI carbon injection well to advance this project.

In May 2022, Sempra Infrastructure, TotalEnergies SE, Mitsui & Co., Ltd. and Mitsubishi Corporation signed a Participation Agreement for the development of the proposed Hackberry Carbon Sequestration project. The Participation Agreement contemplates that the combined Cameron LNG Phase 1 facility and proposed Cameron LNG Phase 2 project would potentially serve as the anchor source for the capture and sequestration of carbon dioxide by the proposed project. It also provides the basis for the parties to enter into a JV with Sempra Infrastructure for the Hackberry Carbon Sequestration project.

The development of the potential Hackberry Carbon Sequestration project is subject to numerous risks and uncertainties, including obtaining required consents from the Cameron LNG JV members, securing binding customer commitments; identifying suitable project partners; obtaining and maintaining a number of permits and regulatory approvals; securing financing; negotiating and completing suitable commercial agreements, including a definitive EPC contract, and equity acquisition and governance agreements; reaching a positive final investment decision; and other factors associated with this potential investment. For a discussion of these risks, see “Part I – Item 1A. Risk Factors.”

Asset and Supply Optimization. As we discuss in “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” Sempra Infrastructure enters into hedging transactions to help mitigate commodity price risk. Sempra Infrastructure posted net margin of approximately $1.4 billion in 2022 and anticipates that, once the natural gas is sold and derivatives are settled, the previously unrealized gains or losses associated with the economic hedge positions would be realized, with the cash collateral posted largely offset by collections from natural gas sales.

Off-Balance Sheet Arrangements. Our investment in Cameron LNG JV is a variable interest in an unconsolidated entity. We discuss variable interests in Note 1 of the Notes to Consolidated Financial Statements.

In June 2021, Sempra provided a promissory note, which constitutes a guarantee, for the benefit of Cameron LNG JV with a maximum exposure to loss of $165 million. The guarantee will terminate upon full repayment of Cameron LNG JV’s debt,

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scheduled to occur in 2039, or replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA. We discuss this guarantee in Note 6 of the Notes to Consolidated Financial Statements.

In July 2020, Sempra entered into a Support Agreement, which contains a guarantee and represents a variable interest, for the benefit of CFIN with a maximum exposure to loss of $979 million. The guarantee will terminate upon full repayment of the guaranteed debt by 2039, including repayment following an event in which the guaranteed debt is put to Sempra. We discuss this guarantee in Notes 1, 6 and 9 of the Notes to Consolidated Financial Statements.

Energy Networks

Construction Projects. In 2022, Sempra Infrastructure completed construction of a terminal for the receipt, storage, and delivery of refined products in the vicinity of Puebla. Sempra Infrastructure is also developing terminals for the receipt, storage, and delivery of refined products in the vicinity of Manzanillo and Ensenada.

As part of an industrywide audit and investigative process initiated by the CRE to enforce fuel procurement laws, federal prosecutors conducted inspections at several refined products terminals, including Sempra Infrastructure’s refined products terminal in Puebla, to confirm that the gasoline and/or diesel in storage were legally imported. During the inspection of the Puebla terminal in September 2021, a federal prosecutor took samples from all the train and storage tanks in the terminal and ordered that the facility be temporarily shut down during the pendency of the analysis of the samples and investigation, while leaving the terminal in Sempra Infrastructure’s custody. In November 2021, the CRE notified Sempra Infrastructure that it had started a process to revoke Sempra Infrastructure’s storage permit at the Puebla terminal. In December 2021, Sempra Infrastructure filed its response to the CRE. In May 2022, the CRE provided a final resolution that stopped the permit revocation process. In August 2022, the federal prosecutor concluded the investigation and lifted the order that had temporarily shut down the facility. Commissioning activities were restarted, and commercial operations commenced in October 2022.

Construction of the Topolobampo terminal was substantially completed in May 2022, at which time commissioning activities commenced. Subject to the receipt of pending permits, we expect the Topolobampo terminal will commence commercial operations in the first half of 2023.

The ability to successfully complete major construction projects is subject to a number of risks and uncertainties. For a discussion of these risks and uncertainties, see “Part I – Item 1A. Risk Factors.”

Clean Power

Construction Projects. ESJ completed construction and began commercial operations of a second, 108-MW wind power generation facility in January 2022. This second wind power generation facility is fully contracted by SDG&E under a long-term PPA expiring in 2042.

Legal and Regulatory Matters

See Note 16 of the Notes to Consolidated Financial Statements and “Part I – Item 1A. Risk Factors” for discussions of the following legal and regulatory matters affecting our operations in Mexico:

Energía Costa Azul

▪Land Disputes

▪Environmental and Social Impact Permits

One or more unfavorable final decisions on these land disputes or environmental and social impact permit challenges could materially adversely affect our existing natural gas regasification operations and proposed natural gas liquefaction projects at the site of the ECA Regas Facility and have a material adverse effect on Sempra’s business, results of operations, financial condition, cash flows and/or prospects.

Sonora Pipeline

▪Guaymas-El Oro Segment

Our investment in the Guaymas-El Oro segment of the Sonora pipeline could be subject to impairment if Sempra Infrastructure and the CFE are unable to re-route a portion of the pipeline (which has not been agreed to by the parties, but is subject to negotiation pursuant to a non-binding MOU and a Shareholders’ Agreement with the CFE that remains subject to regulatory and corporate authorizations) and resume operations or if Sempra Infrastructure terminates the contract and is unable to obtain recovery. Any such occurrence could have a material adverse effect on Sempra’s business, results of operations, financial condition, cash flows and/or prospects.

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Regulatory and Other Actions by the Mexican Government

▪Amendments to Mexico ’s Hydrocarbons Law

▪Amendments to Mexico’s Electricity Industry Law

Sempra Infrastructure and other parties affected by these amendments to Mexican law have challenged them by filing amparo and other claims, some of which remain pending. An unfavorable decision on one or more of these amparo or other challenges, the impact of the amendments that have become effective (due to unsuccessful amparo challenges or otherwise), or the possibility of future reforms to the energy industry through additional amendments to Mexican laws, regulations or rules (including through amendments to the constitution) may impact our ability to operate our facilities at existing levels or at all, may result in increased costs for Sempra Infrastructure and its customers, may adversely affect our ability to develop new projects, may result in decreased revenues and cash flows, and may negatively impact our ability to recover the carrying values of our investments in Mexico, any of which may have a material adverse effect on our business, results of operations, financial condition, cash flows and/or prospects.

SOURCES AND USES OF CASH

We discuss herein our sources and uses of cash for the year ended December 31, 2022 compared to the year ended December 31, 2021. For a discussion of our sources and uses of cash for the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to “Part II – Item 7. MD&A – Sources and Uses of Cash” in our 2021 annual report on Form 10-K filed with the SEC on February 25, 2022.

The following tables include only significant changes in cash flow activities for each of our registrants.


CASH FLOWS FROM OPERATING ACTIVITIES
(Dollars in millions)
Years ended December 31,	Sempra			SDG&E		SoCalGas
2022		$	1,142	$	1,729	$	(454)
2021		3,842		1,376		1,033
Change		$	(2,700)	$	353	$	(1,487)

Net decrease in Reserve for Aliso Canyon Costs, current and noncurrent, due to $2,054 higher payments and $1,328 lower accruals		$	(3,382)			$	(3,382)
Change in net margin posted		(1,154)		$	3	29
Change in accounts receivable		(377)		(58)		(129)
Change in net undercollected regulatory balancing accounts (including long-term amounts in regulatory assets)		(288)		62		(350)
Change in GHG allowances, current and noncurrent		(108)		(72)		(27)
Change in accounts payable		167		146		10
Change in GHG liabilities, current and noncurrent		171		34		141
Higher proceeds received from Insurance Receivable for Aliso Canyon		275				275
Higher net income, adjusted for noncash items included in earnings		1,992		155		1,750
Other		4		83		196
		$	(2,700)	$	353	$	(1,487)

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CASH FLOWS FROM INVESTING ACTIVITIES
(Dollars in millions)
Years ended December 31,	Sempra			SDG&E		SoCalGas
2022		$	(5,039)	$	(2,412)	$	(1,993)
2021		(5,508)		(2,213)		(1,984)
Change		$	469	$	(199)	$	(9)

Higher repayments received from a note receivable from IMG		$	588
Advance to note receivable with KKR in 2021		305
Lower contributions to Oncor Holdings		225
Acquisition of 50% interest in ESJ in March 2021 for $79, net of $14 of cash and cash equivalents acquired		65
Higher contributions to Cameron LNG JV		(28)
Proceeds received from sale of PXiSE in 2021		(38)
Increase in capital expenditures		(342)		$	(253)	$	(9)
Distributions from Oncor Holdings in 2021		(361)
Other		55		54
		$	469	$	(199)	$	(9)


CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
Years ended December 31,	Sempra			SDG&E		SoCalGas
2022		$	3,779	$	665	$	2,431
2021		1,260		600		984
Change		$	2,519	$	65	$	1,447

Lower (higher) payments on long-term debt and finance leases		$	4,147	$	563	$	(3)
Higher (lower) issuances of short-term debt with maturities greater than 90 days		3,640		(375)		800
Higher issuances of long-term debt		2,571		650		1,295
Proceeds from sale of NCI to ADIA in 2022, net of $12 of transaction costs		1,719
Purchases of NCI in 2021		224
Make-whole premium payments related to early redemptions of debt in 2021		121
Lower early termination of interest rate swap		66
Lower preferred dividends paid		55
Higher contributions from noncontrolling interest		27
(Higher) lower common dividends paid		(99)		200		75
Higher repurchases of common stock		(139)
Distributions to SI Partners’ minority shareholders in 2022		(237)
Higher payments for commercial paper and other short-term debt with maturities greater than 90 days		(3,168)		(375)
Change in borrowings and repayments of short-term debt, net		(3,179)		(597)		(557)
Proceeds from sale of NCI to KKR in 2021, net of $170 of transaction costs		(3,199)
Lower equity contributions from Sempra Energy						(150)
Other		(30)		(1)		(13)
		$	2,519	$	65	$	1,447

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Expenditures for PP&E

We invest the majority of our capital expenditures in Sempra California, primarily for transmission and distribution improvements, including pipeline and wildfire safety. The following table summarizes by segment capital expenditures for the last three years.


EXPENDITURES FOR PP&E
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
SDG&E	$	2,473	$	2,220	$	1,942
SoCalGas	1,993		1,984		1,843
Sempra Infrastructure	884		802		879
Parent and other	7		9		12
Total	$	5,357	$	5,015	$	4,676

Expenditures for Investments and Acquisitions

The following table summarizes by segment our investments in entities that we account for under the equity method, as well as asset acquisitions.


EXPENDITURES FOR INVESTMENTS AND ACQUISITIONS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra Texas Utilities	$	346	$	566	$	648
Sempra Infrastructure	30		67		4
Total	$	376	$	633	$	652

Future Capital Expenditures and Investments

The amounts and timing of capital expenditures and certain investments are generally subject to approvals by various regulatory and other governmental and environmental bodies, including the CPUC, the FERC and the PUCT, and various other factors described in this MD&A and in “Part I – Item 1A. Risk Factors.” In 2023, we expect to make capital expenditures and investments of approximately $5.7 billion (which excludes capital expenditures that will be funded by unconsolidated entities), as summarized by segment in the following table.


FUTURE CAPITAL EXPENDITURES AND INVESTMENTS
(Dollars in millions)
	Year ending December 31, 2023
SDG&E	$	2,300
SoCalGas	2,100
Sempra Texas Utilities	300
Sempra Infrastructure	1,000
Total	$	5,700

We expect the majority of our capital expenditures and investments in 2023 will relate to transmission and distribution improvements at our regulated public utilities, and construction of the ECA LNG Phase 1 liquefaction project and natural gas pipelines at Sempra Infrastructure.

From 2023 through 2026, and subject to the factors described below, which could cause these estimates to vary substantially, Sempra expects to make aggregate capital expenditures and investments of approximately $18.7 billion (which excludes capital expenditures that will be funded by unconsolidated entities), as follows: $8.9 billion at SDG&E, $7.8 billion at SoCalGas, $0.8 billion at Sempra Texas Utilities and $1.2 billion at Sempra Infrastructure. Capital expenditure amounts include capitalized interest and AFUDC related to debt.

Periodically, we review our construction, investment and financing programs and revise them in response to changes in regulation, economic conditions, competition, customer growth, inflation, customer rates, the cost and availability of capital, and safety and environmental requirements.

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Our level of capital expenditures and investments in the next few years may vary substantially and will depend on, among other things, the cost and availability of financing, regulatory approvals, changes in U.S. federal tax law and business opportunities providing desirable rates of return. See “Part I – Item 1A. Risk Factors” for a discussion of other factors that could affect future levels of our capital expenditures and investments. We intend to finance our capital expenditures in a manner that will maintain our investment-grade credit ratings and capital structure, but there is no guarantee that we will be able to do so.

Weighted-Average Rate Base

Rate base is the value of assets on which SDG&E and SoCalGas are permitted to earn a specified rate of return in accordance with rules set by regulatory agencies, including the CPUC and the FERC (for SDG&E), which is calculated using a 13-month average in accordance with CPUC methodology as adopted in rate-setting proceedings. The following table summarizes the weighted-average rate base for SDG&E and SoCalGas for the last three years.


WEIGHTED-AVERAGE RATE BASE
(Dollars in millions)
	2022		2021		2020
SDG&E	$	13,780	$	12,527	$	11,109
SoCalGas	10,494		9,371		8,228

The increase in weighted-average rate base reflects the significant capital investments that SDG&E and SoCalGas have made in transmission and distribution safety and reliability. We expect the weighted-average rate base to continue to increase in 2023 based on our expected capital investments.

Capital Stock Transactions

Sempra

Cash provided by issuances of common and preferred stock was:

▪$4 million in 2022

▪$5 million in 2021

▪$902 million in 2020

Cash used for repurchases of common stock was:

▪$478 million in 2022

▪$339 million in 2021

▪$566 million in 2020

Sempra Common Stock Repurchases. As we discuss in Note 14 of the Notes to Consolidated Financial Statements, we repurchased 1,472,756 shares of our common stock for $200 million pursuant to an ASR program that was completed in February 2022. We repurchased an additional 1,471,957 shares of our common stock for $250 million pursuant to an ASR program that was completed in April 2022. These share repurchases were funded with commercial paper borrowings that we repaid with a portion of the proceeds received from the sale of NCI in SI Partners to ADIA, which closed in June 2022.

Dividends

Sempra

Sempra paid cash dividends of:

▪$1,430 million for common stock and $44 million for preferred stock in 2022

▪$1,331 million for common stock and $99 million for preferred stock in 2021

▪$1,174 million for common stock and $157 million for preferred stock in 2020

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DIVIDENDS PER SHARE ON SEMPRA COMMON STOCK
(As approved by our board of directors)

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On February 27, 2023, our board of directors declared a dividend of $1.19 per share on our common stock and a dividend of $24.375 per share on our series C preferred stock, both payable on April 15, 2023.

All declarations of dividends on our common stock and preferred stock are made at the discretion of the board of directors. While we view dividends as an integral component of shareholder return, the amount of future dividends will depend on earnings, cash flows, financial and legal requirements, and other relevant factors at that time. As a result, Sempra’s dividends on common stock and preferred stock declared on a historical basis may not be indicative of future declarations.

SDG&E

In 2022, 2021 and 2020, SDG&E paid common stock dividends to Enova and Enova paid corresponding dividends to Sempra of $100 million, $300 million and $200 million, respectively. SDG&E’s dividends on common stock declared on an annual historical basis may not be indicative of future declarations and could be impacted over the next few years in order for SDG&E to maintain its authorized capital structure while managing its capital investment program.

Enova, a wholly owned subsidiary of Sempra, owns all of SDG&E’s outstanding common stock. Accordingly, dividends paid by SDG&E to Enova and dividends paid by Enova to Sempra are eliminated in Sempra’s consolidated financial statements.

SoCalGas

SoCalGas did not declare or pay common stock dividends in 2022. In 2021 and 2020, SoCalGas paid common stock dividends to PE and PE paid corresponding dividends to Sempra of $75 million and $100 million, respectively. SoCalGas’ dividends on common stock declared on an annual historical basis may not be indicative of future declarations and could be impacted over the next few years in order for SoCalGas to maintain its authorized capital structure.

PE, a wholly owned subsidiary of Sempra, owns all of SoCalGas’ outstanding common stock. Accordingly, dividends paid by SoCalGas to PE and dividends paid by PE to Sempra are eliminated in Sempra’s consolidated financial statements.

Dividend Restrictions

The board of directors for each of Sempra, SDG&E and SoCalGas has the discretion to determine whether to declare and, if declared, the amount of any dividends by each such entity. The CPUC’s regulation of SDG&E’s and SoCalGas’ capital structures limits the amounts that are available for loans and dividends to Sempra. At December 31, 2022, based on these regulations,

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Sempra could have received combined loans and dividends of approximately $504 million from SDG&E and $347 million from SoCalGas. In addition, the terms of Sempra’s series C preferred stock limit Sempra’s ability to declare dividends on its common stock under certain circumstances.

We provide additional information about dividend restrictions in “Restricted Net Assets” in Note 1 of the Notes to Consolidated Financial Statements and in Note 13 of the Notes to Consolidated Financial Statements.

Book Value Per Common Share

Sempra’s book value per common share on the last day of each of the last three fiscal years was as follows:

▪$83.43 in 2022

▪$79.17 in 2021

▪$70.11 in 2020

The increase in 2022 was primarily due to comprehensive income exceeding dividends and a fair value that was higher than carrying value related to the change in ownership, which did not result in a change of control, from the sale of NCI in SI Partners to ADIA. In 2021, the increase was primarily due to a fair value that was higher than carrying value related to the change in ownership, which did not result in a change of control, from the sale of NCI in SI Partners to KKR, the IEnova exchange offer and subsequent cash tender offer, and the common shares issued from the conversion of series A preferred stock and series B preferred stock.

Capitalization

Our debt to capitalization ratio, calculated as total debt as a percentage of total debt and equity, was as follows:


TOTAL CAPITALIZATION AND DEBT-TO-CAPITALIZATION RATIOS
(Dollars in millions)
	Sempra			SDG&E			SoCalGas
	December 31, 2022
Total capitalization	$	58,175		$	18,258		$	13,696
Debt-to-capitalization ratio	50		%	50		%	51		%

	December 31, 2021
Total capitalization	$	52,064		$	16,655		$	10,611
Debt-to-capitalization ratio	47		%	50		%	49		%

Significant changes in 2022 that affected capitalization included the following:

▪Sempra: increase in long-term debt, offset by a decrease in short-term debt and increase in equity primarily from comprehensive income exceeding dividends and the sale of NCI.

▪SDG&E: increase in long-term debt, offset by a decrease in short-term debt and increase in equity from comprehensive income exceeding dividends.

▪SoCalGas: increase in short-term and long-term debt, offset by an increase in equity from comprehensive income and equity contributions from Sempra.

CRITICAL ACCOUNTING ESTIMATES

Management views certain accounting estimates as critical because their application is the most relevant, judgmental and/or material to our financial position and results of operations, and/or because they require the use of material judgments and estimates. We discuss critical accounting estimates that are material to our financial statements with the Audit Committee of Sempra’s board of directors.

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CONTINGENCIES

Sempra, SDG&E, SoCalGas

We accrue losses for the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. For loss contingencies, we accrue the loss if an event has occurred on or before the balance sheet date and if:

▪information available through the date we file our financial statements indicates it is probable that a loss has been incurred, given the likelihood of uncertain future events

▪the amount of the loss or a range of possible losses can be reasonably estimated

We do not accrue contingencies that might result in gains. We continuously assess contingencies for litigation claims, environmental remediation and other events.

Actual amounts realized upon settlement of contingencies may be different than amounts recorded and disclosed and may affect our results of operations, financial condition and cash flows. Details of our issues in this area are discussed in Note 16 of the Notes to Consolidated Financial Statements.

REGULATORY ACCOUNTING

Sempra, SDG&E, SoCalGas

As regulated entities, SDG&E’s and SoCalGas’ customer rates, as set and monitored by regulators, are designed to recover the cost of providing service and to provide the opportunity to realize their authorized rates of return on their investments. SDG&E and SoCalGas assess probabilities of future rate recovery associated with regulatory account balances at the end of each reporting period and whenever new and/or unusual events occur, such as:

▪changes in the regulatory and political environment or the utility’s competitive position

▪issuance of a regulatory commission order

▪passage of new legislation

To the extent that circumstances associated with regulatory balances change, the regulatory balances are evaluated and adjusted if appropriate.

Significant management judgment is required to evaluate the anticipated recovery of regulatory assets and plant investments, the recognition of incentives and revenues subject to refund, as well as the existence and amount of regulatory liabilities. Adverse regulatory or legislative actions could materially impact the amounts of our regulatory assets and liabilities and could materially adversely impact our results of operations and financial condition. Specifically, if future recovery of costs ceases to be probable, all or part of the associated regulatory assets and/or plant investments would need to be written off against current period earnings, or adverse regulatory or legislative actions could give rise to material new or higher regulatory liabilities. We discuss details of SDG&E’s and SoCalGas’ regulatory assets and liabilities and additional factors that management considers when assessing probabilities associated with regulatory balances in Notes 1, 4, 15 and 16 of the Notes to Consolidated Financial Statements.

INCOME TAXES

Sempra, SDG&E, SoCalGas

Our income tax expense and related balance sheet amounts involve significant management judgments and estimates. Amounts of deferred income tax assets and liabilities, as well as current and noncurrent accruals, involve judgments and estimates of the timing and probability of recognition of income and deductions by taxing authorities. When we evaluate the anticipated resolution of income tax issues, we consider:

▪ past resolutions of the same issue or similar issues

▪ the status of any income tax examination in progress

▪ positions taken by taxing authorities with other taxpayers with similar issues

The likelihood of deferred income tax recovery is based on analyses of the deferred income tax assets and our expectation of future taxable income, based on our strategic planning. Should a change in facts or circumstances lead to a change in judgment about the ultimate realizability of a deferred tax asset, we would record or adjust the related valuation allowance in the period that the change in facts and circumstances occurs, along with a corresponding increase or decrease in the provision for income taxes.

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Actual income taxes could vary from estimated amounts because of:

▪ future impacts of various items, including changes in tax laws, regulations, interpretations and rulings

▪ our financial condition in future periods

▪ the resolution of various income tax issues between us and taxing and regulatory authorities

Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our results of operations, financial condition and cash flows.

We discuss these matters and additional information related to accounting for income taxes, including uncertainty in income taxes, in Note 8 of the Notes to Consolidated Financial Statements.

PENSION AND PBOP PLANS

Sempra, SDG&E, SoCalGas

To measure our pension and PBOP obligations, costs and liabilities, we rely on several assumptions. We consider current market conditions, including interest rates, in making these assumptions. We review these assumptions annually and update when appropriate.

The critical assumptions used to develop the required estimates include the following key factors:

▪discount rates

▪expected return on plan assets

▪health care cost trend rates

▪interest crediting rate on cash balance accounts

▪mortality rate

▪rate of compensation increases

▪termination and retirement rates

▪utilization of postretirement welfare benefits

▪payout elections (lump sum or annuity)

▪lump sum interest rates

The actuarial assumptions we use may differ materially from actual results due to:

▪return on plan assets

▪changing market and economic conditions

▪higher or lower withdrawal rates

▪longer or shorter participant life spans

▪more or fewer lump sum versus annuity payout elections made by plan participants

▪higher or lower retirement rates

Changes in the estimated costs or timing of pension and PBOP, or the assumptions and judgments used by management underlying these estimates (primarily the discount rate and assumed rate of return on plan assets), as well as changes in the circumstances associated with rate recovery, could have a material effect on the recorded expenses and liabilities. The following tables summarize the impact to our projected benefit obligation for pension and accumulated benefit obligation for PBOP at December 31, 2022, and 2022 net periodic benefit costs, in each case if the discount rate or assumed rate of return on plan assets were changed by 100 bps.

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IMPACT DUE TO INCREASE/DECREASE IN DISCOUNT RATE
(Dollars in millions)
	Sempra				SDG&E				SoCalGas
	Increase		Decrease		Increase		Decrease		Increase		Decrease
Pension:
(Decrease) increase to projected benefit obligation, net	$	(251)	$	279	$	(38)	$	40	$	(198)	$	223
(Decrease) increase to net periodic benefit cost	(16)		23		5		(2)		(21)		25
PBOP:
(Decrease) increase to accumulated benefit obligation, net	(69)		85		(13)		16		(54)		67
(Decrease) increase to net periodic benefit cost	(8)		11		(2)		2		(7)		9


IMPACT DUE TO INCREASE/DECREASE IN RETURN ON PLAN ASSETS
(Dollars in millions)
	Sempra				SDG&E				SoCalGas
	Increase		Decrease		Increase		Decrease		Increase		Decrease
Pension:
(Decrease) increase to net periodic benefit cost	$	(29)	$	29	$	(8)	$	8	$	(19)	$	19
PBOP:
(Decrease) increase to net periodic benefit cost	(14)		14		(2)		2		(11)		11

For SDG&E and SoCalGas plans, the effects of the assumptions on earnings are expected to be recovered in rates and therefore are offset in regulatory accounts. We provide details of our pension and PBOP plans in Note 9 of the Notes to Consolidated Financial Statements.

ASSET RETIREMENT OBLIGATIONS

Sempra, SDG&E

SDG&E’s legal AROs related to the decommissioning of SONGS are estimated based on a site-specific study performed no less than every three years. The estimate of the obligations includes:

▪ estimated decommissioning costs, including labor, equipment, material and other disposal costs

▪ inflation adjustment applied to estimated cash flows

▪ discount rate based on a credit-adjusted risk-free rate

▪ actual decommissioning costs, progress to date and expected duration of decommissioning activities

SDG&E’s nuclear decommissioning expenses are subject to rate recovery and, therefore, rate-making accounting treatment is applied to SDG&E’s nuclear decommissioning activities. SDG&E recognizes a regulatory asset, or liability, to the extent that its SONGS ARO exceeds, or is less than, the amount collected from customers and the amount earned in SDG&E’s NDT.

SDG&E’s ARO related to the decommissioning of SONGS was $540 million as of December 31, 2022, based on the decommissioning cost study prepared in 2020. Changes in the estimated costs, execution strategy or timing of decommissioning, or in the assumptions and judgments by management underlying these estimates, could cause material revisions to the estimated total cost to decommission this facility, which could have a material effect on the recorded liability.

The following table illustrates the increase to SDG&E’s and Sempra’s ARO liability if the cost escalation rate was adjusted while leaving all other assumptions constant:


INCREASE TO ARO AND REGULATORY ASSET
(Dollars in millions)
	December 31, 2022
Uniform increase in escalation percentage of 1 percentage point	$	62

The increase in the ARO liability driven by an increase in the cost escalation rate would result in a decrease in the regulatory liability for recoveries in excess of ARO liabilities. We provide additional detail in Note 15 of the Notes to Consolidated Financial Statements.

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IMPAIRMENT TESTING OF LONG-LIVED ASSETS

Sempra

Whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable, we consider if the estimated future undiscounted cash flows are less than the carrying amount of the asset. If so, we estimate the fair value of the asset to determine the extent to which carrying value exceeds fair value. For such an estimate, we may consider data from multiple valuation methods, including data from market participants. We exercise judgment to estimate the future cash flows and the useful life of a long-lived asset and to determine our intent to use the asset. Our intent to use or dispose of a long-lived asset is subject to re-evaluation and can change over time. If an impairment test is required, the fair value of a long-lived asset can vary if differing estimates and assumptions are used in the valuation techniques applied as indicated by changing market or other conditions. Critical assumptions that affect our estimates of fair value may include:

▪consideration of market transactions

▪future cash flows

▪the appropriate risk-adjusted discount rate, including the impacts of country risk and entity risk

We discuss impairment of long-lived assets in Note 1 of the Notes to Consolidated Financial Statements.

IMPAIRMENT TESTING OF GOODWILL

Sempra

When determining if goodwill is impaired, the fair value of the reporting unit can vary if differing estimates and assumptions are used in the valuation techniques applied as indicated by changing market or other conditions. As a result, recognizing a goodwill impairment may or may not be required. When we perform the quantitative goodwill impairment test, we exercise judgment to develop estimates of the fair value of the reporting unit and compare that to its carrying value. Our fair value estimates are developed from the perspective of a knowledgeable market participant. We consider observable transactions in the marketplace for similar investments, if available, as well as an income-based approach such as a discounted cash flow analysis. A discounted cash flow analysis may be based directly on anticipated future revenues and expenses and may be performed based on free cash flows generated within the reporting unit. Critical assumptions that affect our estimates of fair value may include:

▪consideration of market transactions

▪future cash flows

▪projected revenue and expense growth rates

▪the appropriate risk-adjusted discount rate, including the impacts of country risk and entity risk

In 2022 and 2021, we performed a quantitative goodwill impairment test and determined that the estimated fair values of our reporting units in Mexico to which goodwill was allocated was substantially above their carrying value for each year as of October 1, our goodwill impairment testing date. Our goodwill impairment test is determined based on assumptions existing as of that point in time. Changes in the business (such as loss of future cash flows from customer disputes, renegotiation of customer contracts or the macroeconomic environment, including rising interest rates) may result in us having to perform an interim goodwill impairment test, which could result in an impairment of our goodwill.

NEW ACCOUNTING STANDARDS

We discuss the recent accounting pronouncements that have had or may have a significant effect on our financial statements and/or disclosures in Note 2 of the Notes to Consolidated Financial Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of erosion of our cash flows, earnings, asset values or equity due to adverse changes in commodity market prices, interest rates and foreign currency and inflation rates.

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MARKET RISK POLICIES

Sempra has policies governing its market risk management and trading activities. Sempra, SDG&E, SoCalGas and Sempra Infrastructure maintain separate risk management committees, organizations and processes to provide oversight of these activities for their respective businesses. The committees consist of senior officers who establish policy, oversee energy risk management activities, and monitor the results of trading and other activities to help ensure compliance with our stated energy risk management and trading policies. These activities include, but are not limited to, monitoring of market positions that create credit, liquidity and market risk. The respective oversight organizations and committees are independent from energy procurement departments.

Along with other tools, we use VaR and liquidity metrics to measure our exposure to market risk associated with commodity portfolios. VaR is an estimate of the potential loss on a position or portfolio of positions over a specified holding period, based on normal market conditions and within a given statistical confidence interval. We use a variance-covariance VaR model at a 95% confidence level. A liquidity metric is intended to monitor the amount of financial resources needed for meeting potential margin calls as forward market prices move. VaR and liquidity risk metrics are independently verified by the respective risk management oversight organizations.

SDG&E and SoCalGas use natural gas derivatives and SDG&E uses electricity derivatives to manage natural gas and electric price risk associated with servicing load requirements. The use of natural gas and electricity derivatives is subject to certain limitations imposed by company policy and regulatory requirements. SDG&E’s risk management and transacting activity plans for electricity derivatives are also required to be filed with, and have been approved by, the CPUC. SoCalGas is also subject to certain regulatory requirements and thresholds related to natural gas procurement under the GCIM. We discuss revenue recognition in Note 3 and additional market-risk information regarding derivative instruments in Note 11 of the Notes to Consolidated Financial Statements.

We have exposure to changes in commodity prices, interest rates and foreign currency and inflation rates. The following discussion of these primary market-risk exposures as of December 31, 2022 includes a discussion of how these exposures are managed.

COMMODITY PRICE RISK

Market risk related to physical commodities is created by volatility in the prices and basis of certain commodities. Our various subsidiaries are exposed, in varying degrees, to commodity price risk, primarily to prices in the natural gas and electricity markets. Our policy is to manage this risk within a framework that considers the specific markets and operating and regulatory environments of each subsidiary.

Sempra Infrastructure is exposed to commodity price risk indirectly through its LNG, natural gas pipelines and storage, and power-generating assets. Sempra Infrastructure has utilized and may continue to utilize commodity contracts, including physical and financial derivatives, in an effort to mitigate these risks and optimize the value of these assets. These transactions are typically priced based on market indices, but may also include fixed price purchases and sales of commodities. Any residual exposure is monitored as described above. Some of these derivatives that we use as economic hedges do not meet the requirements for hedge accounting, or hedge accounting is not elected, and as a result, the changes in fair value of these derivatives are recorded in earnings. Consequently, significant changes in commodity prices have in the past and could in the future result in earnings volatility as the economic offset of these derivatives may not be recorded at fair value. A significant decrease in the fair value of these economic hedges could also result in higher collateral requirements, which could negatively impact our liquidity and our ability to continue to mitigate our commodity risk exposure. We try to structure our hedging transactions with the objective that over time (i) realized gains and losses on our economic hedges would be largely offset by gains and losses related to our purchases or sales of natural gas and (ii) we would realize the economic benefit we anticipated at the time we structured the original transaction.

A hypothetical 10% change in commodity prices would have resulted in a change in the fair value of our commodity-based natural gas and electricity derivatives of $24 million and $3 million at December 31, 2022 and 2021, respectively. The impact of a change in energy commodity prices on our commodity-based derivative instruments at a point in time is not necessarily representative of the results that will be realized when the contracts are ultimately settled and does not typically include the generally offsetting impact of our underlying asset positions.

SDG&E and SoCalGas separately manage risk within the parameters of their market risk management frameworks. In addition, their market-risk exposure is limited due to CPUC-authorized rate recovery of the costs of commodity purchases, interstate and intrastate transportation, and storage activity. However, SoCalGas may, at times, be exposed to market risk as a result of the

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GCIM, which rewards or penalizes the utility for commodity costs below or above certain benchmarks. The one-day VaR for SDG&E and SoCalGas’ commodity positions were $25 million and $2 million, respectively, at December 31, 2022 and $5 million and $1 million, respectively, at December 31, 2021.

INTEREST RATE RISK

We are exposed to fluctuations in interest rates primarily from our short- and long-term debt. Subject to regulatory constraints, we periodically enter into interest rate swap agreements to moderate our exposure to interest rate changes and to lower our overall cost of borrowing.

The table below shows the nominal amount of our debt:


NOMINAL AMOUNT OF DEBT(1)
(Dollars in millions)
	December 31, 2022						December 31, 2021
	Sempra		SDG&E		SoCalGas		Sempra		SDG&E		SoCalGas
Short-term:
Sempra California	$	1,105	$	205	$	900	$	1,161	$	776	$	385
Other	2,247		—		—		2,310		—		—
Long-term:
Sempra California fixed-rate	$	13,159	$	7,400	$	5,759	$	10,876	$	6,417	$	4,459
Sempra California variable-rate	700		400		300		300		—		300
Other fixed-rate	10,079		—		—		8,591		—		—
Other variable-rate	575		—		—		341		—		—

(1) After the effects of interest rate swaps. Before reductions for unamortized discount and debt issuance costs and excluding finance lease obligations at December 31, 2022 and 2021, and before the effects of acquisition-related fair value adjustments at December 31, 2021.

An interest rate risk sensitivity analysis measures interest rate risk by calculating the estimated changes in earnings that would result from a hypothetical change in market interest rates. Earnings are affected by changes in interest rates on short-term debt and variable-rate long-term debt. If weighted-average interest rates on short-term debt outstanding at December 31, 2022 increased or decreased by 10%, the change in earnings over the 12-month period ending December 31, 2023 would be approximately $12 million. If interest rates increased or decreased by 10% on all variable-rate long-term debt at December 31, 2022, after considering the effects of interest rate swaps, the change in earnings over the 12-month period ending December 31, 2023 would be approximately $5 million.

We provide further information about debt and interest rate swap transactions in Notes 7 and 11, respectively, of the Notes to Consolidated Financial Statements.

We also are subject to the effect of interest rate fluctuations on the assets of our pension plans, PBOP plans, and SDG&E’s NDT. However, we expect the effects of these fluctuations, as they relate to Sempra California, to be reflected in future rates.

FOREIGN CURRENCY EXCHANGE RATE RISK AND INFLATION EXPOSURES

We discuss our foreign currency exchange rate risk and inflation exposures in “Part II – Item 7. MD&A – Impact of Foreign Currency and Inflation Rates on Results of Operations.”

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The hypothetical effect for every 10% appreciation in the U.S. dollar against the Mexican peso, in which we have operations and investments, are as follows:


HYPOTHETICAL EFFECTS FROM 10% STRENGTHENING OF U.S. DOLLAR (1)
(Dollars in millions)
	Hypothetical effects
Translation of 2022 earnings to U.S. dollars(2)	$	(3)
Transactional exposure(3)	153
Translation of net assets of foreign subsidiaries and investment in foreign entities(4)	(19)

(1) After the effects of foreign currency derivatives.

(2) Amount represents the impact to earnings for a change in the average exchange rate throughout the reporting period.

(3) Amount primarily represents the effects of currency exchange rate movement from December 31, 2022 on monetary assets and liabilities and remeasurement of non-U.S. deferred income tax balances at our Mexican subsidiaries.

(4) Amount represents the effects of currency exchange rate movement from December 31, 2022 that would be recorded to OCI at the end of the reporting period.

Monetary assets and liabilities at our Mexican subsidiaries and JVs that are denominated in U.S. dollars may fluctuate significantly throughout the year. These monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. Based on a net monetary liability position of $4.8 billion, including those related to our investments in JVs, at December 31, 2022, the hypothetical effect of a 10% increase in the Mexican inflation rate is approximately $104 million lower earnings as a result of higher income tax expense for our consolidated entities, as well as lower equity earnings for our JVs.

In 2022 and 2023 to date, SDG&E and SoCalGas have experienced inflationary pressures from increases in various costs, including the cost of natural gas, electric fuel and purchased power, labor, materials and supplies, as well as availability of labor and materials. Sempra Texas Utilities has experienced increased costs of labor and materials and does not have specific regulatory mechanisms that allow for recovery of higher costs due to inflation; rather, recovery is limited to rate updates through capital trackers and base rate reviews, which may result in partial non-recovery due to the regulatory lag. If such costs were to continue to be subject to significant inflationary pressures and we are not able to fully recover such higher costs in rates or there is a delay in recovery, these increased costs may have a significant effect on Sempra’s, SDG&E’s and SoCalGas’ results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure has experienced inflationary pressures from increases in various costs, including the cost of labor, materials and supplies. Sempra Infrastructure generally secures long-term contracts that are U.S. dollar-denominated or referenced and are periodically adjusted for market factors, including inflation, and Sempra Infrastructure generally enters into lump-sum contracts for its large construction projects in which much of the risk during construction is absorbed or hedged by the EPC contractor. If additional costs were to become subject to significant inflationary pressures, we may not be able to fully recover such higher costs through contractual adjustments for inflation, which may have a significant effect on Sempra’s results of operations, financial condition, cash flows and/or prospects.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements are listed on the Index to Consolidated Financial Statements set forth on page F-1 of this annual report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Sempra, SDG&E, SoCalGas

Sempra, SDG&E and SoCalGas maintain disclosure controls and procedures designed to ensure that information required to be disclosed in their respective reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to the management of each company, including each respective principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating these controls and procedures, the management of each company recognizes that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives; therefore, the management of each company applies judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of the principal executive officers and principal financial officers of Sempra, SDG&E and SoCalGas, each such company’s management evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2022, the end of the period covered by this report. Based on these evaluations, the principal executive officers and principal financial officers of Sempra, SDG&E and SoCalGas concluded that their respective company’s disclosure controls and procedures were effective at the reasonable assurance level as of such date.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Sempra, SDG&E, SoCalGas

The respective management of Sempra, SDG&E and SoCalGas is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f).

Under the supervision and with the participation of the principal executive officers and principal financial officers of Sempra, SDG&E and SoCalGas, each such company’s management evaluated the effectiveness of its internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on these evaluations, each company’s management concluded that its internal control over financial reporting was effective as of December 31, 2022. Deloitte & Touche LLP audited the effectiveness of each company’s internal control over financial reporting as of December 31, 2022, as stated in their reports, which are included in this annual report on Form 10-K.

There have been no changes in Sempra’s, SDG&E’s or SoCalGas’ internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, any such company’s internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Sempra Energy:

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Sempra Energy and subsidiaries (“Sempra”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, Sempra maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements as of and for the year ended December 31, 2022, of Sempra and our report dated February 28, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

Sempra’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Sempra’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Sempra in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 28, 2023

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholder and Board of Directors of San Diego Gas & Electric Company:

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of San Diego Gas & Electric Company (“SDG&E”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, SDG&E maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the financial statements as of and for the year ended December 31, 2022, of SDG&E and our report dated February 28, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

SDG&E’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on SDG&E’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SDG&E in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control over Financial Reporting

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 28, 2023

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Southern California Gas Company:

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Southern California Gas Company (“SoCalGas”) as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, SoCalGas maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the financial statements as of and for the year ended December 31, 2022, of SoCalGas and our report dated February 28, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

SoCalGas’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on SoCalGas’ internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SoCalGas in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control over Financial Reporting

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 28, 2023

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ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III.

Because SDG&E meets the conditions of General Instructions I(1)(a) and (b) of Form 10-K and is therefore filing this report with a reduced disclosure format as permitted by General Instruction I(2), the information required by Part III – Items 10, 11, 12 and 13 below is not required for SDG&E. We have, however, voluntarily provided the information required by Item 401 of SEC Regulation S-K, as required by Part III – Item 10 with respect to SDG&E’s executive officers in “Part I – Item 1. Business – Other Matters – Information About Our Executive Officers.”

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We provide the information required by Item 401 of SEC Regulation S-K, as required by this item, with respect to executive officers of Sempra and SoCalGas in “Part I – Item 1. Business – Other Matters – Information About Our Executive Officers.” All other information required by this item is incorporated by reference from “Corporate Governance” and “Proposal 1: Election of Directors” in the proxy statement to be filed for the May 2023 annual meeting of shareholders for Sempra and from the information statement to be filed for the May 2023 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference from “Executive Compensation,” including “Compensation Discussion and Analysis,” “Compensation and Talent Committee Report” and “Compensation Tables” (except for the disclosure under the heading “Pay-Versus-Performance”), in the proxy statement to be filed for the May 2023 annual meeting of shareholders for Sempra and from the information statement to be filed for the May 2023 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Sempra has LTIPs that permit the grant of a wide variety of equity and equity-based incentive awards to directors, officers and key employees. At December 31, 2022, outstanding awards consisted of stock options and RSUs held by 424 employees.

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The following table sets forth information regarding our equity compensation plans at December 31, 2022.


EQUITY COMPENSATION PLANS

Equity compensation plans approved by shareholders	Number of shares to be issued upon exercise of outstanding options, warrants and rights(1)	Weighted-average exercise price of outstanding options, warrants and rights(2)		Number of additional shares remaining available for future issuance(3)
2013 LTIP	151,876	$	106.76	—
2019 LTIP	1,680,168	$	132.47	5,056,550

(1) The 2013 LTIP consists of 151,876 options to purchase shares of our common stock, all of which were granted at an exercise price equal to 100% of the grant date fair market value of the shares subject to the option, no performance-based RSUs and no service-based RSUs. The 2019 LTIP consists of 564,736 options to purchase shares of our common stock, all of which were granted at an exercise price equal to 100% of the grant date fair market value of the shares subject to the option, 839,795 performance-based RSUs and 275,637 service-based RSUs. Each performance-based RSU granted under the 2013 LTIP and the 2019 LTIP represents the right to receive from zero to 2.0 shares of our common stock if applicable performance conditions are satisfied. For purposes of this table, the number of shares of common stock shown to be subject to each performance-based RSU is 1.0 share, which assumes performance conditions are satisfied at the target level.

(2) Represents the weighted-average exercise price of the 151,876 and 564,736 outstanding options to purchase shares of our common stock under the 2013 LTIP and the 2019 LTIP, respectively.

(3) The number of shares available for future issuance is increased by the number of shares to which each participant would otherwise be entitled that are withheld or surrendered to satisfy the exercise price or to satisfy tax withholding obligations relating to any plan awards, and is also increased by the number of shares subject to awards that expire or are forfeited, canceled or otherwise terminated without the issuance of shares. No new awards may be granted under the 2013 LTIP.

We provide additional discussion of share-based compensation in Note 10 of the Notes to Consolidated Financial Statements.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The information required by Item 403 of SEC Regulation S-K, as required by this item, is incorporated by reference from “Share Ownership” in the proxy statement to be filed for the May 2023 annual meeting of shareholders for Sempra and from the information statement to be filed for the May 2023 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference from “Corporate Governance” in the proxy statement to be filed for the May 2023 annual meeting of shareholders for Sempra and from the information statement to be filed for the May 2023 annual meeting of shareholders for SoCalGas. In all cases, only the specific information that is expressly required by this item is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information regarding principal accountant fees and services is presented below for Sempra, SDG&E and SoCalGas. The following table shows the fees paid to Deloitte & Touche LLP, the independent registered public accounting firm for Sempra, SDG&E and SoCalGas, for services provided for 2022 and 2021.


PRINCIPAL ACCOUNTANT FEES
(Dollars in thousands)
	Sempra				SDG&E				SoCalGas
	Fees		Percent of total		Fees		Percent of total		Fees		Percent of total
2022:
Audit fees:
Consolidated financial statements, internal controls audits and subsidiary audits	$	10,872			$	3,013			$	3,549
Regulatory filings and related services	290				65				130
Total audit fees	11,162		83	%	3,078		87	%	3,679		92	%
Audit-related fees:
Employee benefit plan audits	520				169				287
Other audit-related services(1)	1,245				165				—
Total audit-related fees	1,765		13		334		10		287		7
Tax fees(2)	477		3		116		3		17		1
All other fees(3)	94		1		—		—		—		—
Total fees	$	13,498	100	%	$	3,528	100	%	$	3,983	100	%
2021:
Audit fees:
Consolidated financial statements, internal controls audits and subsidiary audits	$	10,166			$	2,753			$	3,486
Regulatory filings and related services	807				60				—
Total audit fees	10,973		81	%	2,813		87	%	3,486		91	%
Audit-related fees:
Employee benefit plan audits	520				184				309
Other audit-related services(1)	1,840				119				—
Total audit-related fees	2,360		17		303		9		309		8
Tax fees(2)	272		2		113		4		33		1
All other fees(3)	13		—		—		—		8		—
Total fees	$	13,618	100	%	$	3,229	100	%	$	3,836	100	%

(1) Other audit-related services primarily relate to statutory audits and agreed upon procedures.

(2) Tax fees relate to tax consulting and compliance services.

(3) All other fees relate to training and conferences.

The Audit Committee of Sempra’s board of directors is directly responsible for the appointment, compensation, retention and oversight, including the oversight of the audit fee negotiations, of the independent registered public accounting firm for Sempra and its subsidiaries, including SDG&E and SoCalGas. As a matter of good corporate governance, each of the Sempra, SDG&E and SoCalGas boards of directors reviewed the performance of Deloitte & Touche LLP and appointed them as the independent registered public accounting firm for each of Sempra, SDG&E and SoCalGas, respectively. Sempra’s board of directors has determined that each member of its Audit Committee is an independent director and is financially literate, and that Mr. Jack T. Taylor, who chairs the committee, and Ms. Cynthia L. Walker, who is a member of the committee, are audit committee financial experts as defined by the rules of the SEC.

Except where pre-approval is not required by SEC rules, Sempra’s Audit Committee pre-approves all audit, audit-related and permissible non-audit services provided by Deloitte & Touche LLP for Sempra and its subsidiaries, including all services provided by Deloitte & Touche LLP for Sempra, SDG&E and SoCalGas in 2022 and 2021. The committee’s pre-approval policies and procedures provide for the general pre-approval of specific types of services and give detailed guidance to management as to the services that are eligible for general pre-approval, and they require specific pre-approval of all other permitted services. For both types of pre-approval, the committee considers whether the services to be provided are consistent

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with maintaining the firm’s independence. The committee’s policies and procedures also delegate authority to the Chair of the committee to address any requests for pre-approval of services between committee meetings, with any pre-approval decisions to be reported to the committee at its next scheduled meeting.

PART IV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

FINANCIAL STATEMENTS

Our consolidated financial statements are listed on the Index to Consolidated Financial Statements set forth on page F-1 of this annual report on Form 10-K.

FINANCIAL STATEMENT SCHEDULES

Schedule I is listed on the Index to Condensed Financial Information of Parent as set forth on page S-1 of this annual report on Form 10-K.

Any other schedule for which provision is made in SEC Regulation S-X is not required under the instructions contained therein, is inapplicable or the information is included in the Consolidated Financial Statements and Notes thereto in this annual report on Form 10-K.

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EXHIBITS

EXHIBIT INDEX

The exhibits listed below relate to each registrant as indicated. Unless otherwise indicated, the exhibits that are incorporated by reference herein were filed under File Number 1-14201 (Sempra Energy), File Number 1-40 (Pacific Lighting Corporation), File Number 1-03779 (San Diego Gas & Electric Company) and/or File Number 1-01402 (Southern California Gas Company).

EXHIBIT INDEX

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

Form or Registration Statement No.

Exhibit or Appendix

Filing Date

EXHIBIT 2 -- PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION

Sempra Energy

2.1

Purchase and Sale Agreement, dated as of September 27, 2019, by and between Sempra International Holdings N.V. and China Yangtze Power International (Hongkong) Co., Limited.

8-K

2.1

09/30/19

2.2

Letter of Undertaking, dated as of September 27, 2019, by and between Sempra Energy International Holdings N.V., China Three Gorges Corporation and Ching Three Gorges Construction Management Co., Ltd.

8-K

2.2

09/30/19

2.3

Purchase and Sale Agreement, dated as of October 12, 2019, by and between Sempra Energy International Holdings N.V. and State Grid International Development Limited.

8-K

2.1

10/15/19

EXHIBIT 3 -- BYLAWS AND ARTICLES OF INCORPORATION

Sempra Energy

3.1

Amended and Restated Articles of Incorporation of Sempra Energy effective May 23, 2008.

10-K

3.1

02/27/20

3.2

Bylaws of Sempra Energy (as amended through April 14, 2020).

8-K

3.1

04/14/20

3.3

Certificate of Determination of Preferences of the 6% Mandatory Convertible Preferred Stock, Series A, of Sempra Energy (including the form of certificate representing the 6% Mandatory Convertible Preferred Stock, Series A), filed with the Secretary of State of the State of California and effective January 5, 2018.

8-K

3.1

01/09/18

3.4

Certificate of Determination of Preferences of the 6.75% Mandatory Convertible Preferred Stock, Series B, of Sempra Energy (including the form of certificate representing the 6.75% Mandatory Convertible Preferred Stock, Series B), filed with the Secretary of State of the State of California and effective July 11, 2018.

8-K

3.1

07/13/18

3.5

Certificate of Determination of Preferences of 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Stock, Series C, of Sempra Energy (including the form of certificate representing the 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C), filed with the Secretary of State of California and effective June 11, 2020.

8-K

3.1

06/15/20

San Diego Gas & Electric Company

3.6

Amended and Restated Articles of Incorporation of San Diego Gas & Electric Company effective August 15, 2014.

10-K

3.4

02/26/15

3.7

Bylaws of San Diego Gas & Electric (as amended through October 26, 2016).

10-Q

3.1

11/02/16

Southern California Gas Company

3.8

Restated Articles of Incorporation of Southern California Gas Company effective October 7, 1996.

10-K

3.01

03/28/97

3.9

Bylaws of Southern California Gas Company (as amended through January 30, 2017).

8-K

3.1

01/31/17

2022 Form 10-K | 103

Table of Contents

EXHIBIT INDEX (CONTINUED)

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

Form or Registration Statement No.

Exhibit or Appendix

Filing Date

EXHIBIT 4 -- INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES

Certain instruments defining the rights of holders of long-term debt instruments are not required to be filed or incorporated by reference herein pursuant to Item 601(b)(4)(iii)(A) of SEC Regulation S-K. Each registrant agrees to furnish a copy of such instruments to the SEC upon request.

Sempra Energy

4.1

Description of rights of Sempra Energy Common Stock (Amended and Restated Articles of Incorporation of Sempra Energy effective May 23, 2008) (included as Exhibit 3.1 above).

10-K

3.1

02/27/20

4.2

Description of Securities.

4.3

8-K

3.1

01/09/18

4.4

Certificate of Determination of Preferences of the 6.75% Mandatory Convertible Preferred Stock, Series B, of Sempra Energy (including the form of certificate representing the 6.75% Mandatory Convertible Preferred Stock, Series B) filed with the Secretary of State of California and effective July 11, 2018 (included as Exhibit 3.4 above).

8-K

3.1

07/13/18

4.5

8-K

3.1

06/15/20

4.6

Indenture dated as of February 23, 2000, between Sempra Energy and U.S. Bank Trust National Association, as Trustee.

S-3ASR
333-153425

4.1

09/11/08

4.7

Officers’ Certificate of Sempra Energy, including the form of its 6.00% Note due 2039.

8-K

4.1

10/08/09

4.8

Officers’ Certificate of Sempra Energy, including the form of its 3.250% Note due 2027.

8-K

4.1

06/09/17

4.9

Officers’ Certificate of Sempra Energy, including the forms of its 2.900% Note due 2023, 3.400% Note due 2028, 3.800% Note due 2038, and 4.000% Note due 2048.

8-K

4.1

01/12/18

4.10

Officers’ Certificate of Sempra Energy, including the form of 3.300% Note due 2025 and the form of 3.700% Note due 2029.

8-K

4.1

03/24/22

4.11

Subordinated Indenture, dated as of June 26, 2019, between Sempra Energy and U.S. Bank National Association, as trustee.

8-K

4.2

06/26/19

4.12

Officers’ Certificate of Sempra Energy, including the form of its 5.750% Junior Subordinated Note due 2079.

8-K

4.1

06/26/19

4.13

Officers' Certificate of Sempra Energy, including the form of its 4.125% Fixed-to-Fixed Reset Rate Junior Subordinated Note due 2052.

8-K

4.1

11/19/21

2022 Form 10-K | 104

Table of Contents


EXHIBIT INDEX (CONTINUED)
			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed or Furnished Herewith	Form or Registration Statement No.	Exhibit or Appendix	Filing Date

Southern California Gas Company
4.14	Description of preferences of Preferred Stock, Preference Stock and Series Preferred Stock (Southern California Gas Company Restated Articles of Incorporation) (included as Exhibit 3.8 above).		10-K	3.01	03/28/97

4.15	Description of Securities.		10-K	4.9	02/27/20

Sempra Energy / San Diego Gas & Electric Company
4.16	Mortgage and Deed of Trust dated July 1, 1940.		2-4769	B-3	(1)

4.17	Second Supplemental Indenture dated as of March 1, 1948.		2-7418	B-5B	(1)

4.18	Ninth Supplemental Indenture dated as of August 1, 1968.		333-52150	4.5	(1)

4.19	Tenth Supplemental Indenture dated as of December 1, 1968.		2-36042	2-K	(1)

4.20	Sixteenth Supplemental Indenture dated August 28, 1975.		33-34017	4.2	(1)

4.21	Fiftieth Supplemental Indenture, dated as of May 19, 2005.		8-K	4.1	05/19/05

4.22	Fifty-Second Supplemental Indenture, dated as of June 8, 2006.		8-K	4.1	06/08/06

4.23	Fifty-Fourth Supplemental Indenture, dated as of September 20, 2007.		8-K	4.1	09/20/07

4.24	Fifty-Fifth Supplemental Indenture, dated as of May 14, 2009.		8-K	4.1	05/15/09

4.25	Fifty-Sixth Supplemental Indenture, dated as of May 13, 2010.		8-K	4.1	05/13/10

4.26	Fifty-Seventh Supplemental Indenture, dated as of August 26, 2010.		8-K	4.1	08/26/10

4.27	Sixtieth Supplemental Indenture, dated as of November 17, 2011.		8-K	4.1	11/17/11

4.28	Sixty-First Supplemental Indenture, dated as of March 22, 2012.		8-K	4.1	03/23/12

4.29	Sixty-Second Supplemental Indenture, dated as of September 9, 2013.		8-K	4.1	09/09/13

4.30	Sixty-Fifth Supplemental Indenture, dated as of May 19, 2016.		8-K	4.1	05/19/16

4.31	Sixty-Sixth Supplemental Indenture, dated as of June 8, 2017.		8-K	4.1	06/08/17

4.32	Sixty-Seventh Supplemental Indenture, dated as of May 17, 2018.		8-K	4.1	05/17/18

4.33	Sixty-Eighth Supplemental Indenture, dated as of May 31, 2019.		8-K	4.1	05/31/19

4.34	Sixty-Ninth Supplemental Indenture, dated as of April 7, 2020.		8-K	4.1	04/07/20

4.35	Seventieth Supplemental Indenture, dated as of September 28, 2020.		8-K	4.1	09/28/20

4.36	Seventy-First Supplemental Indenture, dated as of August 13, 2021.		8-K	4.1	08/13/21

4.37	Seventy-Second Supplemental Indenture, dated as of March 11, 2022.		8-K	4.1	03/11/22

4.38	Seventy-Third Supplemental Indenture, dated as of March 11, 2022.		8-K	4.2	03/11/22

(1) Exhibit is not available on the SEC’s website as it was filed in paper and predates the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) database.

2022 Form 10-K | 105

Table of Contents


EXHIBIT INDEX (CONTINUED)
			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed or Furnished Herewith	Form or Registration Statement No.	Exhibit or Appendix	Filing Date

Sempra Energy / Southern California Gas Company
4.39	First Mortgage Indenture of Southern California Gas Company to American Trust Company dated October 1, 1940.		2-4504	B-4	(1)

4.40	Supplemental Indenture of Southern California Gas Company to American Trust Company dated as of July 1, 1947.	X

4.41	Supplemental Indenture of Southern California Gas Company to American Trust Company dated as of August 1, 1955.		2-11997	4.07	(1)

4.42	Supplemental Indenture of Southern California Gas Company to American Trust Company dated as of December 1, 1956.		10-K	4.09	02/23/07

4.43	Supplemental Indenture of Southern California Gas Company to Wells Fargo Bank dated as of June 1, 1965.		10-K	4.10	02/23/07

4.44	Supplemental Indenture of Southern California Gas Company to Wells Fargo Bank, National Association dated as of August 1, 1972.		2-59832	2.19	(1)

4.45	Supplemental Indenture of Southern California Gas Company to Wells Fargo Bank, National Association dated as of May 1, 1976.		2-56034	2.20	(1)

4.46	Supplemental Indenture of Southern California Gas Company to Wells Fargo Bank, National Association dated as of September 15, 1981.		333-70654	4.24	(1)

4.47	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of November 18, 2005.		8-K	4.1	11/18/05

4.48	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of November 18, 2010.		8-K	4.1	11/18/10

4.49	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of September 21, 2012.		8-K	4.1	09/21/12

4.50	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of March 13, 2014.		8-K	4.1	03/13/14

4.51	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of September 11, 2014.		8-K	4.1	09/11/14

4.52	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of June 18, 2015.		8-K	4.2	06/18/15

4.53	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of June 3, 2016.		8-K	4.1	06/03/16

4.54	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of May 15, 2018.		8-K	4.1	05/15/18

4.55	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of September 24, 2018.		8-K	4.1	09/24/18

4.56	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of June 4, 2019.		8-K	4.1	06/04/19

4.57	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of January 9, 2020.		8-K	4.1	01/09/20

4.58	Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of March 29, 2022.		10-Q	4.5	05/05/22

(1) Exhibit is not available on the SEC’s website as it was filed in paper and predates EDGAR.

2022 Form 10-K | 106

Table of Contents

EXHIBIT INDEX (CONTINUED)

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

Form or Registration Statement No.

Exhibit or Appendix

Filing Date

4.59

Supplemental Indenture of Southern California Gas Company to U.S. National Bank Association, dated as of November 14, 2022.

8-K

4.1

11/14/22

4.60

Indenture, dated as of May 1, 1989, between Southern California Gas Company and Citibank, N.A., as trustee.

333-28260

4.1.1

(1)

4.61

First Supplemental Indenture, dated as of October 1, 1992, between Southern California Gas Company and Citibank, N.A., as trustee.

8-K

4.1.2

(1)

4.62

Form of 5.670% Medium Term Note due 2028.

8-K

4.2.1

(1)

4.63

Senior Indenture, dated as of September 21, 2020, between Southern California Gas Company and U.S. Bank National Association, as trustee.

8-K

4.1

09/21/20

4.64

Officers’ Certificate of Southern California Gas Company, including the form of its Floating Rate Note due 2023.

8-K

4.2

09/21/20

4.65

Officers’ Certificate of Southern California Gas Company, including the form of its 2.950% Note due 2027.

8-K

4.1

03/14/22

EXHIBIT 10 -- MATERIAL CONTRACTS

Sempra Energy

10.1*

Second Amended and Restated Engineering, Procurement and Construction Contract, dated as of October 19, 2022, between Port Arthur LNG, LLC and PALNG Common Facilities Company, LLC (but only for the limited purpose set forth therein), and Bechtel Energy Inc. (F/K/A Bechtel Oil, Gas and Chemicals, Inc.)

Sempra Energy / San Diego Gas & Electric Company / Southern California Gas Company

10.2

Form of Continental Forge and California Class Action Price Reporting Settlement Agreement dated as of January 4, 2006.

8-K

99.1

01/05/06

Sempra Energy / San Diego Gas & Electric Company

10.3

Amended and Restated Operating Order between San Diego Gas & Electric Company and the California Department of Water Resources effective March 10, 2011.

10-Q

10.4

05/09/11

10.4

Amended and Restated Servicing Order between San Diego Gas & Electric Company and the California Department of Water Resources effective March 10, 2011.

10-Q

10.5

05/09/11

Sempra Energy / Southern California Gas Company

10.5

Master Agreement to Resolve JCCP No. 4861 Private Party Claims, dated as of September 26, 2021, by and among Sempra Energy, Southern California Gas Company, and the plaintiffs’ law firms listed on the signature pages thereto.

8-K

10.1

09/27/21

10.6

First Amendment to Master Agreement to Resolve JCCP No. 4861 Private Party Claims, dated as of July 15, 2022, by and among Sempra Energy, Southern California Gas Company, and the plaintiffs’ law firms listed on the signature pages thereto.

10-Q

10.1

08/04/22

Management Contract or Compensatory Plan, Contract or Arrangement

Sempra Energy / San Diego Gas & Electric Company / Southern California Gas Company

10.7

Form of Sempra Energy 2019 Long-Term Incentive Plan 2021, 2022 and 2023 Nonqualified Stock Option Award Agreement.

10-K

10.6

02/25/21

10.8

Form of Sempra Energy 2019 Long-Term Incentive Plan 2021, 2022 and 2023 Performance-Based Restricted Stock Unit Award - EPS Growth Performance Measure.

10-K

10.7

02/25/21

* Portions of the exhibit have been omitted in accordance with applicable SEC rules.

(1) Exhibit is not available on the SEC’s website as it was filed in paper and predates EDGAR.

2022 Form 10-K | 107

Table of Contents

EXHIBIT INDEX (CONTINUED)

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

Form or Registration Statement No.

Exhibit or Appendix

Filing Date

10.9

Form of Sempra Energy 2019 Long-Term Incentive Plan 2021, 2022 and 2023 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure-S&P 500 Index.

10-K

10.8

02/25/21

10.10

Form of Sempra Energy 2019 Long-Term Incentive Plan 2021, 2022 and 2023 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure-S&P 500 Utilities Index.

10-K

10.9

02/25/21

10.11

Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Nonqualified Stock Option Award Agreement.

10-K

10.5

02/27/20

10.12

Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Time-Based Restricted Stock Unit Award - Three Year Ratable Vest.

10-K

10.6

02/27/20

10.13

Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Time-Based Restricted Stock Unit Award - Four Year Award Vest.

10-Q

10.1

11/05/20

10.14

Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - EPS Growth Performance Measure.

10-K

10.7

02/27/20

10.15

Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure - S&P 500 Index.

10-K

10.8

02/27/20

10.16

Form of Sempra Energy 2019 Long-Term Incentive Plan 2020 Performance-Based Restricted Stock Unit Award - Relative Total Shareholder Return Performance Measure - S&P 500 Utilities Index.

10-K

10.9

02/27/20

10.17

Sempra Energy 2019 Long-Term Incentive Plan.

DEF 14A

03/22/19

10.18

Form of Sempra Energy 2019 Long-Term Incentive Plan 2019 Time-Based Restricted Stock Unit Award - Five Year Vest.

10-Q

10.2

08/02/19

10.19

Form of Sempra Energy 2013 Long-Term Incentive Plan 2019 Nonqualified Stock Option Award Agreement.

10-Q

10.1

05/07/19

10.20

Form of Indemnification Agreement with Directors and Executive Officers (executed before January 2011).

10-Q

10.2

08/07/08

10.21

Form of Indemnification Agreement with Directors and Executive Officers (executed after January 2011).

10-Q

10.1

05/04/16

10.22

Form of Sempra Energy Shared Services Executive Incentive Compensation Plan.

10-K

10.19

02/27/14

10.23

Amendment Number 1 to the Amended and Restated Sempra Energy 2013 Long-Term Incentive Plan.

10-K

10.26

02/25/21

10.24

Amended and Restated Sempra Energy 2013 Long-Term Incentive Plan.

10-K

10.5

02/26/16

10.25

Amended and Restated Sempra Energy 2005 Deferred Compensation Plan, now known as Sempra Energy Employee and Director Savings Plan.

10-K

10.33

02/25/21

10.26

Amended and Restated Sempra Energy Deferred Compensation and Excess Savings Plan.

10-K

10.28

02/28/17

10.27

2009 Amendment and Restatement of the Sempra Energy Supplemental Executive Retirement Plan effective July 1, 2009.

10-K

10.28

02/26/16

10.28

First Amendment to the 2009 Amendment and Restatement of the Sempra Energy Supplemental Executive Retirement Plan effective February 11, 2010.

10-K

10.29

02/26/16

2022 Form 10-K | 108

Table of Contents

EXHIBIT INDEX (CONTINUED)

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

Form or Registration Statement No.

Exhibit or Appendix

Filing Date

10.29

Second Amendment to the 2009 Amendment and Restatement of the Sempra Energy Supplemental Executive Retirement Plan effective January 1, 2014.

10-K

10.43

02/26/15

10.30

2015 Amendment and Restatement of the Sempra Energy Cash Balance Restoration Plan effective November 10, 2015.

10-K

10.31

02/26/16

10.31

Sempra Energy Amended and Restated Executive Life Insurance Plan.

10-K

10.22

02/26/13

10.32

Sempra Energy Executive Personal Financial Planning Program Policy Document.

10-K

10.35

02/27/20

Sempra Energy

10.33

Form of Sempra Energy 2019 Long-Term Incentive Plan Non-Employee Directors’ Annual Restricted Stock Unit Award.

10-Q

10.3

08/02/19

10.34

Form of Sempra Energy 2019 Long-Term Incentive Plan Non-Employee Directors’ Initial Restricted Stock Unit Award.

10-Q

10.4

08/02/19

10.35

Form of 2018 Sempra Energy Non-Employee Directors’ Initial Restricted Stock Unit Award.

10-K

10.50

02/27/18

10.36

Sempra Energy Amended and Restated Retirement Plan for Directors.

10-Q

10.7

08/07/08

10.37

Sempra Energy Annual Incentive Plan.

10-Q

10.7

05/07/18

10.38

Amended and Restated Severance Pay Agreement between Sempra Energy and Jeffrey W. Martin, signed January 4, 2023 and effective January 1, 2023.

10.39

Amended and Restated Severance Pay Agreement between Sempra Energy and Kevin C. Sagara, signed January 2, 2023 and effective January 1, 2023.

10.40

Amended and Restated Severance Pay Agreement between Sempra Energy and Trevor I. Mihalik, signed January 3, 2023 and effective January 1, 2023.

10.41

Amended and Restated Severance Pay Agreement between Sempra Energy and Peter R. Wall, signed December 30, 2022 and effective January 1, 2023.

10.42

Amended and Restated Severance Pay Agreement between Sempra Energy and Karen L. Sedgwick, signed December 29, 2022 and effective January 1, 2023.

Sempra Energy / San Diego Gas & Electric Company

10.43

Form of San Diego Gas & Electric Company Executive Incentive Compensation Plan.

10-K

10.64

02/27/14

10.44

Severance Pay Agreement between Sempra Energy and Caroline A. Winn, signed May 7, 2020 and effective as of January 1, 2020.

10-Q

10.1

08/05/20

10.45

Severance Pay Agreement between Sempra Energy and Bruce A. Folkmann, dated March 1, 2017.

10-Q

10.15

05/09/17

10.46

Severance Pay Agreement between Sempra Energy and Valerie A. Bille, signed September 30, 2020 and effective as of August 22, 2020.

10-Q

10.4

11/05/20

10.47

Severance Pay Agreement between Sempra Energy and Erbin B. Keith, signed June 20, 2017 and effective as of March 1, 2017.

Sempra Energy / Southern California Gas Company

10.48

Form of Southern California Gas Company Executive Incentive Compensation Plan.

10-K

10.71

02/27/14

2022 Form 10-K | 109

Table of Contents

EXHIBIT INDEX (CONTINUED)

Incorporated by Reference

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

Form or Registration Statement No.

Exhibit or Appendix

Filing Date

10.49

Severance Pay Agreement between Sempra Energy and Scott D. Drury dated August 25, 2018.

10-Q

10.4

11/07/18

10.50

Severance Pay Agreement between Sempra Energy and Maryam S. Brown, dated March 1, 2017.

10-Q

10.7

08/02/19

10.51

Severance Pay Agreement between Sempra Energy and Jimmie I. Cho, signed May 4, 2020, effective as of January 1, 2020.

10-Q

10.2

08/05/20

10.52

Severance Pay Agreement between Sempra Energy and David J. Barrett, dated July 23, 2022.

10-Q

10.1

11/03/22

10.53

Severance Pay Agreement between Sempra Energy and Mia L. DeMontigny, dated July 23, 2022.

10-Q

10.2

11/03/22

EXHIBIT 14 -- CODE OF ETHICS

Sempra Energy / San Diego Gas & Electric Company / Southern California Gas Company

14.1

Sempra Energy Code of Business Conduct and Ethics for Directors and Principal and Executive Officers (also applies to Principal Officers of San Diego Gas & Electric Company and Southern California Gas Company).

10-K

14.1

02/25/22

2022 Form 10-K | 110

Table of Contents

EXHIBIT INDEX (CONTINUED)

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

EXHIBIT 21 -- SUBSIDIARIES

Sempra Energy

21.1

Sempra Energy Schedule of Certain Subsidiaries at December 31, 2022.

EXHIBIT 23 -- CONSENTS OF EXPERTS AND COUNSEL

Sempra Energy

23.1

Sempra Energy Consent of Independent Registered Public Accounting Firm.

23.2

Oncor Electric Delivery Holdings Company LLC Consent of Independent Auditors.

San Diego Gas & Electric Company

23.3

San Diego Gas & Electric Company Consent of Independent Registered Public Accounting Firm.

Southern California Gas Company

23.4

Southern California Gas Company Consent of Independent Registered Public Accounting Firm.

EXHIBIT 24 -- POWERS OF ATTORNEY

Sempra Energy

24.1

Power of attorney of Sempra Energy signatories (incorporated by reference to the signature page hereto).

San Diego Gas & Electric Company

24.2

Power of attorney of San Diego Gas & Electric Company signatories (incorporated by reference to the signature page hereto).

Southern California Gas Company

24.3

Power of attorney of Southern California Gas Company signatories (incorporated by reference to the signature page hereto).

EXHIBIT 31 -- SECTION 302 CERTIFICATIONS

Sempra Energy

31.1

Certification of Sempra Energy’s Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.2

Certification of Sempra Energy’s Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

San Diego Gas & Electric Company

31.3

Certification of San Diego Gas & Electric Company’s Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.4

Certification of San Diego Gas & Electric Company’s Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

Southern California Gas Company

31.5

Certification of Southern California Gas Company’s Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

31.6

Certification of Southern California Gas Company’s Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.

2022 Form 10-K | 111

Table of Contents

EXHIBIT INDEX (CONTINUED)

Exhibit Number

Exhibit Description

Filed or Furnished Herewith

EXHIBIT 32 -- SECTION 906 CERTIFICATIONS

Sempra Energy

32.1

Certification of Sempra Energy’s Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350.

32.2

Certification of Sempra Energy’s Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350.

San Diego Gas & Electric Company

32.3

Certification of San Diego Gas & Electric Company’s Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350.

32.4

Certification of San Diego Gas & Electric Company’s Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350.

Southern California Gas Company

32.5

Certification of Southern California Gas Company’s Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350.

32.6

Certification of Southern California Gas Company’s Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350.

EXHIBIT 99 -- ADDITIONAL EXHIBITS

Sempra Energy

99.1

Audited consolidated financial statements of Oncor Electric Delivery Holdings Company LLC and subsidiaries as of December 31, 2022 and 2021 for each of the three years ended in the period ended December 31, 2022, and the related Independent Auditors’ Report.

EXHIBIT 101 -- INTERACTIVE DATA FILE

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

EXHIBIT 104 -- COVER PAGE

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

ITEM 16. FORM 10-K SUMMARY

Not applicable.

2022 Form 10-K | 112

Table of Contents


Sempra Energy:
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			SEMPRA ENERGY, (Registrant)
			By: /s/ J. Walker Martin
			J. Walker Martin Chairman, Chief Executive Officer and President

			Date: February 28, 2023

POWER OF ATTORNEY
Each of the undersigned officers and directors of the registrant hereby severally constitutes and appoints each individual who, at the time of acting under this power of attorney, is the Principal Executive Officer (however designated), the Principal Financial Officer (however designated) or the Principal Accounting Officer (however designated) of Sempra Energy, and each of them singly (with full power to each of them to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them, for him or her and in his or her name, place and stead, and in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney shall be governed by and construed in accordance with the laws of the State of California and applicable federal securities laws. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.


Name/Title	Signature	Date
Principal Executive Officer: J. Walker Martin Chief Executive Officer and President	/s/ J. Walker Martin	February 28, 2023

Principal Financial Officer: Trevor I. Mihalik Executive Vice President and Chief Financial Officer	/s/ Trevor I. Mihalik	February 28, 2023

Principal Accounting Officer: Peter R. Wall Senior Vice President, Controller and Chief Accounting Officer	/s/ Peter R. Wall	February 28, 2023

2022 Form 10-K | 113

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Directors:	Signature	Date
J. Walker Martin, Chairman	/s/ J. Walker Martin	February 28, 2023

Alan L. Boeckmann, Director	/s/ Alan L. Boeckmann	February 28, 2023

Andrés Conesa, Director	/s/ Andrés Conesa	February 28, 2023

Maria Contreras-Sweet, Director	/s/ Maria Contreras-Sweet	February 28, 2023

Pablo A. Ferrero, Director	/s/ Pablo A. Ferrero	February 28, 2023

Bethany J. Mayer, Director	/s/ Bethany J. Mayer	February 28, 2023

Michael N. Mears, Director	/s/ Michael N. Mears	February 28, 2023

Jack T. Taylor, Director	/s/ Jack T. Taylor	February 28, 2023

Cynthia L. Walker, Director	/s/ Cynthia L. Walker	February 28, 2023

Cynthia J. Warner, Director	/s/ Cynthia J. Warner	February 28, 2023

James C. Yardley, Director	/s/ James C. Yardley	February 28, 2023

2022 Form 10-K | 114

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San Diego Gas & Electric Company:
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			SAN DIEGO GAS & ELECTRIC COMPANY, (Registrant)
			By: /s/ Caroline A. Winn
			Caroline A. Winn Chief Executive Officer

			Date: February 28, 2023

POWER OF ATTORNEY
Each of the undersigned officers and directors of the registrant hereby severally constitutes and appoints each individual who, at the time of acting under this power of attorney, is the Principal Executive Officer (however designated), the Principal Financial Officer (however designated) or the Principal Accounting Officer (however designated) of San Diego Gas & Electric Company, and each of them singly (with full power to each of them to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them, for him or her and in his or her name, place and stead, and in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney shall be governed by and construed in accordance with the laws of the State of California and applicable federal securities laws. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.


Name/Title	Signature	Date
Principal Executive Officer: Caroline A. Winn Chief Executive Officer	/s/ Caroline A. Winn	February 28, 2023

Principal Financial Officer: Bruce A. Folkmann President and Chief Financial Officer	/s/ Bruce A. Folkmann	February 28, 2023

Principal Accounting Officer: Valerie A. Bille Vice President, Controller and Chief Accounting Officer	/s/ Valerie A. Bille	February 28, 2023
Directors:
Kevin C. Sagara, Non-Executive Chairman	/s/ Kevin C. Sagara	February 28, 2023

Robert J. Borthwick, Director	/s/ Robert J. Borthwick	February 28, 2023

Karen L. Sedgwick, Director	/s/ Karen L. Sedgwick	February 28, 2023

Caroline A. Winn, Director	/s/ Caroline A. Winn	February 28, 2023

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT:

No annual report to security holders covering the registrant’s last fiscal year and no proxy statement, form of proxy or other proxy soliciting material with respect to any annual or other meeting of security holders has been sent to security holders during the period covered by this annual report on Form 10-K, and no such materials are to be furnished to security holders subsequent to the filing of this annual report on Form 10-K.

2022 Form 10-K | 115

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Southern California Gas Company:
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			SOUTHERN CALIFORNIA GAS COMPANY, (Registrant)
			By: /s/ Scott D. Drury
			Scott D. Drury Chief Executive Officer

			Date: February 28, 2023

POWER OF ATTORNEY
Each of the undersigned officers and directors of the registrant hereby severally constitutes and appoints each individual who, at the time of acting under this power of attorney, is the Principal Executive Officer (however designated), the Principal Financial Officer (however designated) or the Principal Accounting Officer (however designated) of Southern California Gas Company, and each of them singly (with full power to each of them to act alone), as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them, for him or her and in his or her name, place and stead, and in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This power of attorney shall be governed by and construed in accordance with the laws of the State of California and applicable federal securities laws. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.


Name/Title	Signature	Date
Principal Executive Officer: Scott D. Drury Chief Executive Officer	/s/ Scott D. Drury	February 28, 2023

Principal Financial and Accounting Officer: Mia L. DeMontigny Senior Vice President, Chief Financial Officer and Chief Accounting Officer	/s/ Mia L. DeMontigny	February 28, 2023
Directors:
Kevin C. Sagara, Non-Executive Chairman	/s/ Kevin C. Sagara	February 28, 2023

Diana L. Day, Director	/s/ Diana L. Day	February 28, 2023

Scott D. Drury, Director	/s/ Scott D. Drury	February 28, 2023

Lisa Larroque Alexander, Director	/s/ Lisa Larroque Alexander	February 28, 2023

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm (PCAOB ID 34)			F-2

Consolidated Financial Statements:	Sempra	San Diego Gas & Electric Company	Southern California Gas Company
Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020	F-8	F-16	F-22

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020	F-9	F-17	F-23

Consolidated Balance Sheets at December 31, 2022 and 2021	F-10	F-18	F-24

Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020	F-12	F-20	F-26

Consolidated Statements of Changes in Equity for the years ended December 31, 2022, 2021 and 2020	F-14	N/A	N/A

Statements of Changes in Shareholders Equity for the years ended December 31, 2022, 2021 and 2020	N/A	F-21	F-27

Notes to Consolidated Financial Statements
Note 1. Significant Accounting Policies and Other Financial Data			F-28
Note 2. New Accounting Standards			F-52
Note 3. Revenues			F-53
Note 4. Regulatory Matters			F-58
Note 5. Acquisitions, Divestitures and Discontinued Operations			F-62
Note 6. Investments in Unconsolidated Entities			F-63
Note 7. Debt and Credit Facilities			F-68
Note 8. Income Taxes			F-75
Note 9. Employee Benefit Plans			F-82
Note 10. Share-Based Compensation			F-100
Note 11. Derivative Financial Instruments			F-103
Note 12. Fair Value Measurements			F-109
Note 13. Preferred Stock			F-115
Note 14. Sempra – Shareholders’ Equity and Earnings Per Common Share			F-117
Note 15. San Onofre Nuclear Generating Station			F-120
Note 16. Commitments and Contingencies			F-123
Note 17. Segment Information			F-139

2022 Form 10-K | F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Sempra Energy:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sempra Energy and subsidiaries (“Sempra”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2022, the related notes, and the schedule listed in Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Sempra as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), Sempra’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023, expressed an unqualified opinion on Sempra’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of Sempra’s management. Our responsibility is to express an opinion on Sempra’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Sempra in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Regulatory Accounting – Impact of Rate Regulation on the Financial Statements – Refer to Note 1 of the Notes to Consolidated Financial Statements

Critical Audit Matter Description

Sempra is subject to rate regulation by regulators and commissions in various jurisdictions (collectively, the “Commissions”) that have jurisdiction with respect to the rates of electric and gas transmission and distribution companies in those jurisdictions. Management has determined it meets the requirements under U.S. GAAP to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant and equipment; regulatory assets and liabilities; operating revenues; operation and maintenance expense; depreciation expense; and taxes.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management’s judgments include assessing the likelihood of (1) the recovery in future rates of incurred costs and (2) potential refunds to customers. Auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities.

2022 Form 10-K | F-2

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the application of specialized rules to account for the effects of cost-based rate regulation and the uncertainty of future decisions by the Commissions included the following, among others:

▪We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management’s controls over the initial recognition of amounts as regulatory assets or liabilities and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.

▪We read relevant regulatory orders issued by the Commissions for Sempra and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness.

▪We evaluated Sempra’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 28, 2023

We have served as Sempra’s auditor since 1935.

2022 Form 10-K | F-3

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholder and Board of Directors of San Diego Gas & Electric Company:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of San Diego Gas & Electric Company (“SDG&E”) as of December 31, 2022 and 2021, the related statements of operations, comprehensive income (loss), changes in shareholder’s equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of SDG&E as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), SDG&E’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023, expressed an unqualified opinion on SDG&E’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of SDG&E’s management. Our responsibility is to express an opinion on SDG&E’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SDG&E in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Critical Audit Matter

Regulatory Accounting – Impact of Rate Regulation on the Financial Statements – Refer to Note 1 of the Notes to Consolidated Financial Statements

Critical Audit Matter Description

SDG&E is subject to rate regulation by regulators and commissions in various jurisdictions (collectively, the “Commissions”) that have jurisdiction with respect to the rates of electric and gas transmission and distribution companies in those jurisdictions. Management has determined it meets the requirements under U.S. GAAP to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant and equipment; regulatory assets and liabilities; operating revenues; operation and maintenance expense; depreciation expense; and taxes.

2022 Form 10-K | F-4

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How the Critical Audit Matter Was Addressed in the Audit

▪We read relevant regulatory orders issued by the Commissions for SDG&E and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness.

▪We evaluated SDG&E’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 28, 2023

We have served as SDG&E’s auditor since 1935.

2022 Form 10-K | F-5

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Southern California Gas Company:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Southern California Gas Company (“SoCalGas”) as of December 31, 2022 and 2021, the related statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of SoCalGas as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), SoCalGas’ internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023, expressed an unqualified opinion on SoCalGas’ internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of SoCalGas’ management. Our responsibility is to express an opinion on SoCalGas’ financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to SoCalGas in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Critical Audit Matter

Regulatory Accounting – Impact of Rate Regulation on the Financial Statements – Refer to Note 1 of the Notes to Financial Statements

Critical Audit Matter Description

SoCalGas is subject to rate regulation by regulators and commissions in various jurisdictions (collectively, the “Commissions”) that have jurisdiction with respect to the rates of gas transmission and distribution companies in those jurisdictions. Management has determined it meets the requirements under U.S. GAAP to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant and equipment; regulatory assets and liabilities; operating revenues; operation and maintenance expense; depreciation expense; and taxes.

2022 Form 10-K | F-6

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How the Critical Audit Matter Was Addressed in the Audit

▪We read relevant regulatory orders issued by the Commissions for SoCalGas and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness.

▪We evaluated SoCalGas’ disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.

/s/ DELOITTE & TOUCHE LLP

San Diego, California

February 28, 2023

We have served as SoCalGas’ auditor since 1937.

2022 Form 10-K | F-7

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SEMPRA ENERGY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Years ended December 31,
	2022		2021		2020
REVENUES
Utilities:
Natural gas	$	7,868	$	6,333	$	5,411
Electric	4,783		4,658		4,614
Energy-related businesses	1,788		1,866		1,345
Total revenues	14,439		12,857		11,370

EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas	(2,603)		(1,597)		(925)
Cost of electric fuel and purchased power	(937)		(1,010)		(1,187)
Energy-related businesses cost of sales	(942)		(611)		(276)
Operation and maintenance	(4,746)		(4,341)		(3,941)
Aliso Canyon litigation and regulatory matters	(259)		(1,593)		(307)
Depreciation and amortization	(2,019)		(1,855)		(1,666)
Franchise fees and other taxes	(635)		(596)		(543)
Gain (loss) on sale of assets	—		36		(3)
Other income (expense), net	24		58		(48)
Interest income	75		69		96
Interest expense	(1,054)		(1,198)		(1,081)
Income from continuing operations before income taxes and equity earnings	1,343		219		1,489
Income tax expense	(556)		(99)		(249)
Equity earnings	1,498		1,343		1,015
Income from continuing operations, net of income tax	2,285		1,463		2,255
Income from discontinued operations, net of income tax	—		—		1,850
Net income	2,285		1,463		4,105
Earnings attributable to noncontrolling interests	(146)		(145)		(172)
Preferred dividends	(44)		(63)		(168)
Preferred dividends of subsidiary	(1)		(1)		(1)
Earnings attributable to common shares	$	2,094	$	1,254	$	3,764

Basic EPS:
Earnings from continuing operations	$	6.65	$	4.03	$	6.61
Earnings from discontinued operations	$	—	$	—	$	6.32
Earnings	$	6.65	$	4.03	$	12.93
Weighted-average common shares outstanding	315,159		311,755		291,077

Diluted EPS:
Earnings from continuing operations	$	6.62	$	4.01	$	6.58
Earnings from discontinued operations	$	—	$	—	$	6.30
Earnings	$	6.62	$	4.01	$	12.88
Weighted-average common shares outstanding	316,378		313,036		292,252

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-8

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SEMPRA ENERGY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Years ended December 31, 2022, 2021 and 2020
	Sempra Energy shareholders’ equity
	Pretax amount		Income tax (expense) benefit		Net-of-tax amount		Noncontrolling interests (after tax)		Total
2022:
Net income	$	2,695	$	(556)	$	2,139	$	146	$	2,285
Other comprehensive income (loss):
Foreign currency translation adjustments	11		—		11		4		15
Financial instruments	221		(55)		166		50		216
Pension and other postretirement benefits	3		(6)		(3)		—		(3)
Total other comprehensive income	235		(61)		174		54		228
Comprehensive income	2,930		(617)		2,313		200		2,513
Preferred dividends of subsidiary	(1)		—		(1)		—		(1)
Comprehensive income, after preferred dividends of subsidiary	$	2,929	$	(617)	$	2,312	$	200	$	2,512
2021:
Net income	$	1,417	$	(99)	$	1,318	$	145	$	1,463
Other comprehensive income (loss):
Foreign currency translation adjustments	(6)		—		(6)		(3)		(9)
Financial instruments	191		(47)		144		14		158
Pension and other postretirement benefits	28		(6)		22		—		22
Total other comprehensive income	213		(53)		160		11		171
Comprehensive income	1,630		(152)		1,478		156		1,634
Preferred dividends of subsidiary	(1)		—		(1)		—		(1)
Comprehensive income, after preferred dividends of subsidiary	$	1,629	$	(152)	$	1,477	$	156	$	1,633
2020:
Net income	$	5,368	$	(1,435)	$	3,933	$	172	$	4,105
Other comprehensive income (loss):
Foreign currency translation adjustments	547		—		547		(12)		535
Financial instruments	(146)		33		(113)		(12)		(125)
Pension and other postretirement benefits	11		1		12		—		12
Total other comprehensive income (loss)	412		34		446		(24)		422
Comprehensive income	5,780		(1,401)		4,379		148		4,527
Preferred dividends of subsidiary	(1)		—		(1)		—		(1)
Comprehensive income, after preferred dividends of subsidiary	$	5,779	$	(1,401)	$	4,378	$	148	$	4,526

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-9

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SEMPRA ENERGY
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	370	$	559
Restricted cash	40		19
Accounts receivable – trade, net	2,635		2,071
Accounts receivable – other, net	685		398
Due from unconsolidated affiliates	54		23
Income taxes receivable	113		79
Inventories	403		389
Prepaid expenses	268		260
Regulatory assets	351		271
Fixed-price contracts and other derivatives	803		179
Greenhouse gas allowances	141		97
Other current assets	49		30
Total current assets	5,912		4,375

Other assets:
Restricted cash	52		3
Due from unconsolidated affiliates	—		637
Regulatory assets	2,588		2,011
Insurance receivable for Aliso Canyon costs	—		360
Greenhouse gas allowances	796		422
Nuclear decommissioning trusts	841		1,012
Dedicated assets in support of certain benefit plans	505		567
Deferred income taxes	135		151
Right-of-use assets – operating leases	655		594
Investment in Oncor Holdings	13,665		12,947
Other investments	2,012		1,525
Goodwill	1,602		1,602
Other intangible assets	344		370
Wildfire fund	303		331
Other long-term assets	1,382		1,244
Total other assets	24,880		23,776

Property, plant and equipment:
Property, plant and equipment	63,893		58,940
Less accumulated depreciation and amortization	(16,111)		(15,046)
Property, plant and equipment, net	47,782		43,894
Total assets	$	78,574	$	72,045

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-10

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SEMPRA ENERGY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	December 31,
	2022		2021
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	3,352	$	3,471
Accounts payable – trade	1,994		1,671
Accounts payable – other	275		178
Dividends and interest payable	621		563
Accrued compensation and benefits	484		479
Regulatory liabilities	504		359
Current portion of long-term debt and finance leases	1,019		106
Reserve for Aliso Canyon costs	129		1,980
Greenhouse gas obligations	141		97
Other current liabilities	1,380		1,131
Total current liabilities	9,899		10,035

Long-term debt and finance leases	24,548		21,068

Deferred credits and other liabilities:
Due to unconsolidated affiliates	301		287
Regulatory liabilities	3,341		3,402
Greenhouse gas obligations	565		225
Pension and other postretirement benefit plan obligations, net of plan assets	410		687
Deferred income taxes	4,591		3,477
Asset retirement obligations	3,546		3,375
Deferred credits and other	2,117		2,070
Total deferred credits and other liabilities	14,871		13,523

Commitments and contingencies (Note 16)

Equity:
Preferred stock (50 million shares authorized):
Preferred stock, series C (0.9 million shares outstanding)	889		889
Common stock (750 million shares authorized; 314 million and 317 million shares outstanding at December 31, 2022 and 2021, respectively; no par value)	12,160		11,862
Retained earnings	14,201		13,548
Accumulated other comprehensive income (loss)	(135)		(318)
Total Sempra Energy shareholders’ equity	27,115		25,981
Preferred stock of subsidiary	20		20
Other noncontrolling interests	2,121		1,418
Total equity	29,256		27,419
Total liabilities and equity	$	78,574	$	72,045

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-11

Table of Contents


SEMPRA ENERGY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,285	$	1,463	$	4,105
Less: Income from discontinued operations, net of income tax	—		—		(1,850)
Income from continuing operations, net of income tax	2,285		1,463		2,255
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,019		1,855		1,666
Deferred income taxes and investment tax credits	392		(78)		159
(Gain) loss on sale of assets	—		(36)		3
Equity earnings	(1,498)		(1,343)		(1,015)
Foreign currency transaction losses, net	24		18		25
Share-based compensation expense	71		63		71
Fixed-price contracts and other derivatives	863		206		(7)
Other	154		170		140
Net change in other working capital components:
Accounts receivable	(976)		(599)		(328)
Due to/from unconsolidated affiliates, net	(31)		(1)		12
Income taxes receivable/payable, net	(29)		(38)		(94)
Inventories	(17)		(87)		(35)
Other current assets	(1,608)		(220)		38
Accounts payable	430		263		74
Regulatory balancing accounts, net	36		249		(231)
Reserve for Aliso Canyon costs	(1,851)		1,532		141
Other current liabilities	228		(105)		(127)
Insurance receivable for Aliso Canyon costs	360		85		(106)
Distributions from investments	854		941		651
Reserve for Aliso Canyon costs, noncurrent	1		—		294
Changes in other noncurrent assets and liabilities, net	(565)		(496)		56
Net cash provided by continuing operations	1,142		3,842		3,642
Net cash used in discontinued operations	—		—		(1,051)
Net cash provided by operating activities	1,142		3,842		2,591

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(5,357)		(5,015)		(4,676)
Expenditures for investments and acquisitions	(376)		(633)		(652)
Proceeds from sale of assets	—		38		19
Distributions from investments	—		366		761
Purchases of nuclear decommissioning and other trust assets	(700)		(961)		(1,439)
Proceeds from sales of nuclear decommissioning and other trust assets	762		961		1,439
Advances to unconsolidated affiliates	—		(8)		(92)
Repayments of advances to unconsolidated affiliates	626		38		7
Disbursement for note receivable	—		(305)		—
Other	6		11		15
Net cash used in continuing operations	(5,039)		(5,508)		(4,618)
Net cash provided by discontinued operations	—		—		5,171
Net cash (used in) provided by investing activities	(5,039)		(5,508)		553

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-12

Table of Contents


SEMPRA ENERGY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	$	(1,430)	$	(1,331)	$	(1,174)
Preferred dividends paid	(44)		(99)		(157)
Issuances of preferred stock, net	—		—		891
Issuances of common stock, net	4		5		11
Repurchases of common stock	(478)		(339)		(566)
Issuances of debt (maturities greater than 90 days)	9,984		3,773		6,051
Payments on debt (maturities greater than 90 days) and finance leases	(4,510)		(5,489)		(5,864)
(Decrease) increase in short-term debt, net	(1,266)		1,913		(1,759)
Advances from unconsolidated affiliates	28		40		64
Proceeds from sales of noncontrolling interests, net	1,732		3,206		26
Purchases of noncontrolling interests	—		(224)		(248)
Distributions to noncontrolling interests	(237)		—		—
Contributions from noncontrolling interests	31		4		1
Other	(35)		(199)		(50)
Net cash provided by (used in) continuing operations	3,779		1,260		(2,774)
Net cash provided by discontinued operations	—		—		401
Net cash provided by (used in) financing activities	3,779		1,260		(2,373)

Effect of exchange rate changes in continuing operations	(1)		2		—
Effect of exchange rate changes in discontinued operations	—		—		(3)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1)		2		(3)

(Decrease) increase in cash, cash equivalents and restricted cash, including discontinued operations	(119)		(404)		768
Cash, cash equivalents and restricted cash, including discontinued operations, January 1	581		985		217
Cash, cash equivalents and restricted cash, including discontinued operations, December 31	$	462	$	581	$	985

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	1,014	$	1,163	$	1,046
Income tax payments, including discontinued operations, net of refunds	284		230		1,385

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Contribution to Cameron LNG JV	$	—	$	—	$	50
Distribution from Cameron LNG JV	—		—		50
Increase in Cameron LNG JV investment for guarantee	—		22		—
Repayment of advances from unconsolidated affiliate in lieu of distribution	32		45		—
Accrued capital expenditures	590		591		535
Increase in finance lease obligations for investment in PP&E	57		43		77
Derecognized PP&E for net investment in sales-type lease	—		44		—
Increase in ARO for investment in PP&E	91		153		142
Equitization of long-term debt for deficit held by NCI	—		—		22
Accrued purchase price adjustment for sale of NCI	—		13		—
Issuance of common stock in exchange for NCI and related AOCI	—		1,373		—
Common dividends issued in stock	—		—		22
Common dividends declared but not paid	360		349		301
Conversion of mandatory convertible preferred stock	—		2,258		—
Preferred dividends declared but not paid	11		11		47

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-13

Table of Contents


SEMPRA ENERGY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in millions)
	Years ended December 31, 2022, 2021 and 2020
	Preferred stock		Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Sempra Energy shareholders' equity		Non- controlling interests		Total equity
Balance at December 31, 2019	$	2,258	$	7,480	$	11,130	$	(939)	$	19,929	$	1,876	$	21,805
Adoption of ASU 2016-13					(7)				(7)		(2)		(9)
Adjusted balance at December 31, 2019	2,258		7,480		11,123		(939)		19,922		1,874		21,796

Net income					3,933				3,933		172		4,105
Other comprehensive income (loss)							446		446		(24)		422

Share-based compensation expense			71						71				71
Dividends declared:
Series A preferred stock ($6.00/share)					(104)				(104)				(104)
Series B preferred stock ($6.75/share)					(39)				(39)				(39)
Series C preferred stock ($27.90/share)					(25)				(25)				(25)
Common stock ($4.18/share)					(1,214)				(1,214)				(1,214)
Preferred dividends of subsidiary					(1)				(1)				(1)
Issuance of series C preferred stock	889								889				889
Issuances of common stock			33						33				33
Repurchases of common stock			(566)						(566)				(566)
Noncontrolling interest activities:
Contributions											1		1
Distributions											(1)		(1)
Purchases			34				(7)		27		(275)		(248)
Sale			1						1		27		28
Acquisition											1		1
Equitization of long-term debt for deficit held by NCI											22		22
Deconsolidation											(236)		(236)
Balance at December 31, 2020	3,147		7,053		13,673		(500)		23,373		1,561		24,934

Net income					1,318				1,318		145		1,463
Other comprehensive income							160		160		11		171

Share-based compensation expense			63						63				63
Dividends declared:
Series B preferred stock ($3.38/share)					(19)				(19)				(19)
Series C preferred stock ($48.75/share)					(44)				(44)				(44)
Common stock ($4.40/share)					(1,379)				(1,379)				(1,379)
Preferred dividends of subsidiary					(1)				(1)				(1)
Conversion of series A preferred stock	(1,693)		1,693						—				—
Conversion of series B preferred stock	(565)		565						—				—
Issuances of common stock			5						5				5
Repurchases of common stock			(339)						(339)				(339)
Noncontrolling interest activities:
Contributions											4		4
Purchases			1,459				(44)		1,415		(1,567)		(152)
Sales			1,363				66		1,429		1,283		2,712
Deconsolidation											1		1
Balance at December 31, 2021	$	889	$	11,862	$	13,548	$	(318)	$	25,981	$	1,438	$	27,419

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-14

Table of Contents


SEMPRA ENERGY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
(Dollars in millions)
	Years ended December 31, 2022, 2021 and 2020
	Preferred stock		Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Sempra Energy shareholders' equity		Non- controlling interests		Total equity
Balance at December 31, 2021	$	889	$	11,862	$	13,548	$	(318)	$	25,981	$	1,438	$	27,419

Net income					2,139				2,139		146		2,285
Other comprehensive income							174		174		54		228

Share-based compensation expense			71						71				71
Dividends declared:
Series C preferred stock ($48.75/share)					(44)				(44)				(44)
Common stock ($4.58/share)					(1,441)				(1,441)				(1,441)
Preferred dividends of subsidiary					(1)				(1)				(1)
Issuances of common stock			4						4				4
Repurchases of common stock			(478)						(478)				(478)
Noncontrolling interest activities:
Contributions											31		31
Distributions											(237)		(237)
Sale			701				9		710		709		1,419
Balance at December 31, 2022	$	889	$	12,160	$	14,201	$	(135)	$	27,115	$	2,141	$	29,256

See Notes to Consolidated Financial Statements.

2022 Form 10-K | F-15

Table of Contents


SAN DIEGO GAS & ELECTRIC COMPANY
STATEMENTS OF OPERATIONS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Operating revenues:
Electric	$	4,795	$	4,666	$	4,619
Natural gas	1,043		838		694
Total operating revenues	5,838		5,504		5,313
Operating expenses:
Cost of electric fuel and purchased power	994		1,069		1,191
Cost of natural gas	363		242		162
Operation and maintenance	1,677		1,587		1,455
Depreciation and amortization	982		889		801
Franchise fees and other taxes	373		350		331
Total operating expenses	4,389		4,137		3,940
Operating income	1,449		1,367		1,373
Other income, net	92		64		52
Interest income	5		1		2
Interest expense	(449)		(412)		(413)
Income before income taxes	1,097		1,020		1,014
Income tax expense	(182)		(201)		(190)
Net income/Earnings attributable to common shares	$	915	$	819	$	824

See Notes to Financial Statements.

2022 Form 10-K | F-16

Table of Contents


SAN DIEGO GAS & ELECTRIC COMPANY
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Years ended December 31, 2022, 2021 and 2020
	Pretax amount		Income tax expense		Net-of-tax amount
2022:
Net income	$	1,097	$	(182)	$	915
Other comprehensive income (loss):
Pension and other postretirement benefits	4		(1)		3
Total other comprehensive income	4		(1)		3
Comprehensive income	$	1,101	$	(183)	$	918
2021:
Net income/Comprehensive income	$	1,020	$	(201)	$	819
2020:
Net income	$	1,014	$	(190)	$	824
Other comprehensive income (loss):
Pension and other postretirement benefits	8		(2)		6
Total other comprehensive income	8		(2)		6
Comprehensive income	$	1,022	$	(192)	$	830

See Notes to Financial Statements.

2022 Form 10-K | F-17

Table of Contents


SAN DIEGO GAS & ELECTRIC COMPANY
BALANCE SHEETS
(Dollars in millions)
	December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	7	$	25
Accounts receivable – trade, net	799		715
Accounts receivable – other, net	110		78
Income taxes receivable, net	—		9
Inventories	134		123
Prepaid expenses	179		174
Regulatory assets	247		231
Fixed-price contracts and other derivatives	113		58
Greenhouse gas allowances	22		13
Other current assets	19		5
Total current assets	1,630		1,431

Other assets:
Regulatory assets	1,219		786
Greenhouse gas allowances	196		111
Nuclear decommissioning trusts	841		1,012
Right-of-use assets – operating leases	281		185
Wildfire fund	303		331
Other long-term assets	146		154
Total other assets	2,986		2,579

Property, plant and equipment:
Property, plant and equipment	28,574		26,456
Less accumulated depreciation and amortization	(6,768)		(6,408)
Property, plant and equipment, net	21,806		20,048
Total assets	$	26,422	$	24,058

See Notes to Financial Statements.

2022 Form 10-K | F-18

Table of Contents


SAN DIEGO GAS & ELECTRIC COMPANY
BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	December 31,
	2022		2021
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Short-term debt	$	205	$	776
Accounts payable	744		588
Due to unconsolidated affiliates	135		97
Interest payable	63		50
Accrued compensation and benefits	140		148
Accrued franchise fees	120		74
Regulatory liabilities	110		14
Current portion of long-term debt and finance leases	489		49
Greenhouse gas obligations	22		13
Asset retirement obligations	98		86
Other current liabilities	193		216
Total current liabilities	2,319		2,111

Long-term debt and finance leases	8,497		7,581

Deferred credits and other liabilities:
Regulatory liabilities	2,298		2,302
Greenhouse gas obligations	81		31
Pension obligation, net of plan assets	42		25
Deferred income taxes	2,540		2,275
Asset retirement obligations	789		804
Deferred credits and other	789		680
Total deferred credits and other liabilities	6,539		6,117

Commitments and contingencies (Note 16)

Shareholder’s equity:
Preferred stock (45 million shares authorized; none issued)	—		—
Common stock (255 million shares authorized; 117 million shares outstanding; no par value)	1,660		1,660
Retained earnings	7,414		6,599
Accumulated other comprehensive income (loss)	(7)		(10)
Total shareholder’s equity	9,067		8,249
Total liabilities and shareholder’s equity	$	26,422	$	24,058

See Notes to Financial Statements.

2022 Form 10-K | F-19

Table of Contents


SAN DIEGO GAS & ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	915	$	819	$	824
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	982		889		801
Deferred income taxes and investment tax credits	93		153		35
Other	12		(14)		27
Net change in other working capital components:
Accounts receivable	(163)		(105)		(134)
Due to/from unconsolidated affiliates, net	38		33		11
Income taxes receivable/payable, net	9		(20)		129
Inventories	(11)		(19)		(10)
Other current assets	(80)		—		4
Accounts payable	153		7		31
Regulatory balancing accounts, net	(10)		(57)		(71)
Other current liabilities	62		(92)		(100)
Changes in other noncurrent assets and liabilities, net	(271)		(218)		(158)
Net cash provided by operating activities	1,729		1,376		1,389

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(2,473)		(2,220)		(1,942)
Purchases of nuclear decommissioning trust assets	(586)		(961)		(1,439)
Proceeds from sales of nuclear decommissioning trust assets	639		961		1,439
Other	8		7		8
Net cash used in investing activities	(2,412)		(2,213)		(1,934)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	(100)		(300)		(200)
Issuances of debt (maturities greater than 90 days)	1,395		1,120		1,598
Payments on debt (maturities greater than 90 days) and finance leases	(425)		(613)		(510)
(Decrease) increase in short-term debt, net	(196)		401		(80)
Debt issuance costs	(9)		(8)		(11)
Net cash provided by financing activities	665		600		797

(Decrease) increase in cash and cash equivalents	(18)		(237)		252
Cash and cash equivalents, January 1	25		262		10
Cash and cash equivalents, December 31	$	7	$	25	$	262

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	431	$	402	$	404
Income tax payments, net of refunds	79		67		25

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures	$	231	$	228	$	199
Increase in finance lease obligations for investment in PP&E	16		24		30
Increase in ARO for investment in PP&E	15		14		31

See Notes to Financial Statements.

2022 Form 10-K | F-20

Table of Contents


SAN DIEGO GAS & ELECTRIC COMPANY
STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY
(Dollars in millions)
	Years ended December 31, 2022, 2021 and 2020
	Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholder's equity
Balance at December 31, 2019	$	1,660	$	5,456	$	(16)	$	7,100

Net income			824				824
Other comprehensive income					6		6

Common stock dividends declared ($1.72/share)			(200)				(200)
Balance at December 31, 2020	1,660		6,080		(10)		7,730

Net income			819				819

Common stock dividends declared ($2.57/share)			(300)				(300)
Balance at December 31, 2021	1,660		6,599		(10)		8,249

Net income			915				915
Other comprehensive income					3		3

Common stock dividends declared ($0.86/share)			(100)				(100)
Balance at December 31, 2022	$	1,660	$	7,414	$	(7)	$	9,067

See Notes to Financial Statements.

2022 Form 10-K | F-21

Table of Contents


SOUTHERN CALIFORNIA GAS COMPANY
STATEMENTS OF OPERATIONS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Operating revenues	$	6,840	$	5,515	$	4,748
Operating expenses:
Cost of natural gas	2,233		1,369		783
Operation and maintenance	2,402		2,180		2,029
Aliso Canyon litigation and regulatory matters	259		1,593		307
Depreciation and amortization	761		716		654
Franchise fees and other taxes	247		223		190
Total operating expenses	5,902		6,081		3,963
Operating income (loss)	938		(566)		785
Other expense, net	(8)		(14)		(28)
Interest income	6		1		2
Interest expense	(198)		(157)		(158)
Income (loss) before income taxes	738		(736)		601
Income tax (expense) benefit	(138)		310		(96)
Net income (loss)	600		(426)		505
Preferred dividends	(1)		(1)		(1)
Earnings (losses) attributable to common shares	$	599	$	(427)	$	504

See Notes to Financial Statements.

2022 Form 10-K | F-22

Table of Contents


SOUTHERN CALIFORNIA GAS COMPANY
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Years ended December 31, 2022, 2021 and 2020
	Pretax amount		Income tax (expense) benefit		Net-of-tax amount
2022:
Net income	$	738	$	(138)	$	600
Other comprehensive income (loss):
Financial instruments	1		—		1
Pension and other postretirement benefits	8		(2)		6
Total other comprehensive income	9		(2)		7
Comprehensive income	$	747	$	(140)	$	607
2021:
Net loss/Comprehensive loss	$	(736)	$	310	$	(426)
2020:
Net income	$	601	$	(96)	$	505
Other comprehensive income (loss):
Pension and other postretirement benefits	(12)		4		(8)
Total other comprehensive loss	(12)		4		(8)
Comprehensive income	$	589	$	(92)	$	497

See Notes to Financial Statements.

2022 Form 10-K | F-23

Table of Contents


SOUTHERN CALIFORNIA GAS COMPANY
BALANCE SHEETS
(Dollars in millions)
	December 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	21	$	37
Accounts receivable – trade, net	1,295		1,084
Accounts receivable – other, net	293		58
Due from unconsolidated affiliates	77		49
Income taxes receivable, net	—		23
Inventories	159		172
Regulatory assets	104		40
Greenhouse gas allowances	111		75
Other current assets	69		61
Total current assets	2,129		1,599

Other assets:
Regulatory assets	1,291		1,148
Insurance receivable for Aliso Canyon costs	—		360
Greenhouse gas allowances	551		290
Right-of-use assets – operating leases	42		57
Other long-term assets	583		627
Total other assets	2,467		2,482

Property, plant and equipment:
Property, plant and equipment	25,058		23,104
Less accumulated depreciation and amortization	(7,308)		(6,861)
Property, plant and equipment, net	17,750		16,243
Total assets	$	22,346	$	20,324

See Notes to Financial Statements.

2022 Form 10-K | F-24

Table of Contents


SOUTHERN CALIFORNIA GAS COMPANY
BALANCE SHEETS (CONTINUED)
(Dollars in millions)
	December 31,
	2022		2021
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	900	$	385
Accounts payable – trade	953		775
Accounts payable – other	176		142
Due to unconsolidated affiliates	36		36
Accrued compensation and benefits	209		202
Regulatory liabilities	394		345
Current portion of long-term debt and finance leases	318		11
Reserve for Aliso Canyon costs	129		1,980
Greenhouse gas obligations	111		75
Asset retirement obligations	68		77
Other current liabilities	429		284
Total current liabilities	3,723		4,312

Long-term debt and finance leases	5,780		4,773

Deferred credits and other liabilities:
Regulatory liabilities	1,043		1,100
Greenhouse gas obligations	443		174
Pension obligation, net of plan assets	277		551
Deferred income taxes	1,306		1,039
Asset retirement obligations	2,675		2,505
Deferred credits and other	401		428
Total deferred credits and other liabilities	6,145		5,797

Commitments and contingencies (Note 16)

Shareholders’ equity:
Preferred stock (11 million shares authorized; 1 million shares outstanding)	22		22
Common stock (100 million shares authorized; 91 million shares outstanding; no par value)	2,316		1,666
Retained earnings	4,384		3,785
Accumulated other comprehensive income (loss)	(24)		(31)
Total shareholders’ equity	6,698		5,442
Total liabilities and shareholders’ equity	$	22,346	$	20,324

See Notes to Financial Statements.

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SOUTHERN CALIFORNIA GAS COMPANY
STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	600	$	(426)	$	505
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	761		716		654
Deferred income taxes and investment tax credits	146		(494)		(112)
Other	58		19		59
Net change in working capital components:
Accounts receivable	(512)		(383)		(101)
Due to/from unconsolidated affiliates, net	(28)		(25)		(27)
Income taxes receivable/payable, net	23		(43)		189
Inventories	13		(18)		(19)
Other current assets	(139)		(21)		(12)
Accounts payable	191		181		64
Regulatory balancing accounts, net	46		306		(160)
Reserve for Aliso Canyon costs	(1,851)		1,532		141
Other current liabilities	185		(92)		(21)
Insurance receivable for Aliso Canyon costs	360		85		(106)
Reserve for Aliso Canyon costs, noncurrent	1		—		294
Changes in other noncurrent assets and liabilities, net	(308)		(304)		178
Net cash (used in) provided by operating activities	(454)		1,033		1,526

CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment	(1,993)		(1,984)		(1,843)
Net cash used in investing activities	(1,993)		(1,984)		(1,843)

CASH FLOWS FROM FINANCING ACTIVITIES
Common dividends paid	—		(75)		(100)
Preferred dividends paid	(1)		(1)		(1)
Equity contributions from Sempra Energy	650		800		—
Issuances of debt (maturities greater than 90 days)	2,094		—		949
Payments on finance leases	(15)		(12)		(12)
(Decrease) increase in short-term debt, net	(285)		272		(517)
Debt issuance costs	(12)		—		(8)
Net cash provided by financing activities	2,431		984		311

(Decrease) increase in cash and cash equivalents	(16)		33		(6)
Cash and cash equivalents, January 1	37		4		10
Cash and cash equivalents, December 31	$	21	$	37	$	4

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest payments, net of amounts capitalized	$	173	$	151	$	146
Income tax (refunds) payments, net	(31)		227		19

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures	$	245	$	222	$	208
Increase in finance lease obligations for investment in PP&E	41		19		47
Increase in ARO for investment in PP&E	63		125		107

See Notes to Financial Statements.

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SOUTHERN CALIFORNIA GAS COMPANY
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in millions)
	Years ended December 31, 2022, 2021 and 2020
	Preferred stock		Common stock		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
Balance at December 31, 2019	$	22	$	866	$	3,883	$	(23)	$	4,748

Net income					505				505
Other comprehensive loss							(8)		(8)

Dividends declared:
Preferred stock ($1.50/share)					(1)				(1)
Common stock ($1.10/share)					(100)				(100)
Balance at December 31, 2020	22		866		4,287		(31)		5,144

Net loss					(426)				(426)

Dividends declared:
Preferred stock ($1.50/share)					(1)				(1)
Common stock ($0.82/share)					(75)				(75)
Equity contribution from Sempra Energy			800						800
Balance at December 31, 2021	22		1,666		3,785		(31)		5,442

Net income					600				600
Other comprehensive income							7		7

Dividends declared:
Preferred stock ($1.50/share)					(1)				(1)
Equity contributions from Sempra Energy			650						650
Balance at December 31, 2022	$	22	$	2,316	$	4,384	$	(24)	$	6,698

See Notes to Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER FINANCIAL DATA

PRINCIPLES OF CONSOLIDATION

Sempra

Sempra’s Consolidated Financial Statements include the accounts of Sempra Energy, a California-based holding company doing business as Sempra, and its consolidated entities. We have four separate reportable segments, which we discuss in Note 17. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.

SDG&E

SDG&E’s common stock is wholly owned by Enova, which is a wholly owned subsidiary of Sempra.

SoCalGas

SoCalGas’ common stock is wholly owned by PE, which is a wholly owned subsidiary of Sempra.

BASIS OF PRESENTATION

This is a combined report of Sempra, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.

Use of Estimates in the Preparation of the Financial Statements

We have prepared our Consolidated Financial Statements in conformity with U.S. GAAP. This requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, including the disclosure of contingent assets and liabilities at the date of the financial statements. Although we believe the estimates and assumptions are reasonable, actual amounts ultimately may differ significantly from those estimates.

Discontinued Operations

We completed the sales of our equity interests in our Peruvian businesses in April 2020 and our Chilean businesses in June 2020. We determined that these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with these businesses, met the held-for-sale criteria upon our decision to sell them in January 2019. These businesses are presented as discontinued operations, which we discuss further in Note 5. Our discussions in the Notes below relate only to our continuing operations unless otherwise noted.

Subsequent Events

We evaluated events and transactions that occurred after December 31, 2022 through the date the financial statements were issued, and in the opinion of management, the accompanying statements reflect all adjustments and disclosures necessary for a fair presentation.

REGULATED OPERATIONS

SDG&E’s and SoCalGas’ accounting policies and financial statements reflect the application of U.S. GAAP provisions governing rate-regulated operations and the policies of the CPUC and the FERC. Under these provisions, a regulated utility records regulatory assets, which are generally costs that would otherwise be charged to expense, if it is probable that, through the ratemaking process, the utility will recover those assets from customers. To the extent that recovery is no longer probable, the related regulatory assets are written off. Regulatory liabilities generally represent amounts collected from customers in advance of the actual expenditure by the utility. If the actual expenditures are less than amounts previously collected from ratepayers, the excess would be refunded to customers, generally by reducing future rates. Regulatory liabilities may also arise from other transactions such as unrealized gains on fixed price contracts and other derivatives or certain deferred income tax benefits that are passed through to customers in future rates. In addition, SDG&E and SoCalGas record regulatory liabilities when the CPUC or, in

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the case of SDG&E, the FERC, requires a refund to be made to customers or has required that a gain or other transaction of net allowable costs be given to customers over future periods.

Determining probability of recovery of regulatory assets requires judgment by management and may include, but is not limited to, consideration of:

▪the nature of the event giving rise to the assessment

▪existing statutes and regulatory code

▪legal precedents

▪regulatory principles and analogous regulatory actions

▪testimony presented in regulatory hearings

▪regulatory orders

▪a commission-authorized mechanism established for the accumulation of costs

▪status of applications for rehearings or state court appeals

▪specific approval from a commission

▪historical experience

Sempra Infrastructure’s natural gas distribution utility, Ecogas, also applies U.S. GAAP provisions for rate-regulated operations, including the same evaluation of probability of recovery of regulatory assets described above.

Our Sempra Texas Utilities segment is comprised of our equity method investments in Oncor Holdings, which owns an 80.25% interest in Oncor, and Sharyland Holdings, which owns 100% of Sharyland Utilities. Oncor and Sharyland Utilities are regulated electric transmission and distribution utilities in Texas and their rates are regulated by the PUCT and, in the case of Oncor, certain cities and are subject to regulatory rate-setting processes and earnings oversight. Oncor and Sharyland Utilities prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations.

Our Sempra Infrastructure segment includes the operating companies of our subsidiary, IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the CRE and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects currently under construction at IEnova that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below in “Property, Plant and Equipment.”

FAIR VALUE MEASUREMENTS

We measure certain assets and liabilities at fair value on a recurring basis, primarily NDT and benefit plan trust assets and derivatives. We also measure certain assets at fair value on a non-recurring basis in certain circumstances.

A fair value measurement reflects the assumptions market participants would use in pricing an asset or liability based on the best available information. These assumptions include the risk inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model. Also, we consider an issuer’s credit standing when measuring its liabilities at fair value.

We establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

Level 1 – Pricing inputs are unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Our Level 1 financial instruments primarily consist of listed equities, short-term investments, and U.S. government treasury securities, primarily in the NDT and benefit plan trusts, and exchange-traded derivatives.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including:

▪quoted forward prices for commodities

▪time value

▪current market and contractual prices for the underlying instruments

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▪volatility factors

▪other relevant economic measures

Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Our financial instruments in this category include listed equities, domestic corporate bonds, municipal bonds and other foreign bonds, primarily in the NDT and benefit plan trusts, and non-exchange-traded derivatives such as interest rate instruments and over-the-counter forwards and options.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant. Our Level 3 financial instruments consist of CRRs and fixed-price electricity positions at SDG&E and the Support Agreement at Sempra Infrastructure.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash equivalents are highly liquid investments with original maturities of three months or less at the date of purchase.

Restricted cash includes:

▪for Sempra Infrastructure, funds fully drawn against Gazprom’s letters of credit, including draws associated with its LNG storage and regasification agreement that we discuss in Note 16, and funds denominated in Mexican pesos to pay for rights-of-way, license fees, permits, topographic surveys and other costs pursuant to trust and debt agreements related to pipeline projects

▪for Parent and other, funds held in a delisting trust for the purpose of purchasing the remaining publicly owned IEnova shares

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on Sempra’s Consolidated Balance Sheets to the sum of such amounts reported on Sempra’s Consolidated Statements of Cash Flows.


RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
	December 31,
	2022		2021
Cash and cash equivalents	$	370	$	559
Restricted cash, current	40		19
Restricted cash, noncurrent	52		3
Total cash, cash equivalents and restricted cash on the Consolidated Statements of Cash Flows	$	462	$	581

CREDIT LOSSES

We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable, amounts due from unconsolidated affiliates, our net investment in a sales-type lease and a note receivable. We are also exposed to credit losses from off-balance sheet arrangements through Sempra’s guarantee related to Cameron LNG JV’s SDSRA, which we discuss in Note 6.

We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivables and customer payment patterns, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies, pandemics and other factors. We write off financial assets measured at amortized cost in the period in which we determine they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered.

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We provide below the changes in allowances for credit losses for trade receivables and other receivables. SDG&E and SoCalGas record changes in the allowances for credit losses related to Accounts Receivable – Trade in regulatory accounts.


CHANGES IN ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	2022		2021		2020
Sempra:
Allowances for credit losses at January 1	$	136	$	138	$	29
Incremental allowance upon adoption of ASU 2016-13	—		—		1
Provisions for expected credit losses	123		45		124
Write-offs	(78)		(47)		(16)
Allowances for credit losses at December 31	$	181	$	136	$	138
SDG&E:
Allowances for credit losses at January 1	$	66	$	69	$	14
Provisions for expected credit losses	54		23		65
Write-offs	(42)		(26)		(10)
Allowances for credit losses at December 31	$	78	$	66	$	69
SoCalGas:
Allowances for credit losses at January 1	$	69	$	68	$	15
Provisions for expected credit losses	65		22		59
Write-offs	(36)		(21)		(6)
Allowances for credit losses at December 31	$	98	$	69	$	68

Allowances for credit losses related to trade receivables and other receivables are included in the Consolidated Balance Sheets as follows:


ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	December 31,
	2022		2021
Sempra:
Accounts receivable – trade, net	$	140	$	94
Accounts receivable – other, net	40		39
Other long-term assets	1		3
Total allowances for credit losses	$	181	$	136
SDG&E:
Accounts receivable – trade, net	$	52	$	42
Accounts receivable – other, net	25		22
Other long-term assets	1		2
Total allowances for credit losses	$	78	$	66
SoCalGas:
Accounts receivable – trade, net	$	83	$	51
Accounts receivable – other, net	15		17
Other long-term assets	—		1
Total allowances for credit losses	$	98	$	69

As we discuss below in “Transactions with Affiliates,” we had a loan due from an unconsolidated affiliate that was paid in full in July 2022. At December 31, 2021, $1 million of expected credit losses are included in noncurrent Due From Unconsolidated Affiliates on Sempra’s Consolidated Balance Sheet.

As we discuss below in “Note Receivable,” we have an interest-bearing promissory note due from KKR. On a quarterly basis, we evaluate credit losses and record allowances for expected credit losses on this note receivable, including compounded interest and unamortized transaction costs, based on published default rate studies, the maturity date of the instrument and an internally developed credit rating. At December 31, 2022 and 2021, $7 million and $8 million, respectively, of expected credit losses is included in Other Long-Term Assets on Sempra’s Consolidated Balance Sheets.

As we discuss below in Note 6, Sempra provided a guarantee for the benefit of Cameron LNG JV related to amounts withdrawn by Sempra Infrastructure from the SDSRA. On a quarterly basis, we evaluate credit losses and record liabilities for expected credit losses on this off-balance sheet arrangement based on external credit ratings, published default rate studies and the maturity

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date of the arrangement. At December 31, 2022 and 2021, $6 million and $7 million, respectively, of expected credit losses are included in Deferred Credits and Other on Sempra’s Consolidated Balance Sheets.

CONCENTRATION OF CREDIT RISK

Credit risk is the risk of loss that would be incurred as a result of nonperformance by our counterparties on their contractual obligations. We have policies governing the management of credit risk that are administered by the respective credit departments at each of our segments and overseen by their separate risk management committees.

This oversight includes calculating current and potential credit risk on a regular basis and monitoring actual balances in comparison to approved limits. We establish credit limits based on risk and return considerations under terms customarily available in the industry. We avoid concentration of counterparties whenever possible, and we believe our credit policies significantly reduce overall credit risk. These policies include an evaluation of:

▪prospective counterparties’ financial condition (including credit ratings)

▪collateral requirements

▪the use of standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty

▪downgrade triggers

We believe that we have provided adequate reserves for counterparty nonperformance in our allowances for credit losses.

When our development projects become operational, we rely significantly on the ability of suppliers to perform under long-term agreements and on our ability to enforce contract terms in the event of nonperformance. Also, the factors that we consider in evaluating a development project include negotiating customer and supplier agreements and, therefore, we rely on these agreements for future performance. We also may condition our decision to go forward on development projects on first obtaining these customer and supplier agreements.

INVENTORIES

SDG&E and SoCalGas value natural gas inventory using the last-in first-out method. As inventories are sold, differences between the last-in first-out valuation and the estimated replacement cost are reflected in customer rates. These differences are generally temporary, but may become permanent if the natural gas inventory withdrawn from storage during the year is not replaced by year end. SDG&E and SoCalGas generally value materials and supplies at the lower of average cost or net realizable value.

Sempra Infrastructure values natural gas inventory and materials and supplies at the lower of average cost or net realizable value, and LNG inventory using the first-in first-out method.

The components of inventories are as follows:


INVENTORY BALANCES AT DECEMBER 31
(Dollars in millions)
	Sempra				SDG&E				SoCalGas
	2022		2021		2022		2021		2022		2021
Natural gas	$	106	$	164	$	1	$	—	$	74	$	114
LNG	62		27		—		—		—		—
Materials and supplies	235		198		133		123		85		58
Total	$	403	$	389	$	134	$	123	$	159	$	172

NOTE RECEIVABLE

In November 2021, Sempra loaned $300 million to KKR in exchange for an interest-bearing promissory note that is due in full no later than October 2029 and bears compound interest at 5% per annum, which may be paid quarterly or added to the outstanding principal at the election of KKR. At December 31, 2022 and 2021, Other Long-Term Assets includes $316 million and $297 million, respectively, of outstanding principal, compounded interest and unamortized transaction costs, net of allowance for credit losses, and at December 31, 2021, Other Current Assets includes $3 million of interest receivable on Sempra’s Consolidated Balance Sheets.

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WILDFIRE FUND

In July 2019, the Wildfire Legislation was signed into law to address certain issues related to catastrophic wildfires in California and their impact on electric IOUs. Investor-owned gas distribution utilities such as SoCalGas are not covered by this legislation. The issues addressed include wildfire mitigation, cost recovery standards and requirements, a wildfire fund, a cap on liability, and the establishment of a wildfire safety board.

The Wildfire Legislation established a revised legal standard for the recovery of wildfire costs (Revised Prudent Manager Standard) and established a fund (the Wildfire Fund) designed to provide liquidity to SDG&E, PG&E and Edison to pay IOU wildfire-related claims in the event that the governmental agency responsible for determining causation determines the applicable IOU’s equipment caused the ignition of a wildfire, primary insurance coverage is exceeded and certain other conditions are satisfied. A primary purpose of the Wildfire Fund is to pool resources provided by shareholders and ratepayers of the IOUs and make those resources available to reimburse the IOUs for third-party wildfire claims incurred after July 12, 2019, the effective date of the Wildfire Legislation, subject to certain limitations.

An IOU may seek payment from the Wildfire Fund for settled or adjudicated third-party damage claims arising from certain wildfires that exceed, in aggregate in a calendar year, the greater of $1.0 billion or the IOU’s required amount of insurance coverage as recommended by the Wildfire Fund’s administrator. Wildfire claims approved by the Wildfire Fund’s administrator will be paid by the Wildfire Fund to the IOU to the extent funds are available. These utilized funds will be subject to review by the CPUC, which will make a determination as to the degree an IOU’s conduct related to an ignition of a wildfire was prudent or imprudent. The Revised Prudent Manager Standard requires that the CPUC apply clear standards when reviewing wildfire liability losses paid when determining the reasonableness of an IOU’s conduct related to an ignition. Under this standard, the conduct under review related to the ignition may include factors within and beyond the IOU’s control, including humidity, temperature and winds. Costs and expenses may be allocated for cost recovery in full or in part. Also, under this standard, an IOU’s conduct will be deemed reasonable if a valid annual safety certification is in place at the time of the ignition, unless a serious doubt is raised, in which case the burden shifts to the utility to dispel that doubt. The IOUs will receive an annual safety certification from OEIS if they meet various requirements.

If an IOU has maintained a valid annual safety certification, to the extent it is found to be imprudent, claims will be reimbursable by the IOU to the Wildfire Fund up to a cap based on the IOU’s rate base. The aggregate requirement to reimburse the Wildfire Fund over a trailing three calendar year period is capped at 20% of the equity portion of an IOU’s electric transmission and distribution rate base in the year of the prudency determination. Based on its 2022 rate base, the liability cap for SDG&E is approximately $1.2 billion, which is adjusted annually. The liability cap will apply on a rolling three-year basis so long as future annual safety certifications are received and the Wildfire Fund has not been terminated, which could occur if funds are exhausted. Amounts in excess of the liability cap and amounts that are determined to be prudently incurred do not need to be reimbursed by an IOU to the Wildfire Fund. The Wildfire Fund does not have a specified term and coverage will continue until the assets of the Wildfire Fund are exhausted and the Wildfire Fund is terminated, in which case, the remaining funds, if any, will be transferred to California’s general fund to be used for fire risk mitigation programs.

In August 2022, the OEIS approved SDG&E’s 2022 Wildfire Mitigation Plan, which is effective until the OEIS approves a new plan. SDG&E received its annual wildfire safety certification from the OEIS in December 2022.

The Wildfire Fund was initially funded up to $10.5 billion by a loan from the California Surplus Money Investment Fund. The loan is financed through a DWR bond, which was put in place in October 2020 and is securitized through a dedicated surcharge on ratepayers’ bills attributable to the DWR. In October 2019, the CPUC adopted a decision authorizing a non-bypassable charge to be collected by the IOUs to support the anticipated DWR bond issuance authorized by AB 1054. The CPUC decision also determined that ratepayers of non-participating electrical corporations shall not pay the non-bypassable charge.

The Wildfire Fund was also funded by initial shareholder contributions from the IOUs totaling $7.5 billion. SDG&E’s share was $322.5 million. The IOUs are also required to make annual shareholder contributions to the Wildfire Fund with an aggregate value of $3 billion over a 10-year period starting in 2019. SDG&E’s share is $129 million. The contributions are not subject to rate recovery.

Wildfire Fund Asset and Obligation

In 2019, SDG&E recorded both a Wildfire Fund asset and a related obligation for its commitment to make shareholder contributions of $451.5 million to the Wildfire Fund, measured at present value as of July 25, 2019 (the date by which both Edison and SDG&E opted to contribute to the Wildfire Fund). SDG&E paid its initial shareholder contribution of $322.5 million to the Wildfire Fund in September 2019. SDG&E funded this contribution with proceeds from an equity contribution from

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Sempra. SDG&E expects to continue to make annual shareholder contributions of $12.9 million through December 31, 2028. SDG&E is accreting the present value of the Wildfire Fund obligation until the liability is settled.

SDG&E is amortizing the Wildfire Fund asset on a straight-line basis over the estimated period of benefit, as adjusted for utilization by the IOUs. The estimated period of benefit of the Wildfire Fund asset is 15 years and is based on several assumptions, including, but not limited to:

▪historical wildfire experience of each IOU in California, including frequency and severity of the wildfires

▪the value of property potentially damaged by wildfires

▪the effectiveness of wildfire risk mitigation efforts by each IOU

▪liability cap of each IOU

▪IOU prudency determination levels

▪FERC jurisdictional allocation levels

▪insurance coverage levels

The use of different assumptions, or changes to the assumptions used, could have a significant impact on the estimated period of benefit of the Wildfire Fund asset. SDG&E periodically evaluates the estimated period of benefit of the Wildfire Fund asset based on actual experience and changes in these assumptions. SDG&E recognizes a reduction of its Wildfire Fund asset and records a charge against earnings in the period when there is a reduction of the available coverage due to recoverable claims from any of the participating IOUs. Wildfire claims that are recoverable from the Wildfire Fund, net of anticipated or actual reimbursement to the Wildfire Fund by the responsible IOU, decrease the Wildfire Fund asset and remaining available coverage.

The following table summarizes the location of balances related to the Wildfire Fund on Sempra’s and SDG&E’s Consolidated Balance Sheets and Consolidated Statements of Operations.


WILDFIRE FUND
(Dollars in millions)
				December 31,
	Location			2022		2021
Wildfire Fund asset:
Current	Prepaid Expenses			$	29	$	29
Noncurrent	Wildfire Fund			303		331
Wildfire Fund obligation:
Current	Other Current Liabilities			$	13	$	13
Noncurrent	Deferred Credits and Other			53		64

		Years ended December 31,
		2022		2021		2020
Amortization of Wildfire Fund asset	Operation and Maintenance	$	29	$	29	$	29
Impairment of Wildfire Fund asset	Operation and Maintenance	—		3		—
Accretion of Wildfire Fund obligation	Operation and Maintenance	2		2		2

INCOME TAXES

Income tax expense includes current and deferred income taxes. We record deferred income taxes for temporary differences between the book and the tax basis of assets and liabilities. Investment tax credits from prior years are amortized to income by SDG&E and SoCalGas over the estimated service lives of the properties as required by the CPUC.

Under the regulatory accounting treatment required for flow-through temporary differences, SDG&E, SoCalGas and Sempra Infrastructure recognize:

▪regulatory assets to offset deferred income tax liabilities if it is probable that the amounts will be recovered from customers; and

▪regulatory liabilities to offset deferred income tax assets if it is probable that the amounts will be returned to customers.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position we take has to have at least a more-likely-than-not chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more-likely-than-not” means a likelihood of more than 50%. Otherwise, we may not recognize

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any of the potential tax benefit associated with the position. We recognize a benefit for a tax position that meets the more-likely-than-not criterion at the largest amount of tax benefit that is greater than 50% likely of being realized upon its effective resolution.

Unrecognized income tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our ETR.

We accrue income tax to the extent we intend to repatriate cash to the U.S. from our continuing international operations. We currently do not record deferred income taxes for other basis differences between financial statement and income tax investment amounts in non-U.S. subsidiaries because they are indefinitely reinvested. We recognize income tax expense for basis differences related to global intangible low-taxed income as a period cost if and when incurred.

We provide additional information about income taxes in Note 8.

GREENHOUSE GAS ALLOWANCES AND OBLIGATIONS

SDG&E, SoCalGas and Sempra Infrastructure are required by AB 32 to acquire GHG allowances for every metric ton of carbon dioxide equivalent emitted into the atmosphere during electric generation and natural gas consumption. At SDG&E and SoCalGas, many GHG allowances are allocated to us on behalf of our customers at no cost and we purchase any additional allowances required. We record purchased and allocated GHG allowances at the lower of weighted-average cost or market. We measure the compliance obligation, which is based on emissions, at the carrying value of allowances held plus the fair value of additional allowances necessary to satisfy the obligation. SDG&E and SoCalGas balance costs and revenues associated with the GHG program through regulatory balancing accounts. Sempra Infrastructure records the cost of GHG obligations in cost of sales. We remove the assets and liabilities from the balance sheets as the allowances are surrendered.

RENEWABLE ENERGY CERTIFICATES

RECs are energy rights established by governmental agencies for the environmental and social promotion of renewable electricity generation. A REC, and its associated attributes and benefits, can be sold separately from the underlying physical electricity associated with a renewable-based generation source in certain markets.

Retail sellers of electricity obtain RECs through renewable energy PPAs, internal generation or separate purchases in the market to comply with the RPS Program established by the governmental agencies. RECs provide documentation for the generation of a unit of renewable energy that is used to verify compliance with the RPS Program. The cost of RECs at SDG&E, which is recoverable in rates, is recorded in Cost of Electric Fuel and Purchased Power on the Statements of Operations.

PROPERTY, PLANT AND EQUIPMENT

PP&E is recorded at cost and primarily represents the buildings, equipment and other facilities used by SDG&E and SoCalGas to provide natural gas and electric utility services, and by the Sempra Infrastructure businesses in their operations, including construction work in progress. PP&E also includes lease improvements and other equipment at Parent and other. Our plant costs include labor, materials and contract services and expenditures for replacement parts incurred during a major maintenance outage of a plant. In addition, the cost of utility plant at our rate-regulated businesses and PP&E under regulated projects that meet the regulatory accounting requirements of U.S. GAAP includes AFUDC. The cost of PP&E for our non-regulated projects includes capitalized interest. Maintenance costs are expensed as incurred. The cost of most retired depreciable utility plant assets less salvage value is charged to accumulated depreciation. We discuss assets collateralized as security for certain indebtedness in Note 7.

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PROPERTY, PLANT AND EQUIPMENT BY MAJOR FUNCTIONAL CATEGORY
(Dollars in millions)
	December 31,				Depreciation rates for years ended December 31,
	2022		2021		2022		2021			2020
SDG&E:
Natural gas operations	$	3,707	$	3,200	2.57	%	2.55	%		2.51	%
Electric distribution	10,271		9,471		3.94		3.93			3.90
Electric transmission(1)	8,061		7,577		3.03		3.02			3.10
Electric generation	2,461		2,446		5.11		4.74			4.56
Other electric	2,211		2,100		7.03		7.23			6.92
Construction work in progress(1)	1,863		1,662		N/A		N/A			N/A
Total SDG&E	28,574		26,456
SoCalGas:
Natural gas operations	23,646		21,894		3.57		3.65			3.63
Other non-utility	50		50		1.54		2.23			3.80
Construction work in progress	1,362		1,160		N/A		N/A			N/A
Total SoCalGas	25,058		23,104

Sempra Infrastructure and parent(2):					Estimated useful lives				Weighted-average useful life
Land and land rights	476		291		16 to 44 years(3)					37
Machinery and equipment:
Pipelines and storage	3,813		3,698		41 to 49 years					42
Generating plants	1,803		1,659		11 to 28 years					26
LNG terminals	1,138		1,138		43 years					43
Refined products terminals	643		420		38 years					38
Other	344		370		1 to 22 years					3
Construction work in progress	1,757		1,494		N/A					N/A
Other	287		310		4 to 34 years					16
	10,261		9,380
Total Sempra	$	63,893	$	58,940

(1) At December 31, 2022, includes $554 in electric transmission assets and $7 in construction work in progress related to SDG&E’s 86% interest in the Southwest Powerlink transmission line, jointly owned by SDG&E with other utilities. SDG&E, and each of the other owners, holds its undivided interest as a tenant in common in the property. Each owner is responsible for its share of the project and participates in decisions concerning operations and capital expenditures. SDG&E’s share of operating expenses is included in Sempra’s and SDG&E’s Consolidated Statements of Operations.

(2) Includes $246 and $211 at December 31, 2022 and 2021, respectively, of utility plant, primarily pipelines and other distribution assets at Ecogas.

(3) Estimated useful lives are for land rights.

Depreciation expense is computed using the straight-line method over the asset’s estimated composite useful life, the CPUC-prescribed period for SDG&E and SoCalGas, or the remaining term of the site leases, whichever is shortest.


DEPRECIATION EXPENSE
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra	$	1,995	$	1,833	$	1,646
SDG&E	977		884		797
SoCalGas	755		711		649

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ACCUMULATED DEPRECIATION AND AMORTIZATION
(Dollars in millions)
	December 31,
	2022		2021
SDG&E:
Accumulated depreciation:
Natural gas operations	$	979	$	919
Electric transmission, distribution and generation(1)	5,789		5,489
Total SDG&E	6,768		6,408
SoCalGas:
Accumulated depreciation:
Natural gas operations	7,291		6,845
Other non-utility	17		16
Total SoCalGas	7,308		6,861
Sempra Infrastructure and parent:
Accumulated depreciation – other(2)	2,035		1,777
Total Sempra	$	16,111	$	15,046

(1) Includes $307 at December 31, 2022 related to SDG&E’s 86% interest in the Southwest Powerlink transmission line, jointly owned by SDG&E and other utilities.

(2) Includes $65 and $55 at December 31, 2022 and 2021, respectively, of accumulated depreciation for utility plant at Ecogas.

SDG&E and SoCalGas finance construction projects with debt and equity funds. The CPUC and the FERC allow the recovery of the cost of these funds by the capitalization of AFUDC, calculated using rates authorized by the CPUC and the FERC, as a cost component of PP&E. SDG&E and SoCalGas earn a return on the capitalized AFUDC after the utility property is placed in service and recover the AFUDC from their customers over the expected useful lives of the assets.

Pipeline projects under construction by Sempra Infrastructure that are both subject to certain regulation and meet U.S. GAAP regulatory accounting requirements record the impact of AFUDC.

We capitalize interest costs incurred to finance capital projects and interest at equity method investments that have not commenced planned principal operations.

The table below summarizes capitalized financing costs, comprised of AFUDC and capitalized interest.


CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra	$	255	$	217	$	202
SDG&E	116		106		104
SoCalGas	73		64		55

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill is the excess of the purchase price over the fair value of the identifiable net assets of acquired companies measured at the time of acquisition. Goodwill is not amortized, but we test it for impairment annually on October 1 or whenever events or changes in circumstances necessitate an evaluation. If the carrying value of the reporting unit, including goodwill, exceeds its fair value, we record a goodwill impairment loss as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill.

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For our annual goodwill impairment testing, we have the option to first make a qualitative assessment of whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount before applying the quantitative goodwill impairment test. If we elect to perform the qualitative assessment, we evaluate relevant events and circumstances, including but not limited to, macroeconomic conditions, industry and market considerations, cost factors and the overall financial performance of the reporting unit. If, after assessing these qualitative factors, we determine that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then we perform the quantitative goodwill impairment test. If, after performing the quantitative goodwill impairment test, we determine that goodwill is impaired, we record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill.

Goodwill of $1,602 million at December 31, 2022 and 2021 relates to the 2016 acquisitions of IEnova Pipelines and the Ventika wind power generation facilities at Sempra Infrastructure.

Other Intangible Assets

Other Intangible Assets included on Sempra’s Consolidated Balance Sheets are as follows:


OTHER INTANGIBLE ASSETS
(Dollars in millions)
	Amortization period (years)	December 31,
		2022		2021
Renewable energy transmission and consumption permits	15 to 19	$	169	$	169
O&M agreement	23	66		66
ESJ PPA	14	190		190
Other	10 to indefinite	15		15
		440		440
Less accumulated amortization:
Renewable energy transmission and consumption permits		(50)		(40)
O&M agreement		(15)		(12)
ESJ PPA		(23)		(10)
Other		(8)		(8)
		(96)		(70)
		$	344	$	370

Other Intangible Assets at December 31, 2022 primarily include:

▪renewable energy transmission and consumption permits previously granted by the CRE at the Ventika wind power generation facilities, Don Diego Solar and Border Solar;

▪a favorable O&M agreement acquired in connection with the acquisition of DEN; and

▪the relative fair value of the PPA that was acquired in connection with the acquisition of ESJ.

Intangible assets subject to amortization are amortized over their estimated useful lives. Amortization expense for intangible assets was $26 million (including $13 million recorded against revenues) in 2022, $22 million (including $10 million recorded against revenues) in 2021, and $11 million in 2020. We estimate amortization expense for the next five years to be $26 million per year (including $13 million per year recorded against revenues).

LONG-LIVED ASSETS

We test long-lived assets for recoverability whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of long-lived assets. Long-lived assets include intangible assets subject to amortization, but do not include investments in unconsolidated entities. A long-lived asset may be impaired when the estimated future undiscounted cash flows are less than the carrying amount of the asset. If that comparison indicates that the asset’s carrying value may not be recoverable, the impairment is measured based on the difference between the carrying amount and the fair value of the asset. This evaluation is performed at the lowest level for which separately identifiable cash flows exist.

VARIABLE INTEREST ENTITIES

We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based on qualitative and quantitative analyses, which assess:

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▪the purpose and design of the VIE;

▪the nature of the VIE’s risks and the risks we absorb;

▪the power to direct activities that most significantly impact the economic performance of the VIE; and

▪the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.

We will continue to evaluate our VIEs for any changes that may impact our determination of whether an entity is a VIE and if we are the primary beneficiary.

SDG&E

SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various PPAs that include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and indirectly Sempra, is the primary beneficiary.

SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which it considers the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If SDG&E determines that it is the primary beneficiary, SDG&E and Sempra consolidate the entity that owns the facility as a VIE.

In addition to tolling agreements, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities, including the operation and maintenance activities of the generating facility, that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra.

SDG&E determined that none of its PPAs and tolling agreements resulted in SDG&E being the primary beneficiary of a VIE at December 31, 2022 and 2021. PPAs and tolling agreements that relate to SDG&E’s involvement with VIEs are primarily accounted for as finance leases. The carrying amounts of the assets and liabilities under these contracts are included in PP&E, net, and finance lease liabilities with balances of $1,194 million and $1,217 million at December 31, 2022 and 2021, respectively. SDG&E recovers costs incurred on PPAs, tolling agreements and other variable interests through CPUC-approved long-term power procurement plans. SDG&E has no residual interest in the respective entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 16. As a result, SDG&E’s potential exposure to loss from its variable interest in these VIEs is not significant.

Sempra Texas Utilities

Oncor Holdings is a VIE. Sempra is not the primary beneficiary of this VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $13,665 million and $12,947 million at December 31, 2022 and 2021, respectively.

Sempra Infrastructure

Cameron LNG JV

Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of Cameron LNG JV,

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including LNG production and operation and maintenance activities at the liquefaction facility. Therefore, we account for our investment in Cameron LNG JV under the equity method. The carrying value of our investment, including amounts recognized in AOCI related to interest-rate cash flow hedges at Cameron LNG JV, was $886 million and $514 million at December 31, 2022 and 2021, respectively. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and our obligation under the SDSRA, which we discuss in Note 6.

CFIN

As we discuss in Note 6, in July 2020, Sempra entered into a Support Agreement for the benefit of CFIN, which is a VIE. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of CFIN, including modification, prepayment, and refinance decisions related to the financing arrangement with external lenders and Cameron LNG JV’s four project owners as well as the ability to determine and enforce remedies in the event of default. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 12). Sempra’s maximum exposure to loss under the terms of the Support Agreement is $979 million.

ECA LNG Phase 1

ECA LNG Phase 1 is a VIE because its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. We expect that ECA LNG Phase 1 will require future capital contributions or other financial support to finance the construction of the facility. Sempra is the primary beneficiary of this VIE because we have the power to direct the development activities related to the construction of the liquefaction facility, which we consider to be the most significant activities of ECA LNG Phase 1 during the construction phase of its natural gas liquefaction project. As a result, we consolidate ECA LNG Phase 1. Sempra consolidated $1,099 million and $632 million of assets at December 31, 2022 and 2021, respectively, consisting primarily of PP&E, net, and Accounts Receivable – Other attributable to ECA LNG Phase 1 that could be used only to settle obligations of this VIE and that are not available to settle obligations of Sempra, and $685 million and $455 million of liabilities at December 31, 2022 and 2021, respectively, consisting primarily of long-term debt, short-term debt and accounts payable attributable to ECA LNG Phase 1 for which creditors do not have recourse to the general credit of Sempra. Additionally, as we discuss in Note 7, IEnova and TotalEnergies SE have provided guarantees for 83.4% and 16.6%, respectively, of the loan facility supporting construction of the liquefaction facility.

ASSET RETIREMENT OBLIGATIONS

For tangible long-lived assets, we record AROs for the present value of liabilities of future costs expected to be incurred when assets are retired from service, if the retirement process is legally required and if a reasonable estimate of fair value can be made. We also record a liability if a legal obligation to perform an asset retirement exists and can be reasonably estimated, but performance is conditional upon a future event. We record the estimated retirement cost using the present value of the obligation at the time the asset is placed into service, and recognize that cost over the life of the related asset by depreciating the asset retirement cost and accreting the obligation until the liability is settled. Our rate-regulated entities record regulatory assets or liabilities as a result of the timing difference between the recognition of costs in accordance with U.S. GAAP and costs recovered through the rate-making process.

We have recorded AROs related to various assets, including:

SDG&E and SoCalGas

▪fuel and storage tanks

▪natural gas transmission and distribution systems

▪hazardous waste storage facilities

▪asbestos-containing construction materials

SDG&E

▪nuclear power facilities

▪electric transmission and distribution systems

▪energy storage systems

▪power generation plants

SoCalGas

▪underground natural gas storage facilities and wells

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Sempra Infrastructure

▪LNG facility

▪natural gas transportation and distribution systems

▪LPG terminal

▪refined products terminals

▪power generation plants

The changes in AROs are as follows:


CHANGES IN ASSET RETIREMENT OBLIGATIONS
(Dollars in millions)
	Sempra						SDG&E						SoCalGas
	2022		2021		2020		2022		2021		2020		2022		2021		2020
Balance as of January 1(1)	$	3,538	$	3,289	$	3,083	$	890	$	876	$	866	$	2,582	$	2,368	$	2,177
Accretion expense	141		133		127		37		38		39		101		92		86
Liabilities incurred and acquired	21		20		2		6		2		—		—		—		—
Payments	(57)		(63)		(63)		(54)		(60)		(60)		(3)		(3)		(2)
Revisions(2)	69		159		140		8		34		31		63		125		107
Balance at December 31(1)	$	3,712	$	3,538	$	3,289	$	887	$	890	$	876	$	2,743	$	2,582	$	2,368

(1) Current portion of the ARO for Sempra is included in Other Current Liabilities on the Consolidated Balance Sheets.

(2) SDG&E’s change in ARO in 2022 and 2021 includes $1 and $22, respectively, due to a revised estimate that is offset in noncurrent Regulatory Liabilities and Regulatory Assets, respectively, on the Consolidated Balance Sheets.

CONTINGENCIES

▪information available through the date we file our financial statements indicates it is probable that a loss has been incurred, given the likelihood of uncertain future events; and

▪the amount of the loss or a range of possible losses can be reasonably estimated.

We do not accrue contingencies that might result in gains. We continuously assess contingencies for litigation claims, environmental remediation and other events.

LEGAL FEES

Legal fees that are associated with a past event for which a liability has been recorded are accrued when it is probable that fees also will be incurred and amounts are estimable.

COMPREHENSIVE INCOME

Comprehensive income includes all changes in the equity of a business enterprise (except those resulting from investments by owners and distributions to owners), including:

▪foreign currency translation adjustments

▪certain hedging activities

▪changes in unamortized net actuarial gain or loss and prior service cost related to pension and PBOP plans

The Consolidated Statements of Comprehensive Income (Loss) show the changes in the components of OCI, including the amounts attributable to NCI. The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, excluding amounts attributable to NCI.

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CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
	Foreign currency translation adjustments		Financial instruments		Pension and PBOP		Total AOCI
Sempra(2):
Balance as of December 31, 2019	$	(607)	$	(215)	$	(117)	$	(939)
OCI before reclassifications(3)(4)	(102)		(163)		(26)		(291)
Amounts reclassified from AOCI(3)	645		47		38		730
Net OCI(4)	543		(116)		12		439
Balance as of December 31, 2020	(64)		(331)		(105)		(500)
OCI before reclassifications(4)	(34)		62		8		36
Amounts reclassified from AOCI(5)	19		113		14		146
Net OCI(4)(5)	(15)		175		22		182
Balance as of December 31, 2021	(79)		(156)		(83)		(318)
OCI before reclassifications	10		147		(11)		146
Amounts reclassified from AOCI(6)	10		19		8		37
Net OCI(6)	20		166		(3)		183
Balance as of December 31, 2022	$	(59)	$	10	$	(86)	$	(135)
SDG&E:
Balance as of December 31, 2019					$	(16)	$	(16)
OCI before reclassifications(3)					(4)		(4)
Amounts reclassified from AOCI(3)					10		10
Net OCI					6		6
Balance as of December 31, 2020					(10)		(10)
OCI before reclassifications					(1)		(1)
Amounts reclassified from AOCI					1		1
Net OCI					—		—
Balance as of December 31, 2021					(10)		(10)
OCI before reclassifications					2		2
Amounts reclassified from AOCI					1		1
Net OCI					3		3
Balance as of December 31, 2022					$	(7)	$	(7)
SoCalGas:
Balance as of December 31, 2019			$	(13)	$	(10)	$	(23)
OCI before reclassifications(3)			—		(10)		(10)
Amounts reclassified from AOCI(3)			—		2		2
Net OCI			—		(8)		(8)
Balance as of December 31, 2020			(13)		(18)		(31)
OCI before reclassifications			—		(2)		(2)
Amounts reclassified from AOCI			—		2		2
Net OCI			—		—		—
Balance as of December 31, 2021			(13)		(18)		(31)
OCI before reclassifications			—		4		4
Amounts reclassified from AOCI			1		2		3
Net OCI			1		6		7
Balance as of December 31, 2022			$	(12)	$	(12)	$	(24)

(1) All amounts are net of income tax, if subject to tax, and after NCI.

(2) Includes discontinued operations in 2020.

(3) Pension and PBOP and Total AOCI include $6 in transfers of liabilities from SDG&E to SoCalGas and $3 in transfers of liabilities from SDG&E to Sempra in 2020.

(4) Total AOCI includes $(28) of foreign currency translation adjustments and $(16) of financial instruments associated with the IEnova exchange and cash tender offers in 2021. Total AOCI includes $(4) of foreign currency translation adjustments and $(3) of financial instruments associated with IEnova’s repurchases of NCI in 2020. We discuss these transactions below in “Other Noncontrolling Interests – Sempra Infrastructure.” These transactions do not impact the Consolidated Statements of Comprehensive Income (Loss).

(5) Total AOCI includes $19 of foreign currency translation adjustments and $47 of financial instruments associated with the sale of NCI to KKR in 2021. We discuss this transaction below in “Other Noncontrolling Interests – Sempra Infrastructure.” This transaction does not impact the Consolidated Statement of Comprehensive Income (Loss).

(6) Total AOCI includes $9 of foreign currency translation adjustments associated with the sale of NCI to ADIA in 2022. We discuss this transaction below in “Other Noncontrolling Interests – Sempra Infrastructure.” This transaction does not impact the Consolidated Statement of Comprehensive Income (Loss).

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RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other comprehensive income (loss) components	Amounts reclassified from accumulated other comprehensive income (loss)						Affected line item on Consolidated Statements of Operations
	Years ended December 31,
	2022		2021		2020
Sempra:
Foreign currency translation adjustments	$	1	$	—	$	—	Operation and Maintenance
Foreign currency translation adjustments	—		—		645		Income from Discontinued Operations, Net of Income Tax
Total, net of income tax	$	1	$	—	$	645

Financial instruments:
Interest rate instruments	$	1	$	11	$	10	Interest Expense
Interest rate instruments	29		73		46		Equity Earnings(1)
Foreign exchange instruments	(1)		1		(1)		Revenues: Energy-Related Businesses
	1		—		—		Other Income (Expense), Net
Interest rate and foreign exchange instruments	(2)		1		1		Interest Expense
	(12)		6		11		Other Income (Expense), Net
Total, before income tax	16		92		67
	(6)		(24)		(19)		Income Tax Expense
Total, net of income tax	10		68		48
	9		(2)		(1)		Earnings Attributable to Noncontrolling Interests
Total, net of income tax and after NCI	$	19	$	66	$	47

Pension and PBOP(2):
Amortization of actuarial loss	$	7	$	8	$	8	Other Income (Expense), Net
Amortization of actuarial loss	—		—		6		Income from Discontinued Operations, Net of Income Tax
Amortization of prior service cost	4		4		4		Other Income (Expense), Net
Settlement charges	—		7		22		Other Income (Expense), Net
Total, before income tax	11		19		40
	—		—		(2)		Income from Discontinued Operations, Net of Income Tax
	(3)		(5)		(9)		Income Tax Expense
Total, net of income tax	$	8	$	14	$	29

Total reclassifications for the period, net of income tax and after NCI	$	28	$	80	$	721
SDG&E:
Pension and PBOP(2):
Amortization of actuarial loss	$	1	$	—	$	1	Other Income, Net
Amortization of prior service cost	—		1		1		Other Income, Net
Total, before income tax	1		1		2
	—		—		(1)		Income Tax Expense
Total reclassifications for the period, net of income tax	$	1	$	1	$	1
SoCalGas:
Financial instruments:
Interest rate instruments	$	1	$	—	$	—	Interest Expense
Pension and PBOP(2):
Amortization of actuarial loss	$	2	$	1	$	1	Other Expense, Net
Amortization of prior service cost	1		1		1		Other Expense, Net
Total, before income tax	3		2		2
	(1)		—		—		Income Tax Expense
Total, net of income tax	$	2	$	2	$	2

Total reclassifications for the period, net of income tax	$	3	$	2	$	2

(1) Equity earnings at our foreign equity method investees are recognized after tax.

(2) Amounts are included in the computation of net periodic benefit cost (see “Net Periodic Benefit Cost” in Note 9).

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NONCONTROLLING INTERESTS

Ownership interests in a consolidated entity that are held by unconsolidated owners are accounted for and reported as NCI.

SoCalGas Preferred Stock

The preferred stock at SoCalGas is presented at Sempra as NCI. Sempra records charges against income related to NCI for preferred dividends declared by SoCalGas. We provide additional information regarding SoCalGas’ preferred stock in Note 13.

Other Noncontrolling Interests

The following table provides information about NCI held by others in subsidiaries or entities consolidated by us and recorded in Other Noncontrolling Interests in Total Equity on Sempra’s Consolidated Balance Sheets.


OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
	Percent ownership held by noncontrolling interests				Equity held by noncontrolling interests
	December 31,				December 31,
	2022		2021		2022		2021
Sempra Infrastructure:
SI Partners	30.0	%	20.0	%	$	2,060	$	1,384
SI Partners subsidiaries(1)	0.1 - 16.6		0.1 - 16.6		61		34
Total Sempra					$	2,121	$	1,418

(1) SI Partners has subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.

Sempra Infrastructure

Sale of NCI in SI Partners to KKR. On October 1, 2021, Sempra, its wholly owned subsidiary, SI Partners (formerly Sempra Global), and KKR consummated the transactions contemplated under a purchase and contribution agreement dated April 4, 2021 (as amended prior to closing, the KKR Purchase Agreement). Pursuant to the KKR Purchase Agreement, KKR acquired newly designated Class A Units representing a 20% NCI in SI Partners for a purchase price of $3.4 billion, including post-closing adjustments. As a result of this sale, we recorded a $1.3 billion increase in equity held by NCI and an increase in Sempra’s shareholders’ equity of $1.4 billion, net of $173 million in transaction costs and $490 million in tax impacts, including the tax effect of the sale and changes to a deferred income tax liability related to outside basis differences in SI Partners. Transaction costs include $149 million paid to KKR for reimbursement of certain expenses that KKR incurred in connection with closing the transaction.

Prior to the closing of the transactions contemplated under the KKR Purchase Agreement on October 1, 2021, we completed an internal legal reorganization to consolidate the assets of Sempra LNG Holding, LP and our ownership of IEnova under Sempra Global, which was renamed SI Partners.

Pursuant to the KKR Purchase Agreement, we have agreed to indemnify SI Partners for, among other things, certain losses arising from liabilities of SI Partners and its subsidiaries to the extent not primarily relating to the undertaking of the business of SI Partners, and we have agreed to indemnify KKR for losses attributable to pre-closing taxes.

SI Partners has two authorized classes of units, designated as “Class A Units” (which are common voting units) and “Sole Risk Interests.” If KKR approves our request that a project not be pursued jointly, or if KKR decides not to participate in any proposed project for which we nevertheless desire to make a positive final investment decision, we may proceed with such project either independently through a different investment vehicle or as a “Sole Risk Project” within SI Partners and receive Sole Risk Interests in respect thereof. Sole Risk Projects are separated from other SI Partners projects and are conducted at our sole cost, expense and liability and we receive, through the acquisition of Sole Risk Interests, any economic and other benefits from such projects. KKR is not entitled to any benefits or rights in respect of any Sole Risk Project. The Guaymas-El Oro segment of the Sonora pipeline currently constitutes a Sole Risk Project. Until a specified date, KKR has certain discretionary rights to cause the Guaymas-El Oro segment of the Sonora pipeline to cease to be a Sole Risk Project and be pursued jointly within SI Partners.

At the closing of the sale of NCI in SI Partners to KKR, Sempra and KKR entered into a limited partnership agreement (the LP Agreement), which governs our and their respective rights and obligations in respect of our ownership interests in SI Partners. The LP Agreement contains certain default remedies if we or KKR fails to fund any amounts required to be funded under the LP Agreement. The LP Agreement also requires that SI Partners distribute to us and to KKR at least 85% of distributable cash of SI Partners and its subsidiaries on a quarterly basis, subject to certain exceptions and reserves. Generally, distributions from SI

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Partners are made to us and KKR on a pro rata basis in accordance with our and their respective ownership interests in SI Partners. However, KKR is entitled to certain priority distributions in the event of material deviations between certain specified projected cash flows and actual cash flows. Additionally, KKR is entitled to certain priority distributions in the event a specified project that reaches a positive final investment decision does not have projected internal rates of return over a specified threshold or in the event we have not made a positive final investment decision by a certain date on specified LNG projects that are currently in development.

In addition, under the LP Agreement, both parties are granted customary registration rights in the event of an initial public offering of SI Partners, which is subject to certain consent rights of KKR.

At the closing of the transactions contemplated under the KKR Purchase Agreement, SI Partners entered into a management agreement with Sempra to engage Sempra for certain staffing and general and administrative services. The management agreement governs the services that Sempra provides to SI Partners and the charges associated with those services.

Sale of NCI in SI Partners to ADIA. On June 1, 2022, Sempra and ADIA consummated the transaction contemplated under a purchase and sale agreement dated December 21, 2021 (the ADIA Purchase Agreement). Pursuant to the ADIA Purchase Agreement, ADIA acquired Class A Units representing a 10% NCI in SI Partners for a purchase price of $1.7 billion. Following the closing of the transaction, Sempra, KKR and ADIA directly or indirectly own 70%, 20%, and 10%, respectively, of the outstanding Class A Units of SI Partners, which excludes the non-voting Sole Risk Interests held only by Sempra. As a result of this sale to ADIA, we recorded a $709 million increase in equity held by NCI and an increase in Sempra’s shareholders’ equity of $710 million, net of $12 million in transaction costs and $300 million in tax impacts. Transaction costs include $10 million paid to ADIA for reimbursement of certain expenses that ADIA incurred in connection with closing the transaction.

At the closing of the sales of NCI in SI Partners to KKR and ADIA, SI Partners indirectly owned 99.9% of the outstanding shares of IEnova. To the extent we acquire additional shares of IEnova after each respective closing, such additional shares will be acquired by SI Partners, and KKR and ADIA will provide 20% and 10%, respectively, of the funding.

At the closing, KKR and ADIA (the Minority Partners) and Sempra entered into a second amended and restated agreement of limited partnership of SI Partners (the Amended LP Agreement), which governs their respective rights and obligations in respect of their ownership of SI Partners. Under the Amended LP Agreement, matters are decided generally by majority vote and the managers designated by Sempra, KKR and ADIA each, as a group, have voting power equivalent to the ownership percentage of their respective designating limited partner. Sempra maintains control of SI Partners. However, SI Partners and its controlled subsidiaries are prohibited from taking certain limited actions without the prior written approval of the Minority Partners (subject to each Minority Partner maintaining certain ownership thresholds in SI Partners). The minority protections held by ADIA constitute a subset of the minority protections granted to KKR.

The terms of the Amended LP Agreement applicable to ADIA in relation to capital contributions and distributions are generally consistent with those granted to KKR, with adjustments and limitations to take into account ADIA’s relative ownership percentage, including limiting ADIA’s priority distribution rights to the failure of certain proposed projects to receive a positive final investment decision by a certain date or to achieve specified thresholds of projected internal rates of return or leverage. The transfer rights and restrictions and registration rights in the Amended LP Agreement applicable to ADIA are also generally consistent with those granted to KKR, with adjustments and limitations to take into account ADIA’s relative ownership percentage, including a general restriction on ADIA transferring its interests in SI Partners to third parties (other than pursuant to certain specified permitted transfers) for a specified period following its entry into the Amended LP Agreement.

SI Partners Subsidiaries. In May 2021, we acquired 381,015,194 publicly owned shares of IEnova in exchange for 12,306,777 newly issued shares of our common stock upon completion of our exchange offer launched in the U.S. and Mexico, which increased our ownership interest in IEnova from 70.2% to 96.4%. Upon completing the exchange offer, Sempra’s common stock became listed on the Mexican Stock Exchange under the trading symbol SRE.MX. We acquired the IEnova shares at an exchange ratio of 0.0323 shares of our common stock for each one IEnova share. In connection with the exchange offer, we recorded a $1.4 billion decrease in equity held by NCI and an increase in Sempra’s shareholders’ equity of $1.4 billion, net of $12 million in transactions costs.

In September 2021, we acquired 51,014,545 publicly owned shares of IEnova for 4.0 billion Mexican pesos (approximately $202 million in U.S. dollars) in cash upon completion of our tender offer launched in the U.S. and Mexico in August 2021, which increased our ownership interest in IEnova from 96.4% to 99.9%. We acquired these IEnova shares at a price of 78.97 Mexican pesos per share (approximately $3.95 per share in U.S. dollars). In connection with the cash tender offer, we recorded a $188 million decrease in equity held by NCI and a decrease in Sempra’s shareholders’ equity of $17 million, including $4 million in transaction costs.

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As a result of the increase in our ownership interest in IEnova, we recorded an increase in Sempra’s shareholders’ equity of $72 million offset by a deferred income tax asset related to the outside basis difference in IEnova’s shares. Upon completing the sale of a 20% NCI in SI Partners to KKR in October 2021, which we discuss above, we recorded $72 million in net income tax expense related to the utilization of this deferred income tax asset.

Following the exchange offer and the cash tender offer, IEnova’s shares were delisted from the Mexican Stock Exchange effective October 15, 2021. In connection with the delisting, we are maintaining a trust for the purpose of purchasing the 1,212,981 IEnova shares that remained publicly owned as of the completion of the cash tender offer for 78.97 Mexican pesos per share, the same price per share that was offered in our cash tender offer. The trust was to be in place through the earlier of April 14, 2022 or the date on which we acquired all the remaining publicly owned IEnova shares. On April 13, 2022, the term of the trust was amended so that it will remain in place until we terminate it, subject to any maximum term under applicable Mexican law. As of February 21, 2023, an aggregate of 890,170 of the remaining publicly owned IEnova shares had been acquired by such trust.

In 2020, IEnova repurchased 77,122,780 shares of its outstanding common stock held by NCI for approximately $231 million, resulting in an increase in Sempra’s ownership interest in IEnova from 66.6% to 70.2%.

In 2020, Sempra Infrastructure purchased additional shares in ICM Ventures Holdings B.V. for $9 million, increasing its ownership interest from 53.7% to 82.5%. ICM Ventures Holdings B.V. owns certain permits and land where Sempra Infrastructure is developing a terminal in the vicinity of Manzanillo for the receipt, storage and delivery of refined products. In July 2021, Sempra Infrastructure acquired the remaining 17.5% interest held by NCI in ICM Ventures Holdings B.V. for $7 million.

In 2020, an affiliate of TotalEnergies SE acquired a 16.6% ownership interest in ECA LNG Phase 1.

In 2020, Sempra Infrastructure purchased for $7 million the 24.6% minority interest in Liberty Gas Storage LLC, increasing Sempra Infrastructure’s ownership in Liberty Gas Storage LLC to 100%. Prior to the purchase, the minority partner converted $22 million in notes payable due from Sempra Infrastructure to equity. As a result of the purchase, we recorded an increase in Sempra’s shareholders’ equity of $2 million for the difference between the carrying value and fair value related to the change in ownership.

Parent and Other

As we discuss in Note 5, in December 2021, Parent and other sold its equity interest in PXiSE.

Discontinued Operations

As we discuss in Note 5, we completed the sales of our equity interests in our Peruvian and Chilean businesses in 2020. The minority interests in Luz del Sur and Tecsur were deconsolidated upon the sale of our Peruvian businesses in April 2020, and the minority interests in Chilquinta Energía and its subsidiaries were deconsolidated upon the sale of our Chilean businesses in June 2020.

REVENUES

See Note 3 for a description of significant accounting policies for revenues.

OPERATION AND MAINTENANCE EXPENSES

Operation and Maintenance includes O&M and general and administrative costs, consisting primarily of personnel costs, purchased materials and services, insurance, rent and litigation expense (except for litigation expense included in Aliso Canyon Litigation and Regulatory Matters).

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

Our natural gas distribution utility in Mexico, Ecogas, and the majority of our former operations in South America (until our sale of these operations in 2020) use their local currency as their functional currency. The assets and liabilities of their foreign operations are translated into U.S. dollars at current exchange rates at the end of the reporting period, and revenues and expenses are translated at average exchange rates for the year. The resulting noncash translation adjustments do not enter into the calculation of earnings or retained earnings, but are reflected in OCI and in AOCI.

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Cash flows of these consolidated foreign subsidiaries are translated into U.S. dollars using average exchange rates for the period. We report the effect of exchange rate changes on cash balances held in foreign currencies in Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash on Sempra’s Consolidated Statements of Cash Flows.

Foreign currency transaction losses in a currency other than Sempra Infrastructure’s functional currency were $24 million, $18 million and $25 million for the years ended December 31, 2022, 2021 and 2020, respectively, and are included in Other Income (Expense), Net, on Sempra’s Consolidated Statements of Operations. Foreign currency transaction gains (losses) in a currency other than the functional currencies of our operations in South America are included in discontinued operations.

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TRANSACTIONS WITH AFFILIATES

We summarize amounts due from and to unconsolidated affiliates at Sempra, SDG&E and SoCalGas in the following table.


AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	December 31,
	2022		2021
Sempra:
Tax sharing arrangement with Oncor Holdings	$	41	$	18
Various affiliates	13		5
Total due from unconsolidated affiliates – current	$	54	$	23

Sempra Infrastructure – IMG – Note due March 15, 2022, net of allowance for credit losses of $1 at December 31, 2021(1)	$	—	$	637
Total due from unconsolidated affiliates – noncurrent	$	—	$	637



Sempra Infrastructure(2):
TAG Pipelines Norte, S. de R.L. de C.V.:
5.5% Note due January 9, 2024	$	(40)	$	(69)
5.5% Note due January 14, 2025	(23)		(21)
5.5% Note due July 16, 2025	(21)		(20)
5.5% Note due January 14, 2026	(19)		—
5.5% Note due July 14, 2026	(11)		—
TAG – 5.74% Note due December 17, 2029	(187)		(177)
Total due to unconsolidated affiliates – noncurrent	$	(301)	$	(287)
SDG&E:


Sempra	$	(49)	$	(40)
SoCalGas	(72)		(48)
Various affiliates	(14)		(9)
Total due to unconsolidated affiliates – current	$	(135)	$	(97)

Income taxes due from Sempra(3)	$	10	$	19
SoCalGas:
SDG&E	$	72	$	48
Various affiliates	5		1
Total due from unconsolidated affiliates – current	$	77	$	49

Sempra	$	(36)	$	(36)


Total due to unconsolidated affiliates – current	$	(36)	$	(36)

Income taxes due (to) from Sempra(3)	$	(16)	$	6

(1) At December 31, 2021, represents a Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $691 U.S. dollar-equivalent at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps (8.06% at December 31, 2021). At December 31, 2021, $2 of accrued interest receivable is included in Due from Unconsolidated Affiliates – Current. In March 2022, Sempra Infrastructure amended and restated the revolving line of credit to a U.S. dollar-denominated note in the amount of $625 at a variable interest rate based on the adjusted 1-month SOFR plus 180 bps and extended the maturity date to March 15, 2023. In July 2022, this note receivable was paid in full.

(2) U.S. dollar-denominated loans at fixed interest rates. Amounts include principal balances plus accumulated interest outstanding.

(3) SDG&E and SoCalGas are included in the consolidated income tax return of Sempra, and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return. Amounts include current and noncurrent income taxes due to/from Sempra.

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The following table summarizes income statement information from unconsolidated affiliates.


INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra:
Revenues	$	41	$	31	$	37
Cost of sales	—		11		45
Interest income	16		50		56
Interest expense	15		15		14
SDG&E:
Revenues	$	16	$	11	$	6
Cost of sales	92		103		79
SoCalGas:
Revenues	$	100	$	98	$	88
Cost of sales(1)	(9)		1		—

(1) Includes net commodity costs from natural gas transactions with unconsolidated affiliates.

Sempra California

Sempra, SDG&E and SoCalGas provide certain services to each other and are charged an allocable share of the cost of such services. Also, from time-to-time, SDG&E and SoCalGas may make short-term advances of surplus cash to Sempra at interest rates based on the federal funds effective rate plus a margin of 13 to 20 bps, depending on the loan balance.

SoCalGas provides natural gas transportation and storage services to SDG&E and charges SDG&E for such services monthly. SoCalGas records revenues and SDG&E records a corresponding amount to cost of sales.

SDG&E and SoCalGas charge one another, as well as other Sempra affiliates, for shared asset depreciation. SoCalGas and SDG&E record revenues and the affiliates record corresponding amounts to O&M.

The natural gas supply for SDG&E’s and SoCalGas’ core natural gas customers is purchased by SoCalGas as a combined procurement portfolio managed by SoCalGas. Core customers are primarily residential and small commercial and industrial customers. This core gas procurement function is considered a shared service; therefore, revenues and costs related to SDG&E are presented net in SoCalGas’ Statements of Operations.

SDG&E has a 20-year contract for up to 155 MW of renewable power supplied from the ESJ wind power generation facility. Prior to March 2021, ESJ was a 50% owned and unconsolidated JV of Sempra Infrastructure. In March 2021, Sempra Infrastructure completed the acquisition of the remaining 50% interest in ESJ and ESJ became a consolidated subsidiary of Sempra. A second 20-year contract between SDG&E and ESJ for up to 108 MW of renewable power supplied from the same facility commenced in January 2022.

Sempra Infrastructure

Sempra Infrastructure provides maintenance and administrative services to TAG Pipelines Norte, S. de. R.L. de C.V. Additionally, Sempra Infrastructure subleases office space for personnel to TAG Pipelines Norte, S. de. R.L. de C.V. and TAG.

Sempra Infrastructure has agreements with Cameron LNG JV to provide certain business services and project development services related to the Cameron LNG Phase 2 project. Sempra Infrastructure had an agreement to provide transportation services to Cameron LNG JV for capacity on the Cameron Interstate Pipeline through August 2020, when Cameron LNG JV achieved commercial operations of Train 3 of its Phase 1 project.

Sempra provided guarantees related to Cameron LNG JV’s construction-period debt that were terminated in March 2021, as well as guarantees related to Cameron LNG JV’s SDSRA and CFIN’s Support Agreement that remain outstanding. We discuss these guarantees in Note 6.

RESTRICTED NET ASSETS

Sempra

As we discuss below, SDG&E, SoCalGas and certain other Sempra subsidiaries have restrictions on the amount of funds that can be transferred to Sempra by dividend, advance or loan as a result of conditions imposed by various regulators. Additionally,

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certain other Sempra subsidiaries are subject to various financial and other covenants and other restrictions contained in debt and credit agreements (described in Note 7) and in other agreements that limit the amount of funds that can be transferred to Sempra. At December 31, 2022, Sempra was in compliance with all covenants related to its debt agreements.

At December 31, 2022, the amount of restricted net assets of consolidated entities of Sempra, including SDG&E and SoCalGas discussed below, that may not be distributed to Sempra in the form of a loan or dividend is $15.3 billion. Additionally, the amount of restricted net assets of our unconsolidated entities is $14.0 billion. Although the restrictions cap the amount of funding that the various operating subsidiaries can provide to Sempra, we do not believe these restrictions will have a significant impact on our ability to access cash to pay dividends and fund operating needs.

As we discuss in Note 6, $2.0 billion of Sempra’s retained earnings represents undistributed earnings of equity method investments at December 31, 2022.

Sempra California

The CPUC’s regulation of SDG&E’s and SoCalGas’ capital structures limits the amounts available for dividends and loans to Sempra. At December 31, 2022, Sempra could have received combined loans and dividends of approximately $504 million from SDG&E and approximately $347 million from SoCalGas.

The payment and amount of future dividends by SDG&E and SoCalGas are at the discretion of their respective boards of directors. The following restrictions limit the amount of retained earnings that may be paid as common stock dividends or loaned to Sempra from either utility:

▪The CPUC requires that SDG&E’s and SoCalGas’ common equity ratios be no lower than one percentage point below the CPUC-authorized percentage of each entity’s authorized capital structure. The authorized percentage at December 31, 2022 is 52% at both SDG&E and SoCalGas.

▪SDG&E and SoCalGas each have a revolving credit line that requires it to maintain a ratio of consolidated indebtedness to consolidated capitalization (as defined in the agreements) of no more than 65%, as we discuss in Note 7.

Based on these restrictions, at December 31, 2022, SDG&E’s restricted net assets were $8.6 billion and SoCalGas’ restricted net assets were $6.4 billion, which could not be transferred to Sempra.

Sempra Texas Utilities

Sempra owns an indirect, 100% interest in Oncor Holdings, which owns an 80.25% interest in Oncor. As we discuss in Note 6, we account for our investment in Oncor Holdings under the equity method. Significant restrictions at Oncor that limit the amount that may be paid as dividends to Sempra include:

▪In connection with ring-fencing measures, governance mechanisms and commitments, Oncor may not pay any dividends or make any other distributions (except for contractual tax payments) if a majority of its independent directors or a minority member director determines that it is in the best interests of Oncor to retain such amounts to meet expected future requirements.

▪Oncor must remain in compliance with its debt-to-equity ratio established by the PUCT for ratemaking purposes and may not pay dividends or other distributions (except for contractual tax payments) if that payment would cause it to exceed its PUCT authorized debt-to-equity ratio. Oncor’s authorized regulatory capital structure is 57.5% debt to 42.5% equity at December 31, 2022.

▪If the credit rating on Oncor’s senior secured debt by any of the Rating Agencies falls below BBB (or the equivalent), Oncor will suspend dividends and other distributions (except for contractual tax payments), unless otherwise allowed by the PUCT. At December 31, 2022, all of Oncor’s senior secured ratings were above BBB.

▪Oncor’s revolving credit line and certain of its other debt agreements require it to maintain a consolidated senior debt-to-capitalization ratio of no more than 65% and observe certain affirmative covenants. At December 31, 2022, Oncor was in compliance with these covenants.

Based on these restrictions, at December 31, 2022, Oncor’s restricted net assets were $13.5 billion, which could not be transferred to its owners.

Sempra owns an indirect, 50% interest in Sharyland Holdings, which owns a 100% interest in Sharyland Utilities. Significant restrictions related to this equity method investment include:

▪Sharyland Utilities may not pay dividends or make other distributions (except for contractual payments) without the consent of the JV partner.

▪Sharyland Utilities must remain in compliance with the capital structure established by the PUCT for ratemaking purposes and may not pay dividends or other distributions (except for contractual tax payments) if that payment would cause its debt to exceed 60% of its capital structure.

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▪Sharyland Utilities has a revolving credit line and a term loan credit agreement that require it to maintain a consolidated debt-to-capitalization ratio of no more than 70% and observe certain customary reporting requirements and other affirmative covenants. At December 31, 2022, Sharyland Utilities was in compliance with these and all other covenants.

Based on these restrictions, at December 31, 2022, Sharyland Utilities’ restricted net assets were $105 million, which could not be transferred to its owners.

Sempra Infrastructure

Significant restrictions at Sempra Infrastructure include:

▪Partnerships and JVs at Sempra Infrastructure may not pay dividends or make other distributions (except for contractual payments) without the consent of the partners.

▪Sempra Infrastructure has an equity method investment in Cameron LNG JV, which has debt agreements that require the establishment and funding of project accounts to which the proceeds of loans, project revenues and other amounts are deposited and applied in accordance with the debt agreements. The debt agreements require the JV to maintain reserve accounts in order to pay the project debt service, and also contain restrictions related to the payment of dividends and other distributions to the members of the JV.

Pursuant to the transfer restriction agreement under the debt agreements, Sempra must retain at least 10% of the indirect fully diluted economic and beneficial ownership interest in Cameron LNG JV. In addition, at all times, a Sempra controlled (but not necessarily wholly owned) subsidiary must directly own 50.2% of the membership interests of Cameron LNG JV.

To support Cameron LNG JV’s obligations under its debt agreements, Cameron LNG JV has granted security over all of its assets, subject to customary exceptions, and all equity interests in Cameron LNG JV were pledged to HSBC Bank USA, National Association, as security trustee for the benefit of all of Cameron LNG JV’s creditors. As a result, an enforcement action by the lenders taken in accordance with the finance documents could result in the exercise of such security interests by the lenders and the loss of ownership interests in Cameron LNG JV by Sempra and the other project partners.

Under these restrictions, net assets of Cameron LNG JV of approximately $396 million are restricted at December 31, 2022.

▪Mexico requires domestic corporations to maintain minimum legal reserves as a percentage of capital stock, resulting in restricted net assets of $239 million at Sempra Infrastructure’s consolidated Mexican subsidiaries at December 31, 2022.

▪IEnova has restrictions under trust and debt agreements related to pipeline projects to pay for rights-of-way, license fees, permits, topographic surveys and other costs. Under these restrictions, net assets totaling $2 million are restricted at December 31, 2022.

▪TAG, a 50% owned and unconsolidated JV of Sempra Infrastructure, has a long-term debt agreement that requires it to maintain a reserve account to pay the projects’ debt. Under these restrictions, net assets totaling $64 million are restricted at December 31, 2022.

▪As we discuss in Note 16, Sempra Infrastructure drew against and fully exhausted Gazprom’s letters of credit in April 2022 due to Gazprom’s non-renewal of such letters of credit as required under its LNG storage and regasification agreement. As a result, Sempra Infrastructure has restricted cash for funds drawn from the letters of credit. Under these restrictions, net assets totaling $89 million are restricted at December 31, 2022.

Based on these restrictions, at December 31, 2022, Sempra Infrastructure’s restricted net assets of its consolidated and unconsolidated entities were $330 million and $460 million, respectively, which could not be transferred to its owners.

OTHER INCOME (EXPENSE), NET

Other Income (Expense), Net on the Consolidated Statements of Operations consists of the following:

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OTHER INCOME (EXPENSE), NET
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra:
Allowance for equity funds used during construction	$	143	$	133	$	128
Investment (losses) gains, net(1)	(42)		50		41
Gains (losses) on interest rate and foreign exchange instruments, net	11		(28)		(67)
Foreign currency transaction losses, net(2)	(24)		(18)		(25)
Non-service component of net periodic benefit cost	(59)		(67)		(102)
Interest on regulatory balancing accounts, net	26		6		14
Sundry, net	(31)		(18)		(37)
Total	$	24	$	58	$	(48)
SDG&E:
Allowance for equity funds used during construction	$	88	$	81	$	79
Non-service component of net periodic benefit cost	(11)		(13)		(20)
Interest on regulatory balancing accounts, net	18		6		9
Sundry, net	(3)		(10)		(16)
Total	$	92	$	64	$	52
SoCalGas:
Allowance for equity funds used during construction	$	55	$	48	$	41
Non-service component of net periodic benefit cost	(42)		(40)		(54)
Interest on regulatory balancing accounts, net	8		—		5
Sundry, net	(29)		(22)		(20)
Total	$	(8)	$	(14)	$	(28)

(1) Represents net investment (losses) gains on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Consolidated Statements of Operations.

(2) Includes losses of $11, $23 and $42 in 2022, 2021 and 2020, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to IMG, which are offset by corresponding amounts included in Equity Earnings on the Consolidated Statements of Operations.

NOTE 2. NEW ACCOUNTING STANDARDS

We describe below recent accounting pronouncements that have had or may have a significant effect on our results of operations, financial condition, cash flows or disclosures.

ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”: ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. In addition to other changes, this standard amends ASC 470-20, “Debt with Conversion and Other Options,” by removing the accounting models for instruments with beneficial and cash conversion features. The standard also amends certain guidance in ASC 260, “Earnings Per Share,” for the computation of EPS for convertible instruments and contracts on an entity’s own equity. For public entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. An entity can use either a full or modified retrospective approach to adopt ASU 2020-06 and must disclose, in the period of adoption, EPS transition information about the effect of the change on affected per-share amounts. We adopted the standard on January 1, 2022 using a modified retrospective approach and the adoption did not materially impact our financial statements or per-share amounts.

ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU 2022-06, “Deferral of the Sunset Date of Topic 848”: ASU 2022-06 extends the time when entities can utilize the reference rate reform relief provided by ASU 2020-04 from December 31, 2022 to December 31, 2024. Under ASU 2020-04, we elected to apply certain optional expedients for contract modifications to financial instruments that were impacted by the discontinuance of LIBOR. We will continue to apply various optional expedients for contract modifications for our financial instruments affected by the reference rate reform through December 31, 2024 as extended by ASU 2022-06. The application of these practical expedients does not impact our financial statements.

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NOTE 3. REVENUES

The following table disaggregates our revenues from contracts with customers by major service line and market and provides a reconciliation to total revenues by segment. The majority of our revenue is recognized over time.


DISAGGREGATED REVENUES
(Dollars in millions)
	SDG&E		SoCalGas		Sempra Infrastructure		Consolidating adjustments and Parent and other		Sempra
	Year ended December 31, 2022
By major service line:
Utilities	$	5,586	$	6,459	$	89	$	(116)	$	12,018
Energy-related businesses	—		—		1,760		(56)		1,704
Revenues from contracts with customers	$	5,586	$	6,459	$	1,849	$	(172)	$	13,722
By market:
Gas	$	899	$	6,459	$	1,270	$	(103)	$	8,525
Electric	4,687		—		579		(69)		5,197
Revenues from contracts with customers	$	5,586	$	6,459	$	1,849	$	(172)	$	13,722

Revenues from contracts with customers	$	5,586	$	6,459	$	1,849	$	(172)	$	13,722
Utilities regulatory revenues	252		381		—		—		633
Other revenues	—		—		70		14		84
Total revenues	$	5,838	$	6,840	$	1,919	$	(158)	$	14,439

	Year ended December 31, 2021
By major service line:
Utilities	$	5,144	$	5,424	$	81	$	(109)	$	10,540
Energy-related businesses	—		—		1,165		(29)		1,136
Revenues from contracts with customers	$	5,144	$	5,424	$	1,246	$	(138)	$	11,676
By market:
Gas	$	790	$	5,424	$	856	$	(101)	$	6,969
Electric	4,354		—		390		(37)		4,707
Revenues from contracts with customers	$	5,144	$	5,424	$	1,246	$	(138)	$	11,676

Revenues from contracts with customers	$	5,144	$	5,424	$	1,246	$	(138)	$	11,676
Utilities regulatory revenues	360		91		—		—		451
Other revenues	—		—		751		(21)		730
Total revenues	$	5,504	$	5,515	$	1,997	$	(159)	$	12,857

	Year ended December 31, 2020
By major service line:
Utilities	$	4,920	$	4,571	$	58	$	(94)	$	9,455
Energy-related businesses	—		—		854		1		855
Revenues from contracts with customers	$	4,920	$	4,571	$	912	$	(93)	$	10,310
By market:
Gas	$	692	$	4,571	$	623	$	(90)	$	5,796
Electric	4,228		—		289		(3)		4,514
Revenues from contracts with customers	$	4,920	$	4,571	$	912	$	(93)	$	10,310

Revenues from contracts with customers	$	4,920	$	4,571	$	912	$	(93)	$	10,310
Utilities regulatory revenues	393		177		—		—		570
Other revenues	—		—		488		2		490
Total revenues	$	5,313	$	4,748	$	1,400	$	(91)	$	11,370

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REVENUES FROM CONTRACTS WITH CUSTOMERS

Revenues from contracts with customers are primarily related to the transmission, distribution and storage of natural gas and the generation, transmission and distribution of electricity through our regulated utilities. We also provide other midstream and renewable energy-related services. We assess our revenues on a contract-by-contract basis as well as a portfolio basis to determine the nature, amount, timing and uncertainty, if any, of revenues being recognized.

We generally recognize revenues when performance of the promised commodity service is provided to customers and invoices are issued for an amount that reflects the consideration we are entitled to in exchange for those services. We consider the delivery and transmission of natural gas and electricity and providing of natural gas storage services as ongoing and integrated services. Generally, natural gas or electricity services are received and consumed by the customer simultaneously. Performance obligations related to these services are satisfied over time and represent a series of distinct services that are substantially the same and that have the same pattern of transfer to the customers. We recognize revenue based on units delivered, as the satisfaction of respective performance obligations can be directly measured by the amount of natural gas or electricity delivered to the customer. In most cases, the right to consideration from the customer directly corresponds to the value transferred to the customer and we recognize revenue in the amount that we have the right to invoice.

The payment terms in customer contracts vary. Typically, we have an unconditional right to customer payments, which are due after the performance obligation to the customer is satisfied. The term between invoicing and when payment is due is typically between 10 and 90 days.

We exclude sales and usage-based taxes from revenues. In addition, SDG&E and SoCalGas pay franchise fees to operate in various municipalities. SDG&E and SoCalGas bill these franchise fees to their customers based on a CPUC-authorized rate. These franchise fees, which are required to be paid regardless of SDG&E’s and SoCalGas’ ability to collect from the customer, are accounted for on a gross basis and reflected in utilities revenues from contracts with customers and operating expense.

Utilities Revenues

Utilities revenues represent the majority of our consolidated revenues from contracts with customers and include:

▪The transmission, distribution and storage of natural gas at:

◦SDG&E

◦SoCalGas

◦Sempra Infrastructure’s Ecogas

▪The generation, transmission and distribution of electricity at SDG&E.

Utilities revenues are derived from and recognized upon the delivery of natural gas or electricity services to customers. Amounts that we bill customers are based on tariffs set by regulators within the respective state or country. For SDG&E and SoCalGas, which follow the provisions of U.S. GAAP governing rate-regulated operations as we discuss in Note 1, amounts that we bill to customers also include adjustments for previously recognized regulatory revenues.

SDG&E, SoCalGas and Ecogas recognize revenues based on regulator-approved revenue requirements, which allow the utilities to recover their reasonable operating costs and provides the opportunity to realize their authorized rates of return on their investments. While SDG&E’s and SoCalGas’ revenues are not affected by actual sales volumes, the pattern of their revenue recognition during the year is affected by seasonality. SDG&E and SoCalGas recognize annual authorized revenue for customers using seasonal factors established in applicable proceedings. This generally results in a significant portion of operating revenues being recognized in the third quarter of each year for SDG&E and in the first and fourth quarters of each year for SoCalGas.

SDG&E has an arrangement to provide the California ISO with the ability to control its high-voltage transmission lines for prices approved by the FERC. Revenue is recognized over time as access is provided to the California ISO.

Factors that can affect the amount, timing and uncertainty of revenues and cash flows include weather, seasonality and timing of customer billings, which may result in unbilled revenues that can vary significantly from month to month and generally approximate one-half month’s deliveries.

SDG&E and SoCalGas recognize revenues from the sale of allocated California GHG emission allowances at quarterly auctions administered by CARB. GHG allowances are delivered to CARB in advance of the quarterly auctions, and SDG&E and SoCalGas have the right to payment when the GHG allowances are sold at auction. GHG revenue is recognized on a point in time basis within the quarter the auction is held. SDG&E and SoCalGas balance costs and revenues associated with the GHG program through regulatory balancing accounts.

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Energy-Related Businesses Revenues

Revenues at Sempra Infrastructure typically represent revenues from long-term, U.S. dollar-based contracts with customers for the sale of natural gas and LNG, as well as storage and transportation of natural gas. Invoiced amounts are based on the volume of natural gas delivered and contracted prices.

We recognize storage revenue from firm capacity reservation agreements, under which we collect a fee for reserving storage capacity for customers in our storage facilities. Under these firm agreements, customers pay a monthly fixed reservation fee based on the storage capacity reserved rather than the actual volumes stored. For the fixed-fee component, revenue is recognized on a straight-line basis over the term of the contract. We bill customers for any capacity used in excess of the contracted capacity and such revenues are recognized in the month of occurrence. We also recognize revenue for interruptible storage services.

We generate pipeline transportation revenues from firm agreements, under which customers pay a fee for reserving transportation capacity. Revenue is recognized when the volumes are delivered to the customers’ agreed upon delivery point. We recognize revenues for our stand-ready obligation to provide capacity and transportation services throughout the contractual delivery period, as the benefits are received and consumed simultaneously as customers utilize pipeline capacity for the transport and receipt of natural gas and LPG. Invoiced amounts are based on a variable usage fee and a fixed capacity charge, adjusted for the Consumer Price Index, the effects of any foreign currency impacts and the actual quantity of commodity transported.

Sempra Infrastructure develops, invests in and operates solar and wind facilities that have long-term PPAs to sell the electricity and the related green energy attributes they generate to customers, generally load serving entities, industrial and other customers. Load serving entities will sell electric service to their end-users and wholesale customers immediately upon receipt of our power delivery, and industrial and other customers immediately consume the electricity to run their facilities, and thus, we recognize the revenue under the PPAs as the electricity is generated and delivered. We invoice customers based on the volume of energy delivered at rates pursuant to the PPAs.

TdM is a natural gas-fired power plant that generates revenues from selling electricity and/or resource adequacy to the California ISO and to governmental, public utility and wholesale power marketing entities, as the power is delivered at the interconnection point.

Sempra Infrastructure sells natural gas to the CFE and other customers under supply agreements. Sempra Infrastructure recognizes the revenue from the sale of natural gas upon transfer of the natural gas via pipelines to customers at the agreed upon delivery points, and in the case of the CFE, at its thermoelectric power plants.

Remaining Performance Obligations

We do not disclose information about remaining performance obligations for (a) contracts with an original expected length of one year or less, (b) variable consideration recognized at the amount at which we have the right to invoice for services performed, or (c) variable consideration allocated to wholly unsatisfied performance obligations.

For contracts greater than one year, at December 31, 2022, we expect to recognize revenue related to the fixed fee component of the consideration as shown below. Sempra’s remaining performance obligations primarily relate to capacity agreements for natural gas storage and transportation at Sempra Infrastructure and transmission line projects at SDG&E. SoCalGas did not have any remaining performance obligations at December 31, 2022.


REMAINING PERFORMANCE OBLIGATIONS(1)
(Dollars in millions)
	Sempra		SDG&E
2023	$	396	$	4
2024	361		4
2025	359		4
2026	358		4
2027	355		4
Thereafter	4,134		60
Total revenues to be recognized	$	5,963	$	80

(1) Excludes intercompany transactions.

Contract Liabilities from Revenues from Contracts with Customers

From time to time, we receive payments in advance of satisfying the performance obligations associated with customer contracts. We defer such revenues as contract liabilities and recognize them in earnings as the performance obligations are satisfied.

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Activities within Sempra’s and SDG&E’s contract liabilities are presented below. There were no contract liabilities at SoCalGas in 2022, 2021 or 2020. As we discuss in Note 16, Sempra Infrastructure drew against and fully exhausted Gazprom’s letters of credit in April 2022 due to Gazprom’s non-renewal of such letters of credit as required under its LNG storage and regasification agreement. Sempra Infrastructure recorded a contract liability for the funds drawn from the letters of credit as payments received in advance. Gazprom did not pay its invoices from March 2022 through July 2022, so funds drawn from the letters of credit were used to fully offset such nonpayment, which have been reflected as revenue from performance obligations satisfied during the reporting period.


CONTRACT LIABILITIES
(Dollars in millions)
	2022		2021		2020
Sempra:
Contract liabilities at January 1	$	(278)	$	(207)	$	(163)
Revenue from performance obligations satisfied during reporting period	131		52		4
Payments received in advance	(105)		(123)		(48)
Contract liabilities at December 31(1)	$	(252)	$	(278)	$	(207)
SDG&E:
Contract liabilities at January 1	$	(83)	$	(87)	$	(91)
Revenue from performance obligations satisfied during reporting period	4		4		4
Contract liabilities at December 31(2)	$	(79)	$	(83)	$	(87)

(1) Balances at December 31, 2022, 2021 and 2020 include $45, $116 and $52, respectively, in Other Current Liabilities and $207, $162 and $155, respectively, in Deferred Credits and Other.

(2) Balances at December 31, 2022, 2021 and 2020 include $4 in Other Current Liabilities and $75, $79 and $83, respectively, in Deferred Credits and Other.

Receivables from Revenues from Contracts with Customers

The table below shows receivable balances associated with revenues from contracts with customers on the Consolidated Balance Sheets.


RECEIVABLES FROM REVENUES FROM CONTRACTS WITH CUSTOMERS
(Dollars in millions)
	December 31,
	2022		2021
Sempra:
Accounts receivable – trade, net(1)	$	2,291	$	1,886
Accounts receivable – other, net	25		19
Due from unconsolidated affiliates – current(2)	9		2
Other long-term assets(3)	9		70
Total	$	2,334	$	1,977
SDG&E:
Accounts receivable – trade, net(1)	$	799	$	715
Accounts receivable – other, net	12		9
Due from unconsolidated affiliates – current(2)	2		2
Other long-term assets(3)	6		25
Total	$	819	$	751
SoCalGas:
Accounts receivable – trade, net	$	1,295	$	1,084
Accounts receivable – other, net	13		10
Other long-term assets(3)	3		45
Total	$	1,311	$	1,139

(1) At December 31, 2022 and 2021, includes $72 and $24, respectively, of receivables due from customers that were billed on behalf of CCAs, which are not included in revenues.

(2) Amount is presented net of amounts due to unconsolidated affiliates on the Consolidated Balance Sheets, when right of offset exists.

(3) In connection with the COVID-19 pandemic and at the direction of the CPUC, SDG&E and SoCalGas enrolled residential and small business customers with past-due balances in long-term repayment plans.

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REVENUES FROM SOURCES OTHER THAN CONTRACTS WITH CUSTOMERS

Certain of our revenues are derived from sources other than contracts with customers and are accounted for under other accounting standards outside the scope of ASC 606.

Utilities Regulatory Revenues

Alternative Revenue Programs

We recognize revenues from alternative revenue programs when the regulator-specified conditions for recognition have been met and adjust these revenues as they are recovered or refunded through future utility service.

Decoupled Revenues. As we discuss above, the regulatory framework requires SDG&E and SoCalGas to recover authorized revenue based on estimated annual demand forecasts approved in regular proceedings before the CPUC. However, actual demand for natural gas and electricity will generally vary from CPUC-approved forecasted demand due to the impacts from weather volatility, energy efficiency programs, rooftop solar and other factors affecting consumption. The CPUC regulatory framework provides for SDG&E and SoCalGas to use a “decoupling” mechanism, which allows SDG&E and SoCalGas to record revenue shortfalls or excess revenues resulting from any difference between actual and forecasted demand to be recovered or refunded in authorized revenue in a subsequent period based on the nature of the account.

Incentive Mechanisms. The CPUC applies performance-based measures and incentive mechanisms to all California IOUs, under which SDG&E and SoCalGas have earnings potential above authorized base margins if they achieve or exceed specific performance and operating goals. Generally, for performance-based awards, if performance is above or below specific benchmarks, the utility is eligible for financial awards or subject to financial penalties.

Incentive awards are included in revenues when we receive required CPUC approval of the award, the timing of which may not be consistent from year to year. We would record penalties for results below the specified benchmarks against revenues when we believe it is probable that the CPUC would assess a penalty.

Other Cost-Based Regulatory Recovery

The CPUC, and the FERC as it relates to SDG&E, authorize SDG&E and SoCalGas to collect revenue requirements for operating costs and capital related costs (depreciation, taxes and return on rate base) from customers, including:

▪costs to purchase natural gas and electricity;

▪costs associated with administering public purpose, demand response, and customer energy efficiency programs;

▪other programmatic activities, such as gas distribution, gas transmission, gas storage integrity management and wildfire mitigation; and

▪costs associated with third party liability insurance premiums.

Authorized costs are recovered as the commodity service is delivered. To the extent authorized amounts collected vary from actual costs, the differences are generally recovered or refunded in a subsequent period based on the nature of the balancing account mechanism. In general, the revenue recognition criteria for balanced costs billed to customers are met at the time the costs are incurred. Because these costs are substantially recovered in rates through a balancing account mechanism, changes in these costs are reflected as changes in revenues. The CPUC and the FERC may impose various review procedures before authorizing recovery or refund of amounts accumulated for authorized programs, including limitations on the program’s total cost, revenue requirement limits or reviews of costs for reasonableness. These procedures could result in disallowances of recovery from ratepayers.

We discuss balancing accounts and their effects further in Note 4.

Other Revenues

Sempra Infrastructure generates lease revenues from certain of its natural gas and ethane pipelines, compressor stations, LPG storage facilities, a rail facility and refined products terminals. We discuss the recognition of lease income in Note 16.

Sempra Infrastructure has an agreement with Tangguh PSC to supply LNG to the ECA Regas Facility. Under the terms of the agreement, Tangguh PSC must either deliver the contracted number of cargoes or pay a diversion fee for non-delivery of LNG cargoes.

Sempra Infrastructure also recognizes other revenues associated with derivatives related to the sales of natural gas and electricity under short-term and long-term contracts and into the spot market and other competitive markets. Revenues include the net

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realized gains and losses on physical and derivative settlements and net unrealized gains and losses from the change in fair values of these derivatives.

NOTE 4. REGULATORY MATTERS

REGULATORY ASSETS AND LIABILITIES

We show the details of regulatory assets and liabilities in the following table and discuss them below. With the exception of regulatory balancing accounts, we generally do not earn a return on our regulatory assets until such time as a related cash expenditure has been made. Upon the occurrence of a cash expenditure associated with a regulatory asset, the related amounts are recoverable through a regulatory account mechanism for which we earn a return authorized by applicable regulators, which generally approximates the three-month commercial paper rate. The periods during which we recognize a regulatory asset while we do not earn a return vary by regulatory asset.


REGULATORY ASSETS (LIABILITIES)
(Dollars in millions)
	December 31,
	2022		2021
SDG&E:
Fixed-price contracts and other derivatives	$	(110)	$	(50)
Deferred income taxes recoverable in rates	296		125
Pension and PBOP plan obligations	11		(7)
Removal obligations	(2,248)		(2,251)
Environmental costs	107		62
Sunrise Powerlink fire mitigation	123		122
Regulatory balancing accounts(1)(2)
Commodity – electric	220		77
Gas transportation	60		49
Safety and reliability	107		67
Public purpose programs	(69)		(107)
Wildfire mitigation plan	375		178
Liability insurance premium	99		110
Other balancing accounts	(50)		207
Other regulatory assets, net(2)	137		119
Total SDG&E	(942)		(1,299)
SoCalGas:
Deferred income taxes recoverable in rates	161		44
Pension and PBOP plan obligations	(170)		51
Employee benefit costs	24		31
Removal obligations	(616)		(627)
Environmental costs	38		34
Regulatory balancing accounts(1)(2)
Commodity – gas, including transportation	(257)		(146)
Safety and reliability	575		339
Public purpose programs	(158)		(183)
Liability insurance premium	23		16
Other balancing accounts	115		42
Other regulatory assets, net(2)	223		142
Total SoCalGas	(42)		(257)
Sempra Infrastructure:
Deferred income taxes recoverable in rates	78		77
Total Sempra	$	(906)	$	(1,479)

(1) At December 31, 2022 and 2021, the noncurrent portion of regulatory balancing accounts – net undercollected for SDG&E was $562 and $358, respectively, and for SoCalGas was $692 and $410, respectively.

(2) Includes regulatory assets earning a return authorized by applicable regulators, which generally approximates the three-month commercial paper rate.

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Regulatory Assets Not Earning a Return

▪Regulatory assets arising from fixed-price contracts and other derivatives are offset by corresponding liabilities arising from purchased power and natural gas commodity and transportation contracts. The regulatory asset is increased/decreased based on changes in the fair market value of the contracts. It is also reduced as payments are made for commodities and services under these contracts. The related amounts are recovered in rates once these contracts are settled, generally within three years.

▪Deferred income taxes recoverable/refundable in rates are based on current regulatory ratemaking and income tax laws. SDG&E, SoCalGas and Sempra Infrastructure expect to recover/refund net regulatory assets/liabilities related to deferred income taxes over the lives of the assets, ranging from 5 to 69 years, that give rise to the related accumulated deferred income tax balances. Regulatory assets and liabilities include excess deferred income taxes resulting from statutory income tax rate changes and certain income tax benefits and expenses associated with flow-through items, which we discuss in Note 8.

▪Regulatory assets/liabilities related to pension and PBOP plan obligations are offset by corresponding liabilities/assets. The assets are recovered in rates as the plans are funded.

▪The regulatory asset related to employee benefit costs represents our liability associated with long-term disability insurance that will be recovered from customers in future rates as expenditures are made.

▪Regulatory liabilities from removal obligations represent cumulative amounts collected in rates for future asset removal costs in excess of cumulative amounts incurred (or paid).

▪Regulatory assets related to environmental costs represent the portion of our environmental liability recognized at the end of the period in excess of the amount that has been recovered through rates charged to customers. We expect this amount to be recovered in future rates as expenditures are made.

▪The regulatory asset related to Sunrise Powerlink fire mitigation is offset by a corresponding liability for the funding of a trust to cover the mitigation costs. SDG&E expects to recover the regulatory asset in rates as the trust is funded over a remaining 47-year period.

Regulatory Assets Earning a Return

▪Over- and undercollected regulatory balancing accounts and other regulatory assets, net, reflect the difference between customer billings and recorded or CPUC-authorized amounts. Depreciation, taxes and return on rate base may also be included in certain accounts. Amounts in the balancing accounts are recoverable (receivable) or refundable (payable) in future rates, subject to CPUC approval. SDG&E and SoCalGas periodically make requests to the CPUC to true up their revenue requirement for amounts accumulated in the regulatory balancing accounts and in other regulatory assets, net. The CPUC may impose various review procedures before authorizing recovery or refund of amounts accumulated for authorized programs, including limitations on the program’s total cost, revenue requirement limits or reviews of costs for reasonableness. These procedures could result in delays or disallowances of recovery from ratepayers.

Amortization expense on certain regulatory assets for the years ended December 31, 2022, 2021 and 2020 was $11 million, $10 million and $9 million, respectively, at Sempra, $5 million, $5 million and $4 million, respectively, at SDG&E, and $6 million, $5 million and $5 million, respectively, at SoCalGas.

SEMPRA CALIFORNIA

COVID-19 Pandemic Protections

In connection with the COVID-19 pandemic and at the direction of the CPUC, SDG&E and SoCalGas implemented certain measures to assist customers, including suspending service disconnections due to nonpayment for all customers (except for SoCalGas’ noncore customers), waiving late payment fees, and offering flexible payment plans. At the CPUC’s direction, SDG&E and SoCalGas enrolled residential and small business customers with past-due balances in long-term repayment plans.

SDG&E and SoCalGas have been authorized to track and request recovery of incremental costs associated with complying with customer protection measures implemented by the CPUC related to the COVID-19 pandemic, including costs associated with suspending service disconnections and uncollectible expenses that arise from customers’ failure to pay. SDG&E and SoCalGas expect to pursue recovery of small and medium-large commercial and industrial customers’ tracked costs in rates in future CPUC

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proceedings, which recovery is not assured. SDG&E and SoCalGas have each established a two-way balancing account to record the uncollectible expenses associated with residential customers’ inability to pay their electric or gas bills, including as a result of the relief from outstanding utility bill amounts provided under the Arrearage Management Payment Plan.

CPUC GRC

The CPUC uses GRCs to set revenues to allow SDG&E and SoCalGas to recover their reasonable operating costs and to provide the opportunity to realize their authorized rates of return on their investments.

In September 2019, the CPUC issued a final decision in the 2019 GRC approving SDG&E’s and SoCalGas’ test year revenues for 2019 and attrition year adjustments for 2020 and 2021, which was effective retroactively to January 1, 2019. This is the first GRC that includes revenues authorized for risk assessment mitigation phase activities. In January 2020, the CPUC issued a final decision implementing a four-year GRC cycle for California IOUs. SDG&E and SoCalGas were directed to file a petition for modification to revise their 2019 GRC to add two additional attrition years, resulting in a transitional five-year GRC period (2019-2023). In May 2021, the CPUC issued a final decision approving SDG&E’s and SoCalGas’ request to continue their authorized post-test year mechanisms for 2022 and 2023. For SDG&E, the decision authorizes revenue requirement increases of $87 million (3.92%) for 2022 and $86 million (3.70%) for 2023. For SoCalGas, the decision authorizes revenue requirement increases of $142 million (4.53%) for 2022 and $130 million (3.97%) for 2023.

In May 2022, SDG&E and SoCalGas filed their 2024 GRC applications requesting CPUC approval of test year revenue requirements for 2024 and attrition year adjustments for 2025 through 2027. SDG&E and SoCalGas requested revenue requirements for 2024 of $3.0 billion and $4.4 billion, respectively. SDG&E and SoCalGas are proposing post-test year revenue requirement changes using various mechanisms that are estimated to result in annual increases of approximately 8% to 11% at SDG&E and approximately 6% to 8% at SoCalGas. In October 2022, the CPUC issued a scoping ruling that set a schedule for the proceeding, including the expected issuance of a proposed decision in the second quarter of 2024. SDG&E and SoCalGas expect the final decision will be effective retroactive to January 1, 2024. SDG&E expects to submit separate requests in its GRC for review and recovery of its wildfire mitigation plan costs in mid-2023 for costs incurred from 2019 through 2022 and in mid-2024 for costs incurred in 2023.

CPUC Cost of Capital

A CPUC cost of capital proceeding determines a utility’s authorized capital structure and authorized return on rate base. The CCM applies in the interim years between required cost of capital applications and considers changes in the cost of capital based on changes in interest rates based on the applicable utility bond index published by Moody’s (the CCM benchmark rate) for each 12-month period ending September 30 (the measurement period). The index applicable to SDG&E and SoCalGas is based on each utility’s credit rating. The CCM benchmark rate is the basis of comparison to determine if the CCM is triggered in each measurement period, which occurs if the change in the applicable Moody’s utility bond index relative to the CCM benchmark rate is larger than plus or minus 1.000% at the end of the measurement period. The CCM, if triggered, would automatically update the authorized cost of debt based on actual costs and update the authorized ROE upward or downward by one-half of the difference between the CCM benchmark rate and the applicable Moody’s utility bond index. Alternatively, each of SDG&E and SoCalGas are permitted to file a cost of capital application in an interim year in which an extraordinary or catastrophic event materially impacts its cost of capital and affects utilities differently than the market as a whole to have its cost of capital determined in lieu of the CCM.

In December 2019, the CPUC approved the following cost of capital for SDG&E and SoCalGas that became effective on January 1, 2020 and remained in effect through December 31, 2022, subject to the CCM.


CPUC AUTHORIZED COST OF CAPITAL FOR 2020 – 2022

SDG&E							SoCalGas
Authorized weighting		Return on rate base		Weighted return on rate base			Authorized weighting		Return on rate base		Weighted return on rate base
45.25	%	4.59	%	2.08	%	Long-Term Debt	45.60	%	4.23	%	1.93	%
2.75		6.22		0.17		Preferred Equity	2.40		6.00		0.14
52.00		10.20		5.30		Common Equity	52.00		10.05		5.23
100.00	%			7.55	%		100.00	%			7.30	%

For the measurement period that ended September 30, 2021, SDG&E’s CCM benchmark rate was 4.498% based on Moody’s Baa- utility bond index and SoCalGas’ CCM benchmark rate was 4.029% based on Moody’s A- utility bond index. For this

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measurement period, the CCM would have triggered for SDG&E if the CPUC determined that the CCM should be implemented because the average Moody’s Baa- utility bond index between October 1, 2020 and September 30, 2021 was 1.17% below SDG&E’s CCM benchmark rate of 4.498%. In August 2021, SDG&E filed an application with the CPUC to update its cost of capital for 2022 due to the ongoing effects of the COVID-19 pandemic rather than have the CCM apply. In November 2022, the CPUC issued a final decision that found there was an extraordinary event, the CCM will be suspended for 2022 and SDG&E’s current authorized cost of capital for 2022 will be preserved.

In December 2022, the CPUC approved the following cost of capital for SDG&E and SoCalGas that became effective on January 1, 2023 and will remain in effect through December 31, 2025, subject to the CCM. The CPUC will open a second phase of this cost of capital proceeding to evaluate the CCM. For the measurement period that ends on September 30, 2023, SDG&E’s CCM benchmark rate is 4.367% based on Moody’s Baa- utility bond index and SoCalGas’ CCM benchmark rate is 4.074% based on Moody’s A- utility bond index. SDG&E did not propose a 2023 cost of preferred equity in this proceeding. In January 2023, SDG&E filed an advice letter to continue the cost of preferred equity for test year 2023 at 6.22%, which the CPUC approved in February 2023.


CPUC AUTHORIZED COST OF CAPITAL FOR 2023 – 2025

SDG&E							SoCalGas
Authorized weighting		Return on rate base		Weighted return on rate base(1)			Authorized weighting		Return on rate base		Weighted return on rate base
45.25	%	4.05	%	1.83	%	Long-Term Debt	45.60	%	4.07	%	1.86	%
2.75		6.22		0.17		Preferred Equity	2.40		6.00		0.14
52.00		9.95		5.17		Common Equity	52.00		9.80		5.10
100.00	%			7.18	%		100.00	%			7.10	%

(1) Total weighted return on rate base does not sum due to rounding differences.

SDG&E

FERC Rate Matters

SDG&E files separately with the FERC for its authorized ROE on FERC-regulated electric transmission operations and assets. SDG&E’s currently effective TO5 settlement provides for a ROE of 10.60%, consisting of a base ROE of 10.10% plus an additional 50 bps for participation in the California ISO (the California ISO adder). If the FERC issues an order ruling that California IOUs are no longer eligible for the California ISO adder, SDG&E would refund the California ISO adder as of the refund effective date (June 1, 2019) if such a refund is determined to be required by the terms of the TO5 settlement. The TO5 term is effective June 1, 2019 and shall remain in effect until terminated by a notice provided at least six months before the end of the calendar year. Following such notice, SDG&E would file an updated rate request with an effective date of January 1 of the following year.

SOCALGAS

OSCs – Energy Efficiency and Advocacy

In October 2019, the CPUC issued an OSC to determine whether SoCalGas should be sanctioned for violation of certain CPUC code sections and orders relating to energy efficiency (EE) codes and standards advocacy activities, which were undertaken by SoCalGas following a CPUC decision disallowing SoCalGas’ future engagement in advocacy around such EE codes and standards. In March 2022, the CPUC issued a final decision that found that SoCalGas did undertake prohibited EE codes and standards advocacy activities using ratepayer funds. The final decision imposed on SoCalGas a financial penalty of $10 million; customer refunds for certain ratepayer expenditures and shareholder incentives that SoCalGas estimates will be negligible; and a prohibition from recovering from ratepayers costs of proposed codes and standards advocacy activities until SoCalGas demonstrates policies, practices and procedures that adhere to the CPUC’s intent for codes and standards advocacy.

In December 2019, the CPUC issued a second OSC to determine whether SoCalGas is entitled to the EE program’s shareholder incentives for codes and standards advocacy activities in 2016 and 2017 (later expanded to include 2014 and 2015), whether its shareholders should bear the costs of those advocacy activities, and to address whether any other remedies are appropriate. In April 2022, the CPUC issued a final decision that found there were violations of certain legal principles and imposed a financial penalty of $150,000.

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NOTE 5. ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

ACQUISITION

Sempra Infrastructure

ESJ

In March 2021, Sempra Infrastructure completed the acquisition of Saavi Energía S. de R.L. de C.V.’s 50% equity interest in ESJ for a purchase price of $65 million (net of $14 million of acquired cash and cash equivalents) plus the assumption of $277 million in debt (including $94 million owed from ESJ to Sempra Infrastructure that eliminates upon consolidation). Sempra Infrastructure previously accounted for its 50% interest in ESJ as an equity method investment. This acquisition increased Sempra Infrastructure’s ownership interest in ESJ from 50% to 100%. We accounted for this asset acquisition using a cost accumulation model whereby the cost of the acquisition and carrying value of our previously held interest in ESJ ($34 million) were allocated to assets acquired ($458 million) and liabilities assumed ($345 million) based on their relative fair values. ESJ owns a fully operating wind power generation facility with a nameplate capacity of 155 MW that is fully contracted by SDG&E under a long-term PPA. Sempra Infrastructure recorded a $190 million intangible asset for the relative fair value of the PPA that will be amortized over a period of 14 years against revenues. On January 15, 2022, ESJ completed construction and began commercial operation of a second wind power generation facility with a nameplate capacity of 108 MW that is also fully contracted by SDG&E under a long-term PPA.

DIVESTITURE

Parent and Other

PXiSE

In December 2021, Parent and other completed the sale of its 80% interest in PXiSE for total cash proceeds of $38 million, net of transaction costs totaling $4 million, and recorded a $36 million ($26 million after tax) gain, which is included in Gain (Loss) on Sale of Assets on Sempra’s Consolidated Statement of Operations.

DISCONTINUED OPERATIONS

In January 2019, our board of directors approved a plan to sell our South American businesses. We present these businesses, which previously constituted the Sempra South American Utilities segment, and certain activities associated with those businesses as discontinued operations.

In April 2020, we completed the sale of our equity interests in our Peruvian businesses, including our 83.6% interest in Luz del Sur and our interest in Tecsur, to an affiliate of China Yangtze Power International (Hongkong) Co., Limited for cash proceeds of $3,549 million, net of transaction costs and as adjusted for post-closing adjustments, and recorded a pretax gain of $2,271 million ($1,499 million after tax).

In June 2020, we completed the sale of our equity interests in our Chilean businesses, including our 100% interest in Chilquinta Energía and Tecnored and our 50% interest in Eletrans, to State Grid International Development Limited for cash proceeds of $2,216 million, net of transaction costs and as adjusted for post-closing adjustments, and recorded a pretax gain of $628 million ($248 million after tax).

In the year ended December 31, 2020, the pretax gains from the sales of our South American businesses are included in Gain on Sale of Discontinued Operations in the table below and the after-tax gains are included in Income from Discontinued Operations, Net of Income Tax, on Sempra’s Consolidated Statement of Operations.

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Summarized results from discontinued operations were as follows:


DISCONTINUED OPERATIONS
(Dollars in millions)
	Year ended
	December 31, 2020(1)
Revenues	$	570
Cost of sales	(364)
Gain on sale of discontinued operations	2,899
Operating expenses	(66)
Interest and other	(3)
Income before income taxes and equity earnings	3,036
Income tax expense	(1,186)
Equity earnings	—
Income from discontinued operations, net of income tax	1,850
Earnings attributable to noncontrolling interests	(10)
Earnings from discontinued operations attributable to common shares	$	1,840

(1) Results include activity until deconsolidation of our Peruvian businesses on April 24, 2020 and Chilean businesses on June 24, 2020 and post-closing adjustments related to the sales of these businesses.

As a result of the sales of our South American businesses, in 2020, we reclassified $645 million of cumulative foreign currency translation losses from AOCI to Gain on Sale of Discontinued Operations, which is included in Income from Discontinued Operations, Net of Income Tax, on Sempra’s Consolidated Statement of Operations.

NOTE 6. INVESTMENTS IN UNCONSOLIDATED ENTITIES

We generally account for investments under the equity method when we have significant influence over, but do not have control of, these entities. Equity earnings and losses, both before and net of income tax, are combined and presented as Equity Earnings on the Consolidated Statements of Operations.

Our equity method investments include various domestic and foreign entities. Our domestic equity method investees are typically partnerships that are pass-through entities for income tax purposes and therefore they do not record income tax. Sempra’s income tax on earnings from these equity method investees, other than Oncor Holdings as we discuss below, is included in Income Tax Expense on the Consolidated Statements of Operations. Our foreign equity method investees are generally corporations whose operations are taxable on a standalone basis in the countries in which they operate, and we recognize our equity in such income or loss net of investee income tax. See Note 8 for information on how equity earnings and losses before income taxes are factored into the calculations of our pretax income or loss and ETR.

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We provide the carrying values of our investments and earnings (losses) on these investments in the following tables.


EQUITY METHOD AND OTHER INVESTMENT BALANCES(1)
(Dollars in millions)
	Percent ownership
	December 31,				December 31,
	2022		2021		2022		2021
Sempra Texas Utilities:
Oncor Holdings(2)	100	%	100	%	$	13,665	$	12,947
Sempra Texas Utilities:
Sharyland Holdings(3)	50	%	50	%	$	107	$	100
Sempra Infrastructure:
Cameron LNG JV(4)	50.2		50.2		886		514
IMG(5)	40		40		591		523
TAG(6)	50		50		428		388
Total other investments					$	2,012	$	1,525

(1) All amounts are before NCI, where applicable.

(2) The carrying value of our equity method investment is $2,856 and $2,844 higher than the underlying equity in the net assets of the investee at December 31, 2022 and 2021, respectively, due to $2,868 of equity method goodwill and $69 in basis differences in AOCI, offset by $81 and $93 at December 31, 2022 and 2021, respectively, due to a tax sharing liability to TTI under a tax sharing agreement.

(3) The carrying value of our equity method investment is $41 higher than the underlying equity in the net assets of the investee due to equity method goodwill.

(4) The carrying value of our equity method investment is $270 and $276 higher than the underlying equity in the net assets of the investee at December 31, 2022 and 2021, respectively, primarily due to guarantees, which we discuss below, interest capitalized on the investment prior to the JV commencing its planned principal operations in August 2019 and amortization of guarantee fees and capitalized interest thereafter.

(5) The carrying value of our equity method investment is $5 higher than the underlying equity in the net assets of the investee due to guarantees.

(6) The carrying value of our equity method investment is $130 higher than the underlying equity in the net assets of the investee due to equity method goodwill.


EARNINGS (LOSSES) FROM EQUITY METHOD INVESTMENTS(1)
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
EARNINGS (LOSSES) RECORDED BEFORE INCOME TAX(2):
Sempra Texas Utilities:
Sharyland Holdings	$	7	$	5	$	3
Sempra Infrastructure:
Cameron LNG JV(3)	659		559		391
Parent and other:
RBS Sempra Commodities	—		50		(100)
	666		614		294
EARNINGS RECORDED NET OF INCOME TAX:
Sempra Texas Utilities:
Oncor Holdings	735		617		577
Sempra Infrastructure:
ESJ	—		2		5
IMG	68		83		103
TAG	29		27		36
	832		729		721
Total	$	1,498	$	1,343	$	1,015

(1) All amounts are before NCI, where applicable.

(2) We provide our ETR calculation in Note 8.

(3) Includes $12 and $3 of basis differences in equity earnings related to AOCI in 2022 and 2021, respectively.

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We disclose distributions received from our investments, by segment, in the table below.


DISTRIBUTIONS FROM INVESTMENTS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra Texas Utilities	$	345	$	688	$	286
Sempra Infrastructure	541		672		1,176
Total	$	886	$	1,360	$	1,462

At December 31, 2022 and 2021 our share of the undistributed earnings of equity method investments was $2.0 billion and $1.5 billion, respectively, including $386 million at December 31, 2022 in undistributed earnings from investments for which we have less than 50% equity interests.

SEMPRA TEXAS UTILITIES

Oncor Holdings

We account for our 100% ownership interest in Oncor Holdings, which owns an 80.25% interest in Oncor, as an equity method investment. Sempra does not control Oncor Holdings or Oncor, and the ring-fencing measures, governance mechanisms and commitments in effect limit our ability to direct the management, policies and operations of Oncor Holdings and Oncor, including the deployment or disposition of their assets, declarations of dividends, strategic planning and other important corporate issues and actions. We also have limited representation on the Oncor Holdings and Oncor boards of directors.

Oncor is a domestic partnership for U.S. federal income tax purposes and is not included in the consolidated income tax return of Sempra. Rather, only our pretax equity earnings from our investment in Oncor Holdings (a disregarded entity for tax purposes) are included in our consolidated income tax return. A tax sharing agreement with TTI, Oncor Holdings and Oncor provides for the calculation of an income tax liability substantially as if Oncor Holdings and Oncor were taxed as corporations and requires tax payments determined on that basis. While partnerships are not subject to income taxes, in consideration of the tax sharing agreement and Oncor being subject to the provisions of U.S. GAAP governing rate-regulated operations, Oncor recognizes amounts determined under cost-based regulatory rate-setting processes (with such costs including income taxes), as if it were taxed as a corporation. As a result, since Oncor Holdings consolidates Oncor, we recognize equity earnings from our investment in Oncor Holdings net of its recorded income tax.

In 2022, 2021 and 2020, Sempra contributed $341 million, $566 million and $632 million, respectively, to Oncor Holdings.

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We provide summarized income statement and balance sheet information for Oncor Holdings in the following table.


SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Operating revenues	$	5,243	$	4,764	$	4,511
Operating expense	(3,682)		(3,397)		(3,224)
Income from operations	1,561		1,367		1,287
Interest expense	(445)		(413)		(405)
Income tax expense	(203)		(163)		(146)
Net income	893		760		703
Noncontrolling interest held by TTI	(179)		(152)		(141)
Earnings attributable to Sempra(1)	714		608		562

			December 31,
			2022		2021
Current assets			$	1,223	$	1,039
Noncurrent assets			31,703		29,481
Current liabilities			1,579		2,220
Noncurrent liabilities			17,405		15,281
Noncontrolling interest held by TTI			3,141		2,916

(1) Excludes adjustments to equity earnings related to amortization of a tax sharing liability associated with a tax sharing arrangement and changes in basis differences in AOCI within the carrying value of our equity method investment.

Sharyland Holdings

We account for our 50% ownership interest in Sharyland Holdings, a JV with SU Investment Partners, L.P. that owns a 100% interest in Sharyland Utilities, as an equity method investment. In 2022, Sempra contributed $5 million to Sharyland Holdings.

SEMPRA INFRASTRUCTURE

Cameron LNG JV

Cameron LNG JV is a JV between Sempra and three project partners, TotalEnergies SE, Mitsui & Co., Ltd., and Japan LNG Investment, LLC, a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha. We account for our 50.2% investment in Cameron LNG JV under the equity method.

In 2022, 2021 and 2020, Sempra Infrastructure contributed $30 million, $2 million and $54 million, respectively, to Cameron LNG JV.

Sempra Promissory Note for SDSRA Distribution

Cameron LNG JV’s debt agreements require Cameron LNG JV to maintain the SDSRA, which is an additional reserve account beyond the Senior Debt Service Accrual Account, where funds accumulate from operations to satisfy senior debt obligations due and payable on the next payment date. Both accounts can be funded with cash or authorized investments. In June 2021, Sempra Infrastructure received a distribution of $165 million based on its proportionate share of the SDSRA, for which Sempra provided a promissory note and letters of credit to secure a proportionate share of Cameron LNG JV’s obligation to fund the SDSRA. Sempra’s maximum exposure to loss is replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA, or $165 million. We recorded a guarantee liability of $22 million in June 2021, with an associated carrying value of $20 million at December 31, 2022, for the fair value of the promissory note, which is being reduced over the duration of the guarantee through Sempra Infrastructure’s investment in Cameron LNG JV. The guarantee will terminate upon full repayment of Cameron LNG JV’s debt, scheduled to occur in 2039, or replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA.

Sempra Support Agreement for CFIN

In July 2020, CFIN entered into a financing arrangement with Cameron LNG JV’s four project owners and received aggregate proceeds of $1.5 billion from two project owners and from external lenders on behalf of the other two project owners (collectively, the affiliate loans), based on their proportionate ownership interest in Cameron LNG JV. CFIN used the proceeds from the affiliate loans to provide a loan to Cameron LNG JV. The affiliate loans mature in 2039. Principal and interest will be

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paid from Cameron LNG JV’s project cash flows from its three-train natural gas liquefaction facility. Cameron LNG JV used the proceeds from its loan to return equity to its project owners. Sempra used its $753 million share of the proceeds for working capital and other general corporate purposes, including the repayment of indebtedness.

Sempra Infrastructure’s $753 million proportionate share of the affiliate loans, based on SI Partners’ 50.2% ownership interest in Cameron LNG JV, was funded by external lenders comprised of a syndicate of eight banks (the bank debt) to whom Sempra has provided a guarantee pursuant to a Support Agreement under which:

▪Sempra has severally guaranteed repayment of the bank debt plus accrued and unpaid interest if CFIN fails to pay the external lenders;

▪the external lenders may exercise an option to put the bank debt to Sempra Infrastructure upon the occurrence of certain events, including a failure by CFIN to meet its payment obligations under the bank debt;

▪the external lenders will put some or all of the bank debt to Sempra Infrastructure on the fifth, tenth, or fifteenth anniversary date of the affiliate loans, except the portion of the debt owed to any external lender that has elected not to participate in the put option six months prior to the respective anniversary date;

▪Sempra Infrastructure also has a right to call the bank debt back from, or to refinance the bank debt with, the external lenders at any time; and

▪the Support Agreement will terminate upon full repayment of the bank debt, including repayment following an event in which the bank debt is put to Sempra Infrastructure.

In exchange for this guarantee, the external lenders will pay a guarantee fee that is based on the credit rating of Sempra’s long-term senior unsecured non-credit enhanced debt rating, which guarantee fee Sempra Infrastructure will recognize as interest income as earned. Sempra’s maximum exposure to loss is the bank debt plus any accrued and unpaid interest and related fees, subject to a liability cap of 130% of the bank debt, or $979 million. We measure the Support Agreement at fair value, net of related guarantee fees, on a recurring basis (see Note 12). At December 31, 2022, the fair value of the Support Agreement was $17 million, of which $7 million is included in Other Current Assets and $10 million is included in Other Long-Term Assets on Sempra’s Consolidated Balance Sheet.

ESJ

As we discuss in Note 5, in March 2021, Sempra Infrastructure completed the acquisition of the remaining 50% equity interest in ESJ and ESJ became a consolidated subsidiary. Prior to the acquisition date, Sempra Infrastructure owned 50% of ESJ and accounted for its interest as an equity method investment.

IMG

Sempra Infrastructure has a 40% interest in IMG, a JV with a subsidiary of TC Energy Corporation, and accounts for its interest as an equity method investment. IMG owns and operates the Sur de Texas-Tuxpan natural gas marine pipeline, which is fully contracted under a 35-year natural gas transportation service contract with the CFE.

TAG

Sempra Infrastructure has a 50% beneficial ownership interest in TAG, a JV with TETL JV Mexico Norte, S. de R.L. de C.V. and Bravo N Mergeco, S. de R.L. de C.V. that holds a 50% interest in the Los Ramones Norte pipeline. Sempra Infrastructure accounts for its 50% interest in TAG as an equity method investment.

PARENT AND OTHER

RBS Sempra Commodities

RBS Sempra Commodities is a United Kingdom limited liability partnership formed by Sempra and RBS in 2008 to own and operate the commodities-marketing businesses previously operated through wholly owned subsidiaries of Sempra. We and RBS sold substantially all of the partnership’s businesses and assets in four separate transactions completed in 2010 and 2011. Since 2011, our investment balance has reflected our share of the remaining partnership assets, including amounts retained by the partnership to help offset unanticipated future general and administrative costs necessary to complete the dissolution of the partnership and the distribution of the partnership’s remaining assets, if any. We account for our investment in RBS Sempra Commodities under the equity method.

In 2018, we fully impaired our remaining equity method investment in RBS Sempra Commodities. In 2020, we recorded a charge of $100 million in Equity Earnings on Sempra’s Consolidated Statement of Operations for losses from our investment in RBS

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Sempra Commodities. In 2021, we reduced this charge by $50 million based on the favorable outcome of a settlement with HMRC and revised assumptions on the High Court of Justice case. We discuss matters related to RBS Sempra Commodities further in “Other Litigation” in Note 16.

SUMMARIZED FINANCIAL INFORMATION

We present summarized financial information below, aggregated for all other equity method investments (excluding Oncor Holdings and RBS Sempra Commodities) for the periods in which we were invested in the entities. The amounts below represent the results of operations and aggregate financial position of 100% of each of Sempra’s other equity method investments.


SUMMARIZED FINANCIAL INFORMATION – OTHER EQUITY METHOD INVESTMENTS
(Dollars in millions)
	Years ended December 31,
	2022		2021(1)		2020
Gross revenues	$	2,959	$	2,721	$	2,341
Operating expense	(772)		(719)		(706)
Income from operations	2,187		2,002		1,635
Interest expense	(505)		(548)		(514)
Net income/Earnings(2)(3)	1,537		1,388		1,132


	December 31,
	2022		2021(1)
Current assets	$	1,008	$	788
Noncurrent assets	14,786		14,686
Current liabilities	1,147		1,230
Noncurrent liabilities	11,130		11,807

(1) In March 2021, Sempra Infrastructure completed the acquisition of the remaining 50% equity interest in ESJ and ESJ became a consolidated subsidiary.

(2) Except for our investments in Mexico, there was no income tax recorded by the entities, as they are primarily domestic partnerships.

(3) Amounts for Cameron LNG JV exclude adjustments to equity earnings related to amortization of capitalized interest and guarantee fees within the carrying value of our equity method investment and changes in basis differences in equity earnings related to AOCI.

NOTE 7. DEBT AND CREDIT FACILITIES

SHORT-TERM DEBT

Committed Lines of Credit

At December 31, 2022, Sempra had an aggregate capacity of $9.7 billion under seven primary committed lines of credit, which provide liquidity and support our commercial paper programs. Because our commercial paper programs are supported by some of these lines of credit, we reflect the amount of commercial paper outstanding, before reductions of any unamortized discounts, and any letters of credit outstanding as a reduction to the available unused credit capacity in the following table.

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COMMITTED LINES OF CREDIT
(Dollars in millions)
		December 31, 2022
Borrower	Expiration date of facility	Total facility		Commercial paper outstanding		Amounts outstanding		Available unused credit
Sempra	October 2027	$	4,000	$	(454)	$	—	$	3,546
SDG&E	October 2027	1,500		(205)		—		1,295
SoCalGas	October 2027	1,200		(100)		—		1,100
SI Partners	November 2024	1,000		—		(510)		490
IEnova and SI Partners	September 2023	350		—		(264)		86
IEnova and SI Partners	December 2023	150		—		—		150
IEnova and SI Partners	February 2024	1,500		—		(970)		530
Total		$	9,700	$	(759)	$	(1,744)	$	7,197

The principal terms of Sempra’s, SDG&E’s and SoCalGas’ lines of credit reflected in the table above include the following:

▪Each facility has a syndicate of 23 lenders. No single lender has greater than a 6% share in any facility.

▪Sempra’s, SDG&E’s and SoCalGas’ facilities provide for the issuance of $200 million, $100 million and $150 million, respectively, of letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, Sempra, SDG&E and SoCalGas each has the right to increase its letter of credit commitment to up to $500 million, $250 million and $250 million, respectively.

▪Borrowings bear interest at a benchmark rate plus a margin that varies with the borrower’s credit rating.

▪Each borrower must maintain a ratio of indebtedness to total capitalization (as defined in each of the applicable credit facilities) of no more than 65% at the end of each quarter. At December 31, 2022, each entity was in compliance with this ratio under its respective credit facility.

The principal terms of SI Partners’ line of credit reflected in the table above include the following:

▪A syndication of 12 lenders each having an 8.33% share in the facility.

▪The facility provides for issuance of $200 million of letters of credit.

▪The facility includes a $100 million swingline loan sub-limit, whereby any outstanding amounts would reduce available unused credit. No swingline loan borrowings were outstanding at December 31, 2022.

▪Borrowings are issued in U.S. dollars and letters of credit can be issued in U.S. dollars or Mexican pesos.

▪Borrowings bear interest at a benchmark rate plus a margin that varies with SI Partners’ credit rating.

▪SI Partners must maintain a ratio of consolidated adjusted net indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (as defined in its credit facility) of no more than 5.25 to 1.00 as of the end of each quarter. At December 31, 2022, SI Partners was in compliance with this ratio.

The principal terms of the three lines of credit reflected in the table above that are shared by IEnova and SI Partners include the following:

▪The $350 million revolving credit facility has a single lender and borrowings bear interest at a per annum rate equal to 3-month LIBOR plus 54 bps through December 29, 2022. On December 30, 2022, the facility was amended to replace the interest rate to Term SOFR plus 64 bps.

▪The $150 million revolving credit facility has a single lender and borrowings bear interest at a per annum rate equal to Term SOFR plus 70 bps.

▪The $1.5 billion revolving credit facility has a syndicate of 10 lenders and borrowings bear interest at a per annum rate equal to 3-month LIBOR plus 80 bps through December 29, 2022. On December 30, 2022, the facility was amended to replace the interest rate to Term SOFR plus 90 bps.

▪Borrowings can be issued in U.S. dollars only.

Uncommitted Line of Credit

ECA LNG Phase 1 has an uncommitted line of credit, which is generally used for working capital requirements, with an aggregate capacity of $200 million of which $49 million was outstanding at December 31, 2022. The amount outstanding is before reductions of any unamortized discounts. The facility expires in August 2023 and borrowings can be in U.S. dollars or Mexican pesos. At December 31, 2022, outstanding amounts were borrowed in Mexican pesos and bear interest at a variable rate based on the 28-day Interbank Equilibrium Interest Rate plus 105 bps. Borrowings made in U.S. dollars bear interest at a variable rate based on the 1-month or 3-month LIBOR plus 105 bps.

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Uncommitted Letters of Credit

Outside of our domestic and foreign credit facilities, we have bilateral unsecured standby letter of credit capacity with select lenders that is uncommitted and supported by reimbursement agreements. At December 31, 2022, we had $594 million in standby letters of credit outstanding under these agreements.


UNCOMMITTED LETTERS OF CREDIT
(Dollars in millions)
		December 31, 2022
	Expiration date range	Uncommitted letters of credit outstanding
SDG&E	May 2023 - January 2024	$	15
SoCalGas	March 2023 - November 2023	20
Sempra Infrastructure	January 2023 - October 2043	391
Parent and other	March 2023 - November 2023	168
Total		$	594

Term Loan

In July 2022, SoCalGas entered into an $800 million, 364-day term loan agreement with a maturity date of July 6, 2023. In August 2022, SoCalGas borrowed $800 million, net of negligible debt issuance costs, under the term loan agreement. The borrowing bears interest at benchmark rates plus 70 bps and is due in full upon maturity. SoCalGas used the proceeds for payment of a portion of the costs relating to litigation pertaining to the Leak.

Weighted-Average Interest Rates

The weighted-average interest rates on all short-term debt were as follows:


WEIGHTED-AVERAGE INTEREST RATES

	December 31,
	2022		2021
Sempra	5.57	%	0.60	%
SDG&E	4.76		0.65
SoCalGas	4.71		0.21

2022 Form 10-K | F-70

Table of Contents

LONG-TERM DEBT

The following tables show the detail and maturities of long-term debt outstanding.


LONG-TERM DEBT AND FINANCE LEASES
(Dollars in millions)
	December 31,
	2022		2021
SDG&E:
First mortgage bonds (collateralized by plant assets):
1.914% payable 2015 through February 2022	$	—	$	17
3.6% September 1, 2023	450		450
2.5% May 15, 2026	500		500
6% June 1, 2026	250		250
1.7% October 1, 2030	800		800
3% March 15, 2032	500		—
5.35% May 15, 2035	250		250
6.125% September 15, 2037	250		250
6% June 1, 2039	300		300
5.35% May 15, 2040	250		250
4.5% August 15, 2040	500		500
3.95% November 15, 2041	250		250
4.3% April 1, 2042	250		250
3.75% June 1, 2047	400		400
4.15% May 15, 2048	400		400
4.1% June 15, 2049	400		400
3.32% April 15, 2050	400		400
2.95% August 15, 2051	750		750
3.7% March 15, 2052	500		—
	7,400		6,417
Other long-term debt (uncollateralized):
Notes at variable rates (5.17% at December 31, 2022) February 18, 2024(1)	400		—
Finance lease obligations:
Purchased-power contracts	1,194		1,217
Other	62		57
	1,656		1,274
	9,056		7,691
Current portion of long-term debt	(489)		(49)
Unamortized discount on long-term debt	(20)		(17)
Unamortized debt issuance costs	(50)		(44)
Total SDG&E	$	8,497	$	7,581

SoCalGas:
First mortgage bonds (collateralized by plant assets):
3.15% September 15, 2024	$	500	$	500
3.2% June 15, 2025	350		350
2.6% June 15, 2026	500		500
2.55% February 1, 2030	650		650
5.75% November 15, 2035	250		250
5.125% November 15, 2040	300		300
3.75% September 15, 2042	350		350
4.45% March 15, 2044	250		250
4.125% June 1, 2048	400		400
4.3% January 15, 2049	550		550
3.95% February 15, 2050	350		350
6.35% November 15, 2052	600		—
	5,050		4,450
Other long-term debt (uncollateralized):
Notes at variable rates (5.10% at December 31, 2022) September 14, 2023(1)	300		300
1.875% Notes May 14, 2026(1)	4		4
2.95% Notes April 15, 2027	700		—
5.67% Notes January 18, 2028(2)	5		5
Finance lease obligations	87		61
	1,096		370
	6,146		4,820
Current portion of long-term debt	(318)		(11)
Unamortized discount on long-term debt	(12)		(7)
Unamortized debt issuance costs	(36)		(29)
Total SoCalGas	$	5,780	$	4,773

2022 Form 10-K | F-71

Table of Contents


LONG-TERM DEBT AND FINANCE LEASES (CONTINUED)
(Dollars in millions)
	December 31,
	2022		2021
Sempra:
Other long-term debt (uncollateralized):
3.3% Notes April 1, 2025	$	750	$	—
3.25% Notes June 15, 2027	750		750
3.4% Notes February 1, 2028	1,000		1,000
3.7% Notes April 1, 2029	500		—
3.8% Notes February 1, 2038	1,000		1,000
6% Notes October 15, 2039	750		750
4% Notes February 1, 2048	800		800
4.125% Junior Subordinated Notes April 1, 2052(1)	1,000		1,000
5.75% Junior Subordinated Notes July 1, 2079(1)	758		758

Sempra Infrastructure:
Other long-term debt (uncollateralized unless otherwise noted):
6.3% Notes (4.124% after cross-currency swap effective 2013) February 2, 2023	201		189
Loan at variable rates (7.54% at December 31, 2022) December 9, 2025	575		341
Notes at variable rates (5.13% after floating-to-fixed rate swaps effective 2014), payable December 15, 2016 through December 15, 2026, collateralized by plant assets(2)	—		154
3.75% Notes January 14, 2028	300		300
3.25% Notes January 15, 2032	400		—
Loan at variable rates (4.0275% after floating-to-fixed rate swap effective 2019) payable June 15, 2022 through November 19, 2034(1)	196		200
2.9% Loan payable June 15, 2022 through November 19, 2034(1)	236		241
Loan at variable rates (2.38% after floating-to-fixed rate swap effective 2020) payable June 15, 2022 through November 19, 2034(1)	98		100
4.875% Notes January 14, 2048	540		540
4.75% Notes January 15, 2051	800		800
	10,654		8,923
Current portion of long-term debt	(212)		(46)
Unamortized discount on long-term debt	(62)		(65)
Unamortized debt issuance costs	(109)		(98)
Total other Sempra	10,271		8,714
Total Sempra	$	24,548	$	21,068

(1) Callable long-term debt not subject to make-whole provisions.

(2) Debt is not callable.

At December 31, 2022, scheduled maturities of long-term debt are as follows:


MATURITIES OF LONG-TERM DEBT(1)
(Dollars in millions)
	SDG&E		SoCalGas		Other Sempra		Total Sempra
2023	$	450	$	300	$	212	$	962
2024	400		500		30		930
2025	—		350		1,374		1,724
2026	750		504		49		1,303
2027	—		700		799		1,499
Thereafter	6,200		3,705		8,190		18,095
Total	$	7,800	$	6,059	$	10,654	$	24,513

(1) Excludes finance lease obligations, discounts, and debt issuance costs.

Various long-term obligations totaling $12.1 billion at Sempra at December 31, 2022 are unsecured. This includes unsecured long-term obligations totaling $400 million at SDG&E and $1.0 billion at SoCalGas.

2022 Form 10-K | F-72

Table of Contents

Callable Long-Term Debt

At the option of Sempra, SDG&E and SoCalGas, certain debt at December 31, 2022 is callable subject to premiums:


CALLABLE LONG-TERM DEBT
(Dollars in millions)
	SDG&E		SoCalGas		Other Sempra		Total Sempra
Not subject to make-whole provisions	$	400	$	304	$	2,288	$	2,992
Subject to make-whole provisions	7,400		5,750		8,366		21,516

First Mortgage Bonds

SDG&E and SoCalGas issue first mortgage bonds secured by liens on their respective utility plant assets. SDG&E and SoCalGas may issue additional first mortgage bonds if in compliance with the provisions of their bond agreements (indentures). These indentures require, among other things, the satisfaction of pro forma earnings-coverage tests on first mortgage bond interest and the availability of sufficient mortgaged property to support the additional bonds, after giving effect to prior bond redemptions. The most restrictive of these tests (the property test) would permit the issuance, subject to CPUC authorization, of additional first mortgage bonds of $7.8 billion at SDG&E and $1.9 billion at SoCalGas at December 31, 2022.

SDG&E

In March 2022, SDG&E issued $500 million aggregate principal amount of 3.00% first mortgage bonds due in full upon maturity on March 15, 2032 and received proceeds of $494 million (net of debt discount, underwriting discounts and debt issuance costs of $6 million), and $500 million aggregate principal amount of 3.70% first mortgage bonds due in full upon maturity on March 15, 2052 and received proceeds of $492 million (net of debt discount, underwriting discounts and debt issuance costs of $8 million). Each series of first mortgage bonds is redeemable prior to maturity, subject to its terms, and in certain circumstances subject to make-whole provisions. SDG&E used the net proceeds for repayment of commercial paper and its 364-day term loan and for capital expenditures and other general corporate purposes.

SoCalGas

In November 2022, SoCalGas issued $600 million aggregate principal amount of 6.35% green first mortgage bonds due in full upon maturity on November 15, 2052 and received proceeds of $592 million (net of debt discount, underwriting discounts and debt issuance costs of $8 million). The first mortgage bonds are redeemable prior to maturity, subject to their terms, and in certain circumstances subject to make-whole provisions. SoCalGas intends to use the net proceeds to finance or refinance eligible projects that fall into one or more of the following categories: pollution prevention and control, green buildings and clean transportation.

Other Long-Term Debt

Sempra

In March 2022, we issued $750 million aggregate principal amount of 3.30% senior unsecured notes due in full upon maturity on April 1, 2025 and received proceeds of $745 million (net of debt discount, underwriting discounts and debt issuance costs of $5 million), and $500 million of 3.70% senior unsecured notes due in full upon maturity on April 1, 2029 and received proceeds of $494 million (net of debt discount, underwriting discounts and debt issuance costs of $6 million). Each series of notes is redeemable prior to maturity, subject to its terms, and in certain circumstances subject to make-whole provisions. We used the net proceeds for general corporate purposes and repayment of commercial paper.

SDG&E

In February 2022, SDG&E entered into a $400 million, two-year term loan with a maturity date of February 18, 2024. SDG&E borrowed $200 million in the three months ended March 31, 2022 and an additional $200 million in the three months ended June 30, 2022. The borrowings bear interest at benchmark rates plus 62.5 bps and are due in full upon maturity. The margin is based on SDG&E’s long-term senior unsecured credit rating. SDG&E used the net proceeds for repayment of commercial paper and for general corporate purposes.

2022 Form 10-K | F-73

Table of Contents

SoCalGas

In March 2022, SoCalGas issued $700 million aggregate principal amount of 2.95% senior unsecured notes due in full upon maturity on April 15, 2027 and received proceeds of $691 million (net of debt discount, underwriting discounts and debt issuance costs of $9 million). The notes are redeemable prior to maturity, subject to their terms, and in certain circumstances subject to make-whole provisions. SoCalGas used the net proceeds for repayment of commercial paper and general corporate purposes.

Sempra Infrastructure

SI Partners. In January 2022, SI Partners completed a private offering of $400 million in aggregate principal of 3.25% senior unsecured notes due in full upon maturity on January 15, 2032 to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and non-U.S. persons outside the U.S. under Regulation S under the Securities Act. The notes are redeemable prior to maturity, subject to their terms, and in certain circumstances subject to make-whole provisions, and holders of the notes have the right to require SI Partners to offer to purchase some or all of the notes at a premium upon the occurrence of specific kinds of change of control events that result in a downgrade of SI Partners’ credit ratings. Sempra Infrastructure received proceeds of $390 million (net of debt discount, underwriting discounts and debt issuance costs of $10 million). Sempra Infrastructure used the net proceeds for general corporate purposes, including the repayment of certain indebtedness of its subsidiaries.

ECA LNG Phase 1. In December 2020, ECA LNG Phase 1 entered into a five-year loan agreement with a syndicate of nine external lenders for an aggregate principal amount of up to $1.5 billion. Sempra, IEnova and TotalEnergies SE provided guarantees for repayment of the loans plus accrued and unpaid interest based on their proportionate ownership interest in ECA LNG Phase 1 of 41.7%, 41.7% and 16.6%, respectively. At issuance, borrowings under the loan agreement bore interest at a weighted-average blended rate of 2.70% plus a benchmark interest rate per annum equal to (a) the LIBOR for such interest period, divided by (b) one minus the Eurodollar Reserve Percentage, provided that in no event shall the benchmark interest rate at any time be less than 0% per annum. In July 2022, ECA LNG Phase 1 replaced Sempra with IEnova as the guarantor and replaced two of the nine external lenders and their combined principal commitment of $203 million (of which $64 million was outstanding and repaid) with a shareholder loan from IEnova, thereby reducing the syndicate to seven external lenders, increasing the weighted-average blended rate to 2.86% and reducing the aggregate principal amount of borrowing capacity from external lenders to $1.3 billion. In December 2022, the loan agreement was amended to change the benchmark interest rate per annum to (a) the Term SOFR based on a tenor comparable to the applicable interest period, plus (b) a 0.10% margin per annum, for any interest period beginning on or after December 30, 2022. At December 31, 2022 and December 31, 2021, $575 million and $341 million, respectively, of borrowings from external lenders were outstanding under the loan agreement, with a weighted-average interest rate of 7.54% and 2.93%, respectively.

IEnova Pipelines. In September 2022, Sempra Infrastructure used proceeds from borrowings against IEnova’s committed and uncommitted lines of credit to fully repay $141 million of outstanding principal plus accrued and unpaid interest on the IEnova Pipelines variable-rate loans prior to scheduled maturity dates through 2026, and recognized approximately $2 million ($1 million after tax and NCI) in charges associated with the write-off of acquisition-related fair value adjustments offset by a hedge termination benefit.

2022 Form 10-K | F-74

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NOTE 8. INCOME TAXES

We provide our calculations of ETRs in the following table.


INCOME TAX EXPENSE (BENEFIT) AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
	Years ended December 31,
	2022			2021			2020
Sempra:
Income tax expense from continuing operations	$	556		$	99		$	249

Income from continuing operations before income taxes and equity earnings	$	1,343		$	219		$	1,489
Equity earnings, before income tax(1)	666			614			294
Pretax income	$	2,009		$	833		$	1,783

Effective income tax rate	28		%	12		%	14		%
SDG&E:
Income tax expense	$	182		$	201		$	190
Income before income taxes	$	1,097		$	1,020		$	1,014
Effective income tax rate	17		%	20		%	19		%
SoCalGas:
Income tax expense (benefit)	$	138		$	(310)		$	96
Income (loss) before income taxes	$	738		$	(736)		$	601
Effective income tax rate	19		%	42		%	16		%

(1) We discuss how we recognize equity earnings in Note 6.

For SDG&E and SoCalGas, the CPUC requires flow-through rate-making treatment for the current income tax benefit or expense arising from certain property-related and other temporary differences between the treatment for financial reporting and income tax, which will reverse over time. Under the regulatory accounting treatment required for these flow-through temporary differences, deferred income tax assets and liabilities are not recorded to deferred income tax expense, but rather to a regulatory asset or liability, which impacts the ETR. As a result, changes in the relative size of these items compared to pretax income, from period to period, can cause variations in the ETR. The following items are subject to flow-through treatment:

▪repairs expenditures related to a certain portion of utility plant fixed assets

▪the equity portion of AFUDC, which is non-taxable

▪a portion of the cost of removal of utility plant assets

▪utility self-developed software expenditures

▪depreciation on a certain portion of utility plant assets

▪state income taxes

The AFUDC related to equity recorded for regulated construction projects at Sempra Infrastructure has similar flow-through treatment.

2022 Form 10-K | F-75

Table of Contents

We present in the table below reconciliations of net U.S. statutory federal income tax rates to our ETRs.


RECONCILIATION OF FEDERAL INCOME TAX RATES TO EFFECTIVE INCOME TAX RATES

	Years ended December 31,
	2022		2021		2020
Sempra:
U.S. federal statutory income tax rate	21	%	21	%	21	%
Foreign exchange and inflation effects(1)	9		1		(3)
Outside basis differences	6		9		—
Utility depreciation	4		8		3
Non-U.S. earnings taxed at rates different from the U.S. statutory income tax rate(2)	3		5		2
State income taxes, net of federal income tax benefit	1		(4)		1
Compensation-related items	—		(1)		(1)
Impairment losses	—		(1)		1
Noncontrolling interests	—		(2)		—
Utility self-developed software expenditures	—		(5)		(3)
Allowance for equity funds used during construction	(1)		(3)		(1)
Tax credits	(1)		—		(1)
Amortization of excess deferred income taxes	(2)		(3)		(1)
Resolution of prior years’ income tax items	(2)		—		—
Valuation allowances	(2)		1		(1)
Remeasurement of deferred taxes	(3)		(4)		—
Utility repairs expenditures	(5)		(9)		(4)
Other, net	—		(1)		1
Effective income tax rate	28	%	12	%	14	%
SDG&E:
U.S. federal statutory income tax rate	21	%	21	%	21	%
State income taxes, net of federal income tax benefit	4		5		5
Depreciation	3		3		3
Self-developed software expenditures	—		(1)		(4)
Amortization of excess deferred income taxes	(2)		(2)		(1)
Allowance for equity funds used during construction	(2)		(2)		(2)
Resolution of prior years’ income tax items	(2)		—		—
Repairs expenditures	(5)		(4)		(3)
Effective income tax rate	17	%	20	%	19	%
SoCalGas:
U.S. federal statutory income tax rate	21	%	21	%	21	%
Depreciation	5		(5)		5
State income taxes, net of federal income tax benefit	2		11		2
Nondeductible expenditures	2		—		2
Self-developed software expenditures	—		5		(4)
Amortization of excess deferred income taxes	(2)		2		(1)
Allowance for equity funds used during construction	(2)		1		(1)
Repairs expenditures	(6)		5		(7)
Other, net	(1)		2		(1)
Effective income tax rate	19	%	42	%	16	%

(1) Due to fluctuation of the Mexican peso against the U.S. dollar. We record income tax expense (benefit) from the transactional effects of foreign currency and inflation because of appreciation (depreciation) of the Mexican peso. In 2021 and 2020, we also recognized gains (losses) in Other Income (Expense), Net, on the Consolidated Statements of Operations from foreign currency derivatives that were partially hedging Sempra Infrastructure’s exposure to movements in the Mexican peso from its controlling interest in IEnova.

(2) Related to operations in Mexico.

We expect to repatriate approximately $2.1 billion of foreign undistributed earnings in the foreseeable future, and have accrued $65 million of U.S. state deferred income tax liability at December 31, 2022. We repatriated approximately $38 million to the U.S. in 2021.

2022 Form 10-K | F-76

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In the year ended December 31, 2022, we recognized income tax expense of $120 million for a deferred income tax liability related to outside basis differences in our foreign subsidiaries that we had previously considered to be indefinitely reinvested. We have not recorded deferred income taxes with respect to remaining basis differences of approximately $600 million between financial statement and income tax investment amounts in our non-U.S. subsidiaries because we consider them to be indefinitely reinvested as of December 31, 2022. The remaining basis differences are calculated pursuant to U.S. federal tax law, which may differ from tax law in California and foreign jurisdictions. It is currently not practicable to determine the hypothetical amount of tax that might be payable if the underlying basis differences were realized.

The table below presents the geographic components of pretax income.


PRETAX INCOME – SEMPRA
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
By geographic components:
U.S.	$	1,449	$	346	$	1,461
Non-U.S.	560		487		322
Total(1)	$	2,009	$	833	$	1,783

(1) See the Income Tax Expense (Benefit) and Effective Income Tax Rates table above for the calculation of pretax income.

U.S. pretax income was lower in 2021 compared to 2022 and 2020 primarily due to the 2021 charges at SoCalGas related to civil litigation pertaining to the Leak, which we describe in Note 16.

2022 Form 10-K | F-77

Table of Contents

The components of income tax expense are as follows.


INCOME TAX EXPENSE (BENEFIT)
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra:
Current:
U.S. state	$	(1)	$	(6)	$	(22)
Non-U.S.	165		183		112
Total	164		177		90
Deferred:
U.S. federal	248		(9)		157
U.S. state	50		(37)		36
Non-U.S.	94		(31)		(34)
Total	392		(77)		159
Deferred investment tax credits	—		(1)		—
Total income tax expense	$	556	$	99	$	249
SDG&E:
Current:
U.S. federal	$	76	$	35	$	121
U.S. state	13		13		34
Total	89		48		155
Deferred:
U.S. federal	54		99		11
U.S. state	38		54		25
Total	92		153		36
Deferred investment tax credits	1		—		(1)
Total income tax expense	$	182	$	201	$	190
SoCalGas:
Current:
U.S. federal	$	(5)	$	134	$	163
U.S. state	(3)		50		45
Total	(8)		184		208
Deferred:
U.S. federal	125		(334)		(85)
U.S. state	22		(159)		(28)
Total	147		(493)		(113)
Deferred investment tax credits	(1)		(1)		1
Total income tax expense (benefit)	$	138	$	(310)	$	96

2022 Form 10-K | F-78

Table of Contents

The tables below present the components of deferred income taxes:


DEFERRED INCOME TAXES
(Dollars in millions)
	December 31,
	2022		2021
Sempra:
Deferred income tax liabilities:
Differences in financial and tax bases of fixed assets, investments and other assets(1)	$	5,533	$	5,230
U.S. state and non-U.S. withholding tax on repatriation of foreign earnings	53		47
Regulatory balancing accounts	632		538
Right-of-use assets – operating leases	177		160
Property taxes	60		52
Postretirement benefits	31		—
Other deferred income tax liabilities	55		50
Total deferred income tax liabilities	6,541		6,077
Deferred income tax assets:
Tax credits	1,210		1,135
Net operating losses	579		706
Postretirement benefits	—		30
Compensation-related items	144		164
Operating lease liabilities	164		140
Other deferred income tax assets	40		130
State income taxes	—		21
Bad debt allowance	48		33
Accrued expenses not yet deductible	92		575
Deferred income tax assets before valuation allowances	2,277		2,934
Less: valuation allowances	192		183
Total deferred income tax assets	2,085		2,751
Net deferred income tax liability(2)	$	4,456	$	3,326

(1) In addition to the financial over tax basis differences in fixed assets, the amount also includes financial over tax basis differences in various interests in partnerships and certain subsidiaries.

(2) At December 31, 2022 and 2021, includes $135 and $151, respectively, recorded as a noncurrent asset and $4,591 and $3,477, respectively, recorded as a noncurrent liability on the Consolidated Balance Sheets.

2022 Form 10-K | F-79

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DEFERRED INCOME TAXES
(Dollars in millions)
	SDG&E				SoCalGas
	December 31,				December 31,
	2022		2021		2022		2021
Deferred income tax liabilities:
Differences in financial and tax bases of utility plant and other assets	$	2,157	$	1,970	$	1,568	$	1,444
Regulatory balancing accounts	397		323		236		215
Right-of-use assets – operating leases	79		52		12		16
Property taxes	38		35		21		17
Postretirement benefits	—		—		45		—
Other	—		1		—		1
Total deferred income tax liabilities	2,671		2,381		1,882		1,693
Deferred income tax assets:
Tax credits	5		5		2		3
Postretirement benefits	—		—		—		18
Compensation-related items	9		12		27		33
Operating lease liabilities	79		52		12		16
Bad debt allowance	19		16		23		15
State income taxes	5		4		—		12
Accrued expenses not yet deductible	10		16		59		539
Net operating losses	—		—		441		—
Other	4		1		12		18
Total deferred income tax assets	131		106		576		654
Net deferred income tax liability	$	2,540	$	2,275	$	1,306	$	1,039

The following table summarizes our unused NOLs and tax credit carryforwards.


NET OPERATING LOSSES AND TAX CREDIT CARRYFORWARDS
(Dollars in millions)
	Unused amount at December 31, 2022		Year expiration begins
Sempra:
U.S. federal:
NOLs(1)	$	2,192	Indefinite
General business tax credits(1)	450		2032
Foreign tax credits(2)	766		2024
U.S. state(2):
NOLs	3,662		2023
General business tax credits	35		2023
Non-U.S. NOLs(2)	164		2023
SoCalGas:
U.S. federal NOLs(1)	$	1,540	Indefinite
U.S. state NOLs(1)	1,729		2042

(1) We have recorded deferred income tax benefits on these NOLs and tax credits, in total, because we currently believe they will be realized on a more-likely-than-not-basis.

(2) We have not recorded deferred income tax benefits on a portion of these NOLs and tax credits because we currently believe they will not be realized on a more-likely-than-not-basis, as discussed below.

A valuation allowance is recorded when, based on more-likely-than-not criteria, negative evidence outweighs positive evidence with regard to our ability to realize a deferred income tax asset in the future. Of the valuation allowances recorded to date, the negative evidence outweighs the positive evidence primarily due to cumulative pretax losses in various U.S. state and non-U.S. jurisdictions resulting in deferred income tax assets that we currently do not believe will be realized on a more-likely-than-not basis. The following table provides the valuation allowances that we recorded against a portion of our total deferred income tax assets shown above in the “Deferred Income Taxes – Sempra” table.

2022 Form 10-K | F-80

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VALUATION ALLOWANCES
(Dollars in millions)
	December 31,
	2022		2021
Sempra:
U.S. federal	$	115	$	128
U.S. state	51		31
Non-U.S.	26		24
	$	192	$	183

Following is a reconciliation of the changes in unrecognized income tax benefits and the potential effect on our ETR for the years ended December 31:


RECONCILIATION OF UNRECOGNIZED INCOME TAX BENEFITS
(Dollars in millions)
	2022		2021		2020
Sempra:
Balance at January 1	$	304	$	99	$	93
Increase in prior period tax positions	16		3		3
Decrease in prior period tax positions	(2)		(2)		(1)
Settlements with tax authorities	(43)		—		—
Expiration of statutes of limitations	(1)		—		—
Increase in current period tax positions	4		204		4
Balance at December 31	$	278	$	304	$	99
Of December 31 balance, amounts related to tax positions that if recognized in future years would
decrease the effective tax rate(1)	(117)		$	(105)	$	(87)
increase the effective tax rate(1)	38		34		31
SDG&E:
Balance at January 1	$	14	$	13	$	12
Increase in prior period tax positions	—		1		1
Balance at December 31	$	14	$	14	$	13
Of December 31 balance, amounts related to tax positions that if recognized in future years would
decrease the effective tax rate(1)	$	(11)	$	(11)	$	(10)
increase the effective tax rate(1)	1		1		1
SoCalGas:
Balance at January 1	$	72	$	68	$	64
Increase in prior period tax positions	1		1		1
Increase in current period tax positions	4		3		3
Balance at December 31	$	77	$	72	$	68
Of December 31 balance, amounts related to tax positions that if recognized in future years would
decrease the effective tax rate(1)	$	(67)	$	(63)	$	(59)
increase the effective tax rate(1)	37		33		30

(1) Includes temporary book and tax differences that are treated as flow-through for ratemaking purposes, as discussed above.

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It is reasonably possible that within the next 12 months, unrecognized income tax benefits could decrease due to the following:


POSSIBLE DECREASES IN UNRECOGNIZED INCOME TAX BENEFITS WITHIN 12 MONTHS
(Dollars in millions)
	December 31,
	2022		2021		2020
Sempra:
Potential resolution of audit issues with various U.S. federal, state and local and non-U.S. taxing authorities	$	8	$	8	$	8
SDG&E:
Potential resolution of audit issues with various U.S. federal, state and local taxing authorities	$	6	$	6	$	6
SoCalGas:
Potential resolution of audit issues with various U.S. federal, state and local taxing authorities	$	2	$	2	$	2

Amounts accrued for interest and penalties associated with unrecognized income tax benefits are included in Income Tax Expense (Benefit) on the Consolidated Statements of Operations. Sempra, SDG&E and SoCalGas each accrued negligible amounts for interest expense and penalties at December 31, 2022 and 2021 on the Consolidated Balance Sheets, and recorded negligible amounts for interest expense and penalties on the Consolidated Statements of Operations for all periods presented.

INCOME TAX AUDITS

Sempra is subject to U.S. federal income tax as well as income tax of multiple state and non-U.S. jurisdictions. We remain subject to examination for U.S. federal tax years after 2018. We are subject to examination by major state tax jurisdictions for tax years after 2012. Certain major non-U.S. income tax returns for tax years 2013 through the present are open to examination.

SDG&E and SoCalGas are subject to U.S. federal income tax and state income tax. They remain subject to examination for U.S. federal tax years after 2018 and state tax years after 2012.

In addition, Sempra has filed protests to contest proposed state audit adjustments for tax years 2009 through 2012. The pre-2013 tax years for our major state tax jurisdictions are closed to new issues; therefore, no additional tax may be assessed by the taxing authorities for these tax years.

NOTE 9. EMPLOYEE BENEFIT PLANS

For our employee benefit plans, we:

▪recognize an asset for a plan’s overfunded status or a liability for a plan’s underfunded status in the balance sheet;

▪measure a plan’s assets and its obligations that determine its funded status as of the end of the fiscal year; and

▪recognize changes in the funded status of pension and PBOP plans in the year in which the changes occur. Generally, those changes are reported in OCI and as a separate component of shareholders’ equity.

The detailed information presented below covers the employee benefit plans of primarily Sempra and its consolidated entities.

Sempra has funded and unfunded noncontributory traditional defined benefit and cash balance plans, including separate plans for SDG&E and SoCalGas, which collectively cover all eligible employees. Pension benefits under the traditional defined benefit plans are based on service and final average earnings, while the cash balance plans provide benefits using a career average earnings methodology.

IEnova has an unfunded noncontributory defined benefit plan covering all employees that provides defined benefits to retirees based on date of hire, years of service and final average earnings.

Sempra also has PBOP plans, including separate plans for SDG&E and SoCalGas, which collectively cover all domestic and certain foreign employees. The life insurance plans are both contributory and noncontributory, and the health care plans are contributory. Participants’ contributions are adjusted annually. PBOP plans include medical benefits.

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Pension and PBOP costs and obligations are dependent on assumptions used in calculating such amounts. We review these assumptions on an annual basis and update them as appropriate. We consider current market conditions, including interest rates, in making these assumptions. We use a December 31 measurement date for all of our plans.

DEDICATED ASSETS IN SUPPORT OF CERTAIN BENEFITS PLANS

In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $505 million and $567 million at December 31, 2022 and 2021, respectively.

PENSION AND PBOP PLANS

Oncor

In 2022 and 2021, we had $26 million and $7 million, respectively, in AOCI representing an actuarial loss related to Oncor’s pension plans.

Benefit Obligations and Assets

The following three tables provide a reconciliation of the changes in the plans’ projected benefit obligations and the fair value of assets during 2022 and 2021, and a statement of the funded status at December 31, 2022 and 2021.


PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
(Dollars in millions)
	Pension(1)				PBOP
	2022		2021		2022		2021
Sempra:
CHANGE IN PROJECTED BENEFIT OBLIGATION
Net obligation at January 1	$	3,857	$	4,077	$	940	$	989
Service cost	146		145		23		23
Interest cost	118		112		28		28
Contributions from plan participants	—		—		23		21
Actuarial gain	(925)		(76)		(282)		(53)
Benefit payments	(89)		(98)		(69)		(68)
Settlements	(301)		(303)		—		—
Net obligation at December 31	2,806		3,857		663		940

CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	3,182		3,002		1,408		1,399
Actual return on plan assets	(625)		340		(271)		51
Employer contributions	223		241		5		5
Contributions from plan participants	—		—		23		21
Benefit payments	(89)		(98)		(69)		(68)
Settlements	(301)		(303)		—		—
Fair value of plan assets at December 31	2,390		3,182		1,096		1,408
Funded status at December 31	$	(416)	$	(675)	$	433	$	468
Net recorded (liability) asset at December 31	$	(416)	$	(675)	$	433	$	468

(1) The accumulated benefit obligation was $2,574 and $3,419 at December 31, 2022 and 2021, respectively.

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PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
(Dollars in millions)
	Pension(1)				PBOP
	2022		2021		2022		2021
SDG&E:
CHANGE IN PROJECTED BENEFIT OBLIGATION
Net obligation at January 1	$	885	$	913	$	188	$	193
Service cost	37		35		5		5
Interest cost	26		25		6		5
Contributions from plan participants	—		—		8		7
Actuarial gain	(135)		(2)		(54)		(3)
Benefit payments	(17)		(17)		(19)		(19)
Settlements	(82)		(69)		—		—
Net obligation at December 31	714		885		134		188

CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	859		819		197		213
Actual return on plan assets	(142)		73		(40)		(5)
Employer contributions	52		53		1		1
Contributions from plan participants	—		—		8		7
Benefit payments	(17)		(17)		(19)		(19)
Settlements	(82)		(69)		—		—
Fair value of plan assets at December 31	670		859		147		197
Funded status at December 31	$	(44)	$	(26)	$	13	$	9
Net recorded (liability) asset at December 31	$	(44)	$	(26)	$	13	$	9

(1) The accumulated benefit obligation was $678 and $824 at December 31, 2022 and 2021, respectively.


PROJECTED BENEFIT OBLIGATION, FAIR VALUE OF ASSETS AND FUNDED STATUS
(Dollars in millions)
	Pension(1)				PBOP
(Dollars in millions)	2022		2021		2022		2021
SoCalGas:
CHANGE IN PROJECTED BENEFIT OBLIGATION
Net obligation at January 1	$	2,647	$	2,829	$	706	$	749
Service cost	96		97		17		17
Interest cost	81		78		21		22
Contributions from plan participants	—		—		14		13
Actuarial gain	(748)		(83)		(215)		(49)
Benefit payments	(58)		(63)		(46)		(46)
Settlements	(204)		(211)		—		—
Net obligation at December 31	1,814		2,647		497		706

CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	2,095		1,969		1,178		1,159
Actual return on plan assets	(449)		243		(224)		51
Employer contributions	151		157		1		1
Contributions from plan participants	—		—		14		13
Benefit payments	(58)		(63)		(46)		(46)
Settlements	(204)		(211)		—		—
Fair value of plan assets at December 31	1,535		2,095		923		1,178
Funded status at December 31	$	(279)	$	(552)	$	426	$	472
Net recorded (liability) asset at December 31	$	(279)	$	(552)	$	426	$	472

(1) The accumulated benefit obligation was $1,644 and $2,306 at December 31, 2022 and 2021, respectively.

Actuarial (gains) losses fluctuate based on changes in assumptions that we describe below in “Assumptions for Pension and PBOP Plans” and updates to census data. In 2021, the Society of Actuaries released updated mortality improvement projection scales, reflecting changes to projected observed longevity improvements in its mortality tables. There was no update in 2022. We

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have incorporated these assumptions, adjusted for the Sempra companies’ actual mortality experience, in our calculations for each of those years.

▪Actuarial gains in pension plans at Sempra in 2022 were driven primarily by an increase in discount rates at SoCalGas, SDG&E and Sempra, a change in the rates used to convert traditional pension benefits to lump-sums at SoCalGas, and administrative changes in the long-term disability plan at SoCalGas. These actuarial gains were partially offset by actuarial losses due to an increase in the interest crediting rate for the cash balance plans at SDG&E, SoCalGas and Sempra, changes in the rates used to convert cash balance accounts to traditional pension benefit distributions at SDG&E, and updated census data at SoCalGas and Sempra.

▪Actuarial gains in PBOP plans at Sempra in 2022 were driven primarily by an increase in discount rates at SoCalGas, SDG&E and Sempra.

Net Assets and Liabilities

The assets and liabilities of the pension and PBOP plans are affected by changing market conditions as well as when actual plan experience is different than assumed. Such events result in investment gains and losses, which we defer and recognize in pension and PBOP costs over a period of years. Our funded pension and PBOP plans use the asset smoothing method, except for those at SDG&E. This method develops an asset value that recognizes realized and unrealized investment gains and losses over a three-year period. This adjusted asset value, known as the market-related value of assets, is used in conjunction with an expected long-term rate of return to determine the expected return-on-assets component of net periodic benefit cost. SDG&E does not use the asset smoothing method, but rather recognizes realized and unrealized investment gains and losses during the current year.

The 10% corridor accounting method is used at Sempra, SDG&E and SoCalGas. Under the corridor accounting method, if as of the beginning of a year unrecognized net gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets, the excess is amortized over the average remaining service period of active participants (or, for plans where participants are substantially inactive employees, the average remaining lifetime of all participants or the period for which benefits will be paid, whichever is shorter). The asset smoothing and 10% corridor accounting methods help mitigate volatility of net periodic benefit costs from year to year.

Defined benefit pension and PBOP plans with an aggregated overfunded status are recognized as an asset and with an aggregated underfunded status are recognized as a liability; unrecognized changes in these assets and/or liabilities are normally recorded in AOCI on the balance sheet. SDG&E and SoCalGas record regulatory assets and liabilities that offset the funded pension and PBOP plans’ assets or liabilities, as these costs are expected to be recovered in future utility rates based on decisions by regulatory agencies.

SDG&E and SoCalGas record annual pension and PBOP net periodic benefit costs equal to the contributions to their qualified plans as authorized by the CPUC. The annual contributions to the pension plans are the greater of:

▪a minimum required funding amount as required by the IRS;

▪the amount required to maintain an 85% Adjusted Funding Target Attainment Percentage as defined by the Pension Protection Act of 2006, as amended; or

▪beginning January 1, 2019 and for the duration of the 2019 GRC cycle, a fixed amount equal to the estimated annual service cost as defined by U.S. GAAP plus one year of a 14-year amortization of the unfunded projected benefit obligation of the pension plan as of January 1, 2019, and limited to an annual amount that keeps the fair value of the pension plan assets from exceeding 110% of the pension benefit obligation of the plan.

The annual contributions to PBOP plans are equal to the lesser of the maximum tax deductible amount or the net periodic benefit cost calculated in accordance with U.S. GAAP for pension and PBOP plans. Any differences between booked net periodic benefit cost and amounts contributed to the pension and PBOP plans for SDG&E and SoCalGas are disclosed as regulatory adjustments in accordance with U.S. GAAP for rate-regulated entities.

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The net (liability) asset is included in the following categories on the Consolidated Balance Sheets.


PENSION AND PBOP OBLIGATIONS, NET OF PLAN ASSETS
(Dollars in millions)
	Pension				PBOP
	December 31,				December 31,
	2022		2021		2022		2021
Sempra:
Noncurrent assets	$	8	$	19	$	443	$	481
Current liabilities	(23)		(19)		(1)		(1)
Noncurrent liabilities	(401)		(675)		(9)		(12)
Net recorded (liability) asset	$	(416)	$	(675)	$	433	$	468
SDG&E:
Noncurrent assets	$	—	$	—	$	13	$	9
Current liabilities	(2)		(1)		—		—
Noncurrent liabilities	(42)		(25)		—		—
Net recorded (liability) asset	$	(44)	$	(26)	$	13	$	9
SoCalGas:
Noncurrent assets	$	—	$	—	$	426	$	472
Current liabilities	(2)		(1)		—		—
Noncurrent liabilities	(277)		(551)		—		—
Net recorded (liability) asset	$	(279)	$	(552)	$	426	$	472

Amounts recorded in AOCI, net of income tax effects and amounts recorded as regulatory assets, are as follows.


AMOUNTS IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Pension				PBOP
	December 31,				December 31,
	2022		2021		2022		2021
Sempra:
Net actuarial (loss) gain	$	(95)	$	(86)	$	14	$	11
Prior service cost	(5)		(8)		—		—
Total	$	(100)	$	(94)	$	14	$	11
SDG&E:
Net actuarial loss	$	(6)	$	(9)
Prior service cost	(1)		(1)
Total	$	(7)	$	(10)
SoCalGas:
Net actuarial loss	$	(9)	$	(15)
Prior service cost	(3)		(3)
Total	$	(12)	$	(18)

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Sempra, SDG&E and SoCalGas each have a funded pension plan. The following table shows the obligations of funded pension plans with benefit obligations in excess of plan assets.


OBLIGATIONS OF FUNDED PENSION PLANS
(Dollars in millions)
	December 31,
	2022		2021
Sempra:
Projected benefit obligation	$	2,476	$	2,612
Accumulated benefit obligation	2,277		2,277
Fair value of plan assets	2,205		2,095
SDG&E:
Projected benefit obligation	$	691
Accumulated benefit obligation	658
Fair value of plan assets	670
SoCalGas:
Projected benefit obligation	$	1,785	$	2,612
Accumulated benefit obligation	1,619		2,277
Fair value of plan assets	1,535		2,095

We also have unfunded pension plans at Sempra, SDG&E, SoCalGas and IEnova. The following table shows the obligations of unfunded pension plans.


OBLIGATIONS OF UNFUNDED PENSION PLANS
(Dollars in millions)
	December 31,
	2022		2021
Sempra:
Projected benefit obligation	$	153	$	178
Accumulated benefit obligation	124		139
SDG&E:
Projected benefit obligation	$	23	$	26
Accumulated benefit obligation	20		22
SoCalGas:
Projected benefit obligation	$	29	$	35
Accumulated benefit obligation	25		29

Sempra, SDG&E and SoCalGas each have a funded PBOP plan. The following table shows the obligations of funded PBOP plans with accumulated postretirement benefit obligations in excess of plan assets.


OBLIGATIONS OF FUNDED PBOP PLANS
(Dollars in millions)
	December 31, 2021
Sempra:
Accumulated postretirement benefit obligation	$	34
Fair value of plan assets	33

We also have unfunded PBOP plans at Sempra. The following table shows the obligations of unfunded PBOP plans.


OBLIGATIONS OF UNFUNDED PBOP PLANS
(Dollars in millions)
	December 31,
	2022		2021
Sempra:
Accumulated postretirement benefit obligation	$	10	$	12

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Net Periodic Benefit Cost

The following tables provide the components of net periodic benefit cost and pretax amounts recognized in OCI:


NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OCI
(Dollars in millions)
	Pension						PBOP
	Years ended December 31,						Years ended December 31,
	2022		2021		2020		2022		2021		2020
Sempra:
NET PERIODIC BENEFIT COST
Service cost	$	146	$	145	$	129	$	23	$	23	$	18
Interest cost	118		112		129		28		28		33
Expected return on assets	(183)		(173)		(169)		(64)		(61)		(55)
Amortization of:
Prior service cost (credit)	10		11		12		(2)		(2)		(2)
Actuarial loss (gain)	25		45		35		(15)		(9)		(10)
Settlement charges	28		38		22		—		—		—
Net periodic benefit cost (credit)	144		178		158		(30)		(21)		(16)
Regulatory adjustment	84		57		91		30		21		16
Total expense recognized	228		235		249		—		—		—

CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OCI (1)
Net loss (gain)	12		(5)		28		(4)		(4)		1
Amortization of actuarial loss	(8)		(8)		(14)		1		—		—
Amortization of prior service cost	(4)		(4)		(4)		—		—		—
Settlements	—		(7)		(22)		—		—		—
Total recognized in OCI	—		(24)		(12)		(3)		(4)		1
Total recognized in net periodic benefit cost and OCI	$	228	$	211	$	237	$	(3)	$	(4)	$	1

(1) Includes discontinued operations in 2020.


NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OCI
(Dollars in millions)
	Pension						PBOP
	Years ended December 31,						Years ended December 31,
	2022		2021		2020		2022		2021		2020
SDG&E:
NET PERIODIC BENEFIT COST
Service cost	$	37	$	35	$	31	$	5	$	5	$	4
Interest cost	26		25		30		6		5		6
Expected return on assets	(46)		(50)		(49)		(10)		(10)		(10)
Amortization of:
Prior service cost	1		1		2		—		—		—
Actuarial loss (gain)	1		2		3		(2)		(2)		(3)
Settlement charges	14		6		—		—		—		—
Net periodic benefit cost (credit)	33		19		17		(1)		(2)		(3)
Regulatory adjustment	20		34		38		1		2		3
Total expense recognized	53		53		55		$	—	$	—	$	—

CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OCI
Net (gain) loss	(3)		1		6
Transfer of actuarial gain	—		—		(7)
Transfer of prior service credit	—		—		(5)
Amortization of actuarial loss	(1)		—		(1)
Amortization of prior service cost	—		(1)		(1)
Total recognized in OCI	(4)		—		(8)
Total recognized in net periodic benefit cost and OCI	$	49	$	53	$	47

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NET PERIODIC BENEFIT COST AND AMOUNTS RECOGNIZED IN OCI
(Dollars in millions)
	Pension						PBOP
	Years ended December 31,						Years ended December 31,
	2022		2021		2020		2022		2021		2020
SoCalGas:
NET PERIODIC BENEFIT COST
Service cost	$	96	$	97	$	86	$	17	$	17	$	14
Interest cost	81		78		88		21		22		25
Expected return on assets	(126)		(113)		(107)		(53)		(48)		(43)
Amortization of:
Prior service cost (credit)	8		8		8		(2)		(3)		(2)
Actuarial loss (gain)	18		36		26		(12)		(7)		(7)
Settlement charges	14		25		—		—		—		—
Net periodic benefit cost (credit)	91		131		101		(29)		(19)		(13)
Regulatory adjustment	64		23		53		29		19		13
Total expense recognized	155		154		154		$	—	$	—	$	—

CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OCI
Net (gain) loss	(5)		2		6
Transfer of actuarial loss	—		—		5
Transfer of prior service cost	—		—		3
Amortization of actuarial loss	(2)		(1)		(1)
Amortization of prior service cost	(1)		(1)		(1)
Total recognized in OCI	(8)		—		12
Total recognized in net periodic benefit cost and OCI	$	147	$	154	$	166

Assumptions for Pension and PBOP Plans

Benefit Obligation and Net Periodic Benefit Cost

Except for the IEnova plans, we develop the discount rate assumptions using a bond selection-settlement portfolio approach. This approach develops a discount rate by selecting a portfolio of high-quality corporate bonds that generate sufficient cash flows to provide for projected benefit payments of the plan. The selected bond portfolio is derived from a universe of corporate bonds with a Bloomberg Composite of AA or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plans’ projected benefit payments discounted at this rate with the market value of the bonds selected.

We develop the discount rate assumptions for the plans at IEnova by constructing a synthetic government zero coupon bond yield curve from the available market data, based on duration matching, and we add a risk spread to allow for the yields of high-quality corporate bonds. Such method is required when there is no deep market for high quality corporate bonds.

Long-term return on assets is based on the weighted average of the plans’ investment allocation as of the measurement date and the expected returns for those asset types.

Interest crediting rate is based on an average 30-year Treasury bond from the month of November of the preceding year.

We amortize prior service cost using straight line amortization over average future service (or average expected lifetime for plans where participants are substantially inactive employees), which is an alternative method allowed under U.S. GAAP.

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The significant assumptions affecting benefit obligation and net periodic benefit cost are as follows:


WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATION

	Pension				PBOP
	December 31,				December 31,
	2022		2021		2022		2021
Sempra:
Discount rate	5.63	%	3.04	%	5.65	%	3.04	%
Interest crediting rate(1)(2)	3.99		1.94		3.99		1.94
Rate of compensation increase	2.70-10.00		2.70-10.00		2.70-10.00		2.70-10.00
SDG&E:
Discount rate	5.60	%	2.99	%	5.65	%	3.05	%
Interest crediting rate(1)(2)	3.99		1.94		3.99		1.94
Rate of compensation increase	3.50-10.00		3.50-10.00		3.50-10.00		3.50-10.00
SoCalGas:
Discount rate	5.60	%	3.04	%	5.65	%	3.05	%
Interest crediting rate(1)(2)	3.99		1.94		3.99		1.94
Rate of compensation increase	2.70-10.00		2.70-10.00		2.70-10.00		2.70-10.00

(1) Interest crediting rate for pension benefits applies only to funded cash balance plans.

(2) Interest crediting rate for PBOP applies only to interest bearing health retirement accounts at SDG&E and SoCalGas.


WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST

	Pension						PBOP
	Years ended December 31,						Years ended December 31,
	2022		2021		2020		2022		2021		2020
Sempra:
Discount rate	3.04	%	2.78	%	3.49	%	3.04	%	2.88	%	3.54	%
Expected return on plan assets	6.27		6.47		7.00		4.77		4.76		4.64
Interest crediting rate(1)(2)	1.94		1.62		2.28		1.94		1.62		2.28
Rate of compensation increase	2.70-10.00		2.70-10.00		2.70-10.00		2.70-10.00		2.70-10.00		2.70-10.00
SDG&E:
Discount rate	2.99	%	2.73	%	3.44	%	3.05	%	2.85	%	3.55	%
Expected return on plan assets	5.50		6.25		7.00		4.80		4.81		5.51
Interest crediting rate(1)(2)	1.94		1.62		2.28		1.94		1.62		2.28
Rate of compensation increase	3.50-10.00		2.70-10.00		2.70-10.00		3.50-10.00		2.70-10.00		2.70-10.00
SoCalGas:
Discount rate	3.04	%	2.79	%	3.50	%	3.05	%	2.90	%	3.55	%
Expected return on plan assets	6.75		6.75		7.00		4.71		4.70		4.41
Interest crediting rate(1)(2)	1.94		1.62		2.28		1.94		1.62		2.28
Rate of compensation increase	2.70-10.00		2.70-10.00		2.70-10.00		2.70-10.00		2.70-10.00		2.70-10.00

(1) Interest crediting rate for pension benefits applies only to funded cash balance plans.

(2) Interest crediting rate for PBOP applies only to interest bearing health retirement accounts at SDG&E and SoCalGas.

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Health Care Cost Trend Rates

Assumed health care cost trend rates have a significant effect on the amounts that Sempra, SDG&E and SoCalGas report for the health care plan costs. Following are the health care cost trend rates applicable to our PBOP plans:


ASSUMED HEALTH CARE COST TREND RATES

	PBOP
	Pre-65 retirees						Retirees aged 65 years and older
	Years ended December 31,						Years ended December 31,
	2022		2021		2020		2022		2021		2020
Health care cost trend rate assumed for next year	6.00	%	6.00	%	6.00	%	4.50	%	4.75	%	4.75	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend)	4.75	%	4.75	%	4.75	%	4.50	%	4.50	%	4.50	%
Year the rate reaches the ultimate trend	2028		2025		2025		2022		2022		2022

Plan Assets

Investment Allocation Strategy for Sempra’s Pension Master Trust

Sempra’s pension master trust holds the investments for our pension plans and a portion of the investments for our PBOP plans. We maintain additional trusts, as we discuss below, for certain of SDGE’s and SoCalGas’ PBOP plans. Other than through indexing strategies, the trusts do not invest in securities of Sempra.

The current asset allocation objective for the pension master trust is to protect the funded status of the plans while generating sufficient returns to cover future benefit payments and accruals. A portion of the pension master trust is invested in accordance with plan specific de-risking glidepaths designed to reduce the assets’ exposure to risk as the plans become better funded. We assess the portfolio performance by comparing actual returns with relevant benchmarks. The target asset allocations for Sempra’s pension master trust are between return-seeking assets (i.e., generally, equity securities, high-yield fixed income securities and other instruments with a similar risk profile) and risk-mitigating assets (i.e., generally, government and corporate fixed income securities) as follows:


TARGET ASSET ALLOCATIONS FOR SEMPRA’S PENSION MASTER TRUST
(Dollars in millions)
	Sempra		SDG&E		SoCalGas
Return-seeking assets	34	%	42	%	65	%
Risk-mitigating assets	66	%	58	%	35	%

We maintain asset allocations at strategic levels within reasonable bands of variance. The asset allocations are reviewed by our Plan Funding Committee and our Pension and Benefits Investment Committee (the Committees) on a regular basis to help ensure that plan assets are positioned to meet plan obligations. When evaluating strategic asset allocations, the Committees consider many variables, including:

▪long-term cost

▪variability and level of contributions

▪funded status

▪a range of expected outcomes over varying confidence levels

In accordance with the Sempra pension investment guidelines, derivative financial instruments may be used by the pension master trust’s equity and fixed income portfolio investment managers to equitize cash, hedge certain exposures, and as substitutes for certain types of fixed income securities.

Rate of Return Assumption

The expected return on assets in our pension and PBOP plans is based on the weighted-average of the plans’ investment allocations to specific asset classes as of the measurement date. We expect a return of between 4% and 12% on return-seeking assets and between 1% and 4% for risk-mitigating assets. Certain trusts that hold assets for SDG&E’s and SoCalGas’ PBOP plans are subject to taxation, which impacts the expected after-tax return on assets in the plan.

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Concentration of Risk

Plan assets are diversified across global equity and bond markets, and concentration of risk in any one economic, industry, maturity or geographic sector is limited.

Investment Strategy for Sempra’s, SDG&E’s and SoCalGas’ PBOP Plans

Sempra’s PBOP plan is funded by cash contributions from Sempra. SDG&E’s and SoCalGas’ PBOP plans are funded by cash contributions from SDG&E and SoCalGas and their current retirees. The assets of these plans are placed into the pension master trust and other Voluntary Employee Beneficiary Association trusts and are invested in accordance with a de-risking glidepath designed to reduce the assets’ exposure to risk as the trusts become better funded. These specific allocations are periodically reviewed to help ensure that plan assets are positioned to meet plan obligations. The target asset allocations for the PBOP plans are between return-seeking assets and risk-mitigating assets as follows:


TARGET ASSET ALLOCATIONS FOR PBOP PLANS
(Dollars in millions)
	Sempra		SDG&E and SoCalGas
	Assets held in pension master trust		Assets held in pension master trust		Assets held in Voluntary Employee Beneficiary Association trusts
Return-seeking assets	74	%	38	%	30	%
Risk-mitigating assets	26	%	62	%	70	%

Fair Value of Pension and PBOP Plan Assets

We classify the investments in Sempra’s pension master trust and the trusts for SDG&E’s and SoCalGas’ PBOP plans based on the fair value hierarchy, except for certain investments measured at NAV.

The following are descriptions of the valuation methods and assumptions we use to estimate the fair values of investments held by pension and PBOP plan trusts.

Equity Securities – Equity securities are valued using quoted prices listed on nationally recognized securities exchanges.

Registered Investment Companies – Investments in mutual funds sponsored by a registered investment company are valued based on exchange listed prices. Where the value is a quoted price in an active market, the investment is classified within Level 1 of the fair value hierarchy. Other investments are valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks.

Fixed Income Securities – Certain fixed income securities are valued at the closing price reported in the active market in which the security is traded. Other fixed income securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar securities, the security is valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable, such as credit and liquidity risks. Certain high yield fixed-income securities are valued by applying a price adjustment to the bid side to calculate a mean and ask value. Adjustments can vary based on maturity, credit standing, and reported trade frequencies. The bid to ask spread is determined by the investment manager based on the review of the available market information.

Common/Collective Trusts – Investments in common/collective trust funds are valued based on the NAV of units owned, which is based on the current fair value of the funds’ underlying assets.

Derivative Financial Instruments – Futures contracts that are publicly traded in active markets are valued at closing prices as of the last business day of the year. Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies, and unrealized gain (loss) is recorded daily. Fixed income futures and options are marked to market daily. Equity index futures contracts are valued at the last sales price quoted on the exchange on which they primarily trade.

While management believes the valuation methods described above are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

We provide more discussion of fair value measurements in Notes 1 and 12. The following tables set forth by level within the fair value hierarchy a summary of the investments in our pension and PBOP plan trusts measured at fair value on a recurring basis.

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The fair values by asset category are as follows:


FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF PENSION PLANS
(Dollars in millions)
	Fair value at December 31, 2022
	Level 1		Level 2		Total
SDG&E:
Cash and cash equivalents	$	3	$	—	3
Equity securities:
Domestic	79		1		80
International	40		—		40
Registered investment companies:
Domestic	35		2		37
International	5		—		5
Fixed income securities:
Domestic government and government agencies	224		3		227
International government bonds	—		2		2
Domestic corporate bonds	—		52		52
International corporate bonds	—		8		8
Other	(1)		—		(1)
Total investment assets in the fair value hierarchy	385		68		453
Accounts receivable/payable, net					(1)
Investments measured at NAV:
Common/collective trusts					210
Other					8
Total SDG&E investment assets					670
SoCalGas:
Cash and cash equivalents	6		—		6
Equity securities:
Domestic	311		2		313
International	158		—		158
Registered investment companies:
Domestic	137		7		144
International	20		—		20
Fixed income securities:
Domestic government and government agencies	261		17		278
International government bonds	—		6		6
Domestic corporate bonds	—		204		204
International corporate bonds	—		30		30
Other	(1)		1		—
Total investment assets in the fair value hierarchy	892		267		1,159
Accounts receivable/payable, net					(7)
Investments measured at NAV:
Common/collective trusts					355
Other					28
Total SoCalGas investment assets					$	1,535

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FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF PENSION PLANS (CONTINUED)
(Dollars in millions)
	Fair value at December 31, 2022
	Level 1		Level 2		Total
Other Sempra:
Cash and cash equivalents	$	1	$	—	$	1
Equity securities:
Domestic	17		—		17
International	9		—		9
Registered investment companies:
Domestic	7		—		7
International	2		—		2
Fixed income securities:
Domestic government and government agencies	72		3		75
Domestic corporate bonds	—		11		11
International corporate bonds	—		1		1
Total investment assets in the fair value hierarchy	108		15		123
Investments measured at NAV:
Common/collective trusts					60
Other					2
Total other Sempra investment assets					185

Total Sempra investment assets in the fair value hierarchy	$	1,385	$	350
Total Sempra investment assets					$	2,390

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FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF PENSION PLANS
(Dollars in millions)
	Fair value at December 31, 2021
	Level 1		Level 2		Total
SDG&E:
Cash and cash equivalents	$	3	$	—	$	3
Equity securities:
Domestic	154		1		155
International	70		—		70
Registered investment companies:
Domestic	37		4		41
International	6		—		6
Fixed income securities:
Domestic government and government agencies	251		4		255
International government bonds	—		2		2
Domestic corporate bonds	—		75		75
International corporate bonds	—		12		12
Total investment assets in the fair value hierarchy	521		98		619
Accounts receivable/payable, net					(4)
Investments measured at NAV:
Common/collective trusts					233
Other					11
Total SDG&E investment assets					859
SoCalGas:
Cash and cash equivalents	14		—		14
Equity securities:
Domestic	656		4		660
International	299		1		300
Registered investment companies:
Domestic	158		17		175
International	26		—		26
Fixed income securities:
Domestic government and government agencies	136		19		155
International government bonds	—		8		8
Domestic corporate bonds	—		321		321
International corporate bonds	—		50		50
Total investment assets in the fair value hierarchy	1,289		420		1,709
Accounts receivable/payable, net					(15)
Investments measured at NAV:
Common/collective trusts					356
Other					45
Total SoCalGas investment assets					$	2,095

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FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF PENSION PLANS (CONTINUED)
(Dollars in millions)
	Fair value at December 31, 2021
	Level 1		Level 2		Total
Other Sempra:
Cash and cash equivalents	$	1	$	—	$	1
Equity securities:
Domestic	34		—		34
International	15		—		15
Registered investment companies:
Domestic	9		—		9
International	1		—		1
Fixed income securities:
Domestic government and government agencies	76		1		77
International government bonds	—		1		1
Domestic corporate bonds	—		17		17
International corporate bonds	—		3		3
Other	1		—		1
Total investment assets in the fair value hierarchy	137		22		159
Accounts receivable/payable, net					(1)
Investments measured at NAV:
Common/collective trusts					68
Other					2
Total other Sempra investment assets					228

Total Sempra investment assets in the fair value hierarchy	$	1,947	$	540
Total Sempra investment assets					$	3,182

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The fair values by asset category of the PBOP plan assets held in the pension master trust and in the additional trusts for SoCalGas’ PBOP plans and SDG&E’s PBOP plan trusts are as follows:


FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF PBOP PLANS
(Dollars in millions)
	Fair value at December 31, 2022
	Level 1		Level 2		Total
SDG&E:
Equity securities:
Domestic	$	10	$	—	$	10
International	5		—		5
Registered investment companies:
Domestic	65		—		65
International	7		—		7
Fixed income securities:
Domestic government and government agencies	9		2		11
Domestic corporate bonds	—		6		6
International corporate bonds	—		1		1
Total investment assets in the fair value hierarchy	96		9		105
Investments measured at NAV – Common/collective trusts					42
Total SDG&E investment assets					147
SoCalGas:
Cash and cash equivalents	1		—		1
Equity securities:
Domestic	46		—		46
International	24		—		24
Registered investment companies:
Domestic	80		72		152
International	3		—		3
Fixed income securities:
Domestic government and government agencies	151		14		165
International government bonds	1		8		9
Domestic corporate bonds	—		269		269
International corporate bonds	—		37		37
Total investment assets in the fair value hierarchy	306		400		706
Accounts receivable/payable, net					(4)
Investments measured at NAV:
Common/collective trusts					218
Other					3
Total SoCalGas investment assets					923
Other Sempra:
Equity securities:
Domestic	6		—		6
International	3		—		3
Registered investment companies – Domestic	2		—		2
Fixed income securities:
Domestic government and government agencies	2		—		2
Domestic corporate bonds	—		4		4
Total investment assets in the fair value hierarchy	13		4		17
Investments measured at NAV:
Common/collective trusts					7
Other					2
Total other Sempra investment assets					26

Total Sempra investment assets in the fair value hierarchy	$	415	$	413
Total Sempra investment assets					$	1,096

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FAIR VALUE MEASUREMENTS – INVESTMENT ASSETS OF PBOP PLANS
(Dollars in millions)
	Fair value at December 31, 2021
	Level 1		Level 2		Total
SDG&E:
Equity securities:
Domestic	$	16	$	—	$	16
International	7		—		7
Registered investment companies:
Domestic	82		1		83
International	9		—		9
Fixed income securities:
Domestic government and government agencies	24		1		25
Domestic corporate bonds	—		8		8
International corporate bonds	—		1		1
Total investment assets in the fair value hierarchy	138		11		149
Accounts receivable/payable, net					(1)
Investments measured at NAV – Common/collective trusts					49
Total SDG&E investment assets					197

SoCalGas:
Cash and cash equivalents	2		—		2
Equity securities:
Domestic	83		1		84
International	37		—		37
Registered investment companies:
Domestic	74		73		147
International	3		—		3
Fixed income securities:
Domestic government and government agencies	241		17		258
International government bonds	1		11		12
Domestic corporate bonds	—		337		337
International corporate bonds	—		49		49
Total investment assets in the fair value hierarchy	441		488		929
Accounts receivable/payable, net					(1)
Investments measured at NAV:
Common/collective trusts					244
Other					6
Total SoCalGas investment assets					1,178

Other Sempra:
Equity securities:
Domestic	9		—		9
International	6		—		6
Registered investment companies – Domestic	2		—		2
Fixed income securities:
Domestic government and government agencies	2		1		3
Domestic corporate bonds	—		4		4
International corporate bonds	—		1		1
Total investment assets in the fair value hierarchy	19		6		25
Investments measured at NAV:
Common/collective trusts					7
Other					1
Total other Sempra investment assets					33

Total Sempra investment assets in the fair value hierarchy	$	598	$	505
Total Sempra investment assets					$	1,408

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Future Payments

We expect to contribute the following amounts to our pension and PBOP plans in 2023:


EXPECTED CONTRIBUTIONS
(Dollars in millions)
	Sempra		SDG&E		SoCalGas
Pension plans	$	233	$	53	$	153
PBOP plans	5		1		1

The following table shows the total benefits we expect to pay for the next 10 years to current employees and retirees from the plans or from company assets.


EXPECTED BENEFIT PAYMENTS
(Dollars in millions)
	Sempra				SDG&E				SoCalGas
	Pension		PBOP		Pension		PBOP		Pension		PBOP
2023	$	223	$	46	$	58	$	10	$	130	$	33
2024	220		45		58		10		129		33
2025	216		45		59		10		131		32
2026	220		47		57		10		132		32
2027	220		44		56		10		129		32
2028-2032	1,062		220		285		47		654		161

SAVINGS PLANS

Sempra, SDG&E and SoCalGas offer trusteed savings plans to all employees. Employee participation, employee contributions and employer matching contributions are subject to the provisions of the respective plans, and for employee contributions, limits imposed by the respective governmental authorities.

Employer contributions to the savings plans were as follows:


EMPLOYER CONTRIBUTIONS TO SAVINGS PLANS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra	$	64	$	52	$	47
SDG&E	19		18		16
SoCalGas	30		28		25

The market value of Sempra common stock held by the savings plans was $1.1 billion and $1.0 billion at December 31, 2022 and 2021, respectively.

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NOTE 10. SHARE-BASED COMPENSATION

SEMPRA EQUITY COMPENSATION PLANS

Sempra has share-based compensation plans intended to align employee and shareholder objectives related to the long-term growth of Sempra. The plans permit a wide variety of share-based awards, including:

▪nonqualified stock options

▪incentive stock options

▪restricted stock awards

▪restricted stock units

▪stock appreciation rights

▪performance awards

▪stock payments

▪dividend equivalents

Eligible employees, including those from SDG&E and SoCalGas, participate in Sempra’s share-based compensation plans as a component of their compensation package.

In the three years ended December 31, 2022, Sempra had the following types of equity awards outstanding:

▪Nonqualified Stock Options: Options to purchase common stock have an exercise price equal to the market price of the common stock at the date of grant, are service-based, become exercisable over a three-year period and expire 10 years from the date of grant. Unvested option awards are subject to forfeiture following a termination of employment, except where the retirement criteria under such awards have been met and subject to certain other exceptions described below.

▪Performance-Based Restricted Stock Units: These RSU awards generally vest in Sempra common stock at the end of three-year performance periods based on Sempra’s total return to shareholders relative to that of specified market indices or based on the compound annual growth rate of Sempra’s EPS. The comparative market indices for the awards that vest based on total return to shareholders are the S&P 500 Utilities Index (excluding water companies) and the S&P 500 Index. We use long-term analyst consensus growth estimates for S&P 500 Utilities Index peer companies (excluding water companies) to develop our targets for awards that vest based on EPS growth. These RSU awards are subject to forfeiture prior to vesting following a termination of employment, except where the retirement criteria under such awards have been met and subject to certain other exceptions described below.

◦If Sempra’s total return to shareholders or EPS growth is below the target levels but above threshold performance levels, shares are subject to partial vesting on a pro rata basis. If Sempra’s total return to shareholders or EPS growth exceeds target levels, up to an additional 100% of the granted RSUs may be issued.

◦For certain awards granted in 2018 that vest based on Sempra’s total return to shareholders, a modifier adds 20% to the award’s payout (as initially calculated based on total return to shareholders relative to that of specified market indices) for total shareholder return performance in the top quartile relative to historical benchmark data for Sempra and reduces the award’s payout by 20% for performance in the bottom quartile. However, in no event will more than an additional 100% of the granted RSUs be issued. If performance falls within the second or third quartiles, the modifier is not triggered, and the payout is based solely on total return to shareholders relative to that of specified market indices.

▪Service-Based Restricted Stock Units: RSUs may also be service-based; these generally vest ratably over three-year service periods (for awards granted after 2018), or at the end of three-year service periods (for awards granted during 2018). These awards are subject to earlier forfeiture upon termination of employment, subject to certain exceptions described below.

For awards that would otherwise be forfeited upon termination of employment, the Compensation and Talent Development Committee of Sempra’s board of directors may waive the forfeiture requirement and, with respect to options and service-based RSUs, may accelerate vesting. Awards are also subject to accelerated vesting under certain circumstances upon a change in control under the applicable LTIP, in accordance with severance pay agreements or to the extent otherwise required by the terms of the applicable award. Dividend equivalents on shares subject to RSUs are reinvested to purchase additional common shares that become subject to the same vesting conditions as the RSUs to which the dividends relate.

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SHARE-BASED AWARDS AND COMPENSATION EXPENSE

At December 31, 2022, 5,056,550 common shares were authorized and available for future grants of share-based awards. Our practice is to satisfy share-based awards by issuing new shares rather than by open-market purchases.

We measure and recognize compensation expense for all share-based payment awards made to our employees and directors based on estimated fair values on the date of grant. We recognize compensation costs net of an estimated forfeiture rate (based on historical experience) and recognize the compensation costs for nonqualified stock options and RSUs on a straight-line basis over the requisite service period of the award, which is generally three years. However, for awards granted to retirement-eligible participants, the expense is recognized over the initial year in which the award was granted as the award requires service through the end of the year in which it was granted. For awards granted to participants who become eligible for retirement during the requisite service period, the expense is recognized over the period between the date of grant and the later of the end of the year in which the award was granted or the date the participant first becomes eligible for retirement. Substantially all awards outstanding are classified as equity instruments; therefore, we recognize additional paid in capital as we recognize the compensation expense associated with the awards. We recognize in earnings the tax benefits (or deficiencies) resulting from tax deductions that are in excess of (or less than) tax benefits related to compensation cost recognized for share-based payments.

Sempra subsidiaries record an expense for the plans to the extent that subsidiary employees participate in the plans and/or the subsidiaries are allocated a portion of the Sempra plans’ corporate staff costs. Total share-based compensation expense for all of Sempra’s share-based awards was comprised as follows:


SHARE-BASED COMPENSATION EXPENSE
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra:
Share-based compensation expense, before income taxes(1)	$	61	$	58	$	62
Income tax benefit(1)	(17)		(16)		(17)
	$	44	$	42	$	45

Capitalized share-based compensation cost	$	11	$	9	$	11
Excess income tax (benefit) deficiency	$	(3)	$	(9)	$	(19)
SDG&E:
Share-based compensation expense, before income taxes	$	11	$	10	$	11
Income tax benefit	(3)		(3)		(3)
	$	8	$	7	$	8

Capitalized share-based compensation cost	$	6	$	5	$	7
Excess income tax (benefit) deficiency	$	—	$	(1)	$	(3)
SoCalGas:
Share-based compensation expense, before income taxes	$	17	$	14	$	14
Income tax benefit	(5)		(4)		(4)
	$	12	$	10	$	10

Capitalized share-based compensation cost	$	5	$	4	$	4
Excess income tax (benefit) deficiency	$	—	$	(1)	$	(3)

(1) Includes activity of awards issued from the IEnova 2013 LTIP, which settled in cash upon vesting based on the price of IEnova’s common stock.

SEMPRA NONQUALIFIED STOCK OPTIONS

We use a Black-Scholes option-pricing model to estimate the fair value of each nonqualified stock option grant. The use of a valuation model requires us to make certain assumptions about selected model inputs. Expected volatility is calculated based on a blend of the historical and implied volatility of Sempra’s common stock price. The average expected term for options is based on the vesting schedule, contractual term of the option, expected employee exercise and post-termination behavior. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term estimated at the date of the grant. In 2022, 2021 and 2020, Sempra’s board of directors granted 219,898, 222,620 and 154,860 nonqualified stock options, respectively, that become exercisable over a three-year period. The weighted-average per-share fair value for options

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granted was $21.98, $19.07 and $19.76 in 2022, 2021 and 2020, respectively. To calculate this fair value, we used the Black-Scholes model with the following weighted-average assumptions:


KEY ASSUMPTIONS FOR STOCK OPTIONS GRANTED

	Years ended December 31,
	2022		2021		2020
Sempra:
Stock price volatility	26.08	%	26.57	%	18.78	%
Expected term	5.36 years		5.36 years		5.34 years
Risk-free rate of return	1.40	%	0.41	%	1.68	%
Annual dividend yield	3.33	%	3.38	%	2.60	%

The following table shows a summary of nonqualified stock options at December 31, 2022 and activity for the year then ended:


NONQUALIFIED STOCK OPTIONS

	Common shares under options	Weighted- average exercise price		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value (in millions)
Sempra:
Outstanding at January 1, 2022	537,344	$	123.45
Granted	219,898	$	131.99
Exercised	(40,630)	$	106.76

Outstanding at December 31, 2022	716,612	$	127.02	7.72	$	20

Vested or expected to vest at December 31, 2022	716,612	$	127.02	7.72	$	20
Exercisable at December 31, 2022	307,563	$	122.09	6.75	$	10

The aggregate intrinsic value at December 31, 2022 is the total of the difference between Sempra’s closing common stock price and the exercise price for all in-the-money options. The aggregate intrinsic value for nonqualified stock options exercised in the last three years was:

▪$1.7 million in 2022

▪$1.4 million in 2021

▪$0.4 million in 2020

All compensation cost related to stock options had been recognized as of December 31, 2022. The weighted-average exercise price for nonqualified stock options granted in 2021 and 2020 was $123.80 and $149.12, respectively.

We received cash of $4 million, $5 million and a negligible amount from stock option exercises in 2022, 2021 and 2020, respectively.

SEMPRA RESTRICTED STOCK UNITS

We use Sempra’s common stock price at the grant date to estimate the fair value of our service-based RSUs and our RSUs that vest based on the compound annual growth rate of Sempra’s EPS.

We use a Monte-Carlo simulation model to estimate the fair value of our RSUs that vest based on Sempra’s total return to shareholders. Our determination of fair value is affected by the historical volatility of the common stock price for Sempra and its peer group companies. The valuation also is affected by the risk-free rates of return and a number of other variables. Below are key assumptions for RSUs granted in the last three years:

2022 Form 10-K | F-102

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KEY ASSUMPTIONS FOR RSUs GRANTED

	Years ended December 31,
	2022		2021		2020
Sempra:
Stock price volatility	32.82	%	33.39	%	16.35	%
Risk-free rate of return	1.05	%	0.16	%	1.55	%

The following table shows a summary of RSUs at December 31, 2022 and activity for the year then ended:


RESTRICTED STOCK UNITS

	Performance-based restricted stock units			Service-based restricted stock units
	Units	Weighted- average grant-date fair value		Units	Weighted- average grant-date fair value
Sempra:
Nonvested at January 1, 2022	870,777	$	131.64	277,300	$	127.54
Granted	341,139	$	146.94	153,243	$	132.64
Vested	(317,956)	$	113.66	(139,020)	$	126.41
Forfeited	(54,165)	$	134.65	(15,886)	$	139.01
Nonvested at December 31, 2022(1)	839,795	$	144.39	275,637	$	130.86
Expected to vest at December 31, 2022	823,418	$	144.46	267,778	$	130.90

(1) Each RSU represents the right to receive one share of our common stock if applicable performance conditions are satisfied. For all performance-based RSUs, up to an additional 100% of the shares represented by the RSUs may be issued if Sempra exceeds target performance conditions.

In 2022, 2021 and 2020, the total fair value of RSU shares vested during the year was $54 million, $57 million and $70 million, respectively.

We expect $43 million of total compensation cost related to nonvested RSUs not yet recognized as of December 31, 2022 to be recognized over a weighted-average period of 1.6 years. The weighted-average per-share fair values for performance-based RSUs granted were $133.03 and $155.62 in 2021 and 2020, respectively. The weighted-average per-share fair values for service-based RSUs granted were $124.84 and $138.91 in 2021 and 2020, respectively.

NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS

We use derivative instruments primarily to manage exposures arising in the normal course of business. Our principal exposures are commodity market risk, benchmark interest rate risk and foreign exchange rate exposures. Our use of derivatives for these risks is integrated into the economic management of our anticipated revenues, anticipated expenses, assets and liabilities. Derivatives may be effective in mitigating these risks (1) that could lead to declines in anticipated revenues or increases in anticipated expenses, or (2) that could cause our asset values to fall or our liabilities to increase. Accordingly, our derivative activity summarized below generally represents an impact that is intended to offset associated revenues, expenses, assets or liabilities that are not included in the tables below.

In certain cases, we apply the normal purchase or sale exception to derivative instruments and have other commodity contracts that are not derivatives. These contracts are not recorded at fair value and are therefore excluded from the disclosures below.

In all other cases, we record derivatives at fair value on the Consolidated Balance Sheets. We may have derivatives that are (1) cash flow hedges, (2) fair value hedges, or (3) undesignated. Depending on the applicability of hedge accounting and, for SDG&E and SoCalGas and other operations subject to regulatory accounting, the requirement to pass impacts through to customers, the impact of derivative instruments may be offset in OCI (cash flow hedges), on the balance sheet (regulatory offsets), or recognized in earnings (fair value hedges and undesignated derivatives not subject to rate recovery). We classify cash flows from the principal settlements of cross-currency swaps that hedge exposure related to Mexican peso-denominated debt and hedge

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termination costs on interest rate swaps as financing activities and settlements of other derivative instruments as operating activities on the Consolidated Statements of Cash Flows.

HEDGE ACCOUNTING

We may designate a derivative as a cash flow hedging instrument if it effectively converts anticipated cash flows associated with revenues or expenses to a fixed dollar amount. We may utilize cash flow hedge accounting for derivative commodity instruments, foreign currency instruments and interest rate instruments. Designating cash flow hedges is dependent on the business context in which the instrument is being used, the effectiveness of the instrument in offsetting the risk that the future cash flows of a given revenue or expense item may vary, and other criteria.

ENERGY DERIVATIVES

Our market risk is primarily related to natural gas and electricity price volatility and the specific physical locations where we transact. We use energy derivatives to manage these risks. The use of energy derivatives in our various businesses depends on the particular energy market, and the operating and regulatory environments applicable to the business, as follows:

▪SDG&E and SoCalGas use natural gas derivatives and SDG&E uses electricity derivatives, for the benefit of customers, with the objective of managing price risk and basis risk, and stabilizing and lowering natural gas and electricity costs. These derivatives include fixed-price natural gas and electricity positions, options, and basis risk instruments, which are either exchange-traded or over-the-counter financial instruments, or bilateral physical transactions. This activity is governed by risk management and transacting activity plans limited by company policy. SDGE’s risk management and transacting activity plans for electricity derivatives are also required to be filed with, and have been approved by, the CPUC. SoCalGas is also subject to certain regulatory requirements and thresholds related to natural gas procurement under the GCIM. Natural gas and electricity derivative activities are recorded as commodity costs that are offset by regulatory account balances and are recovered in rates. Net commodity cost impacts on the Consolidated Statements of Operations are reflected in Cost of Natural Gas or in Cost of Electric Fuel and Purchased Power.

▪SDG&E is allocated and may purchase CRRs, which serve to reduce the regional electricity price volatility risk that may result from local transmission capacity constraints. Unrealized gains and losses do not impact earnings, as they are offset by regulatory account balances. Realized gains and losses associated with CRRs, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Consolidated Statements of Operations.

▪Sempra Infrastructure may use natural gas and electricity derivatives, as appropriate, in an effort to optimize the earnings of its assets which support the following businesses: LNG, natural gas pipelines and storage, and power generation. Gains and losses associated with undesignated derivatives are recognized in Energy-Related Businesses Revenues on the Consolidated Statements of Operations.

▪From time to time, our various businesses, including SDG&E and SoCalGas, may use other energy derivatives to hedge exposures such as GHG allowances.

The following table summarizes net energy derivative volumes.


NET ENERGY DERIVATIVE VOLUMES
(Quantities in millions)
		December 31,
Commodity	Unit of measure	2022	2021
Sempra:
Natural gas	MMBtu	254	184
Electricity	MWh	1	1
Congestion revenue rights	MWh	42	45
SDG&E:
Natural gas	MMBtu	15	7
Electricity	MWh	—	1
Congestion revenue rights	MWh	42	45
SoCalGas:
Natural gas	MMBtu	224	201

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INTEREST RATE DERIVATIVES

We are exposed to interest rates primarily as a result of our current and expected use of financing. SDG&E and SoCalGas, as well as Sempra and its other subsidiaries and JVs, periodically enter into interest rate derivative agreements intended to moderate our exposure to interest rates and to lower our overall costs of borrowing. In addition, we may utilize interest rate swaps, typically designated as cash flow hedges, to lock in interest rates on outstanding debt or in anticipation of future financings.

In December 2022, Sempra Infrastructure entered into an undesignated contingent interest rate swap to lock in interest rates on up to $3.5 billion of the variable rate indebtedness from anticipated future project-level debt financing that would be used to pay for construction costs of the proposed PA LNG Phase 1 project. The contingent interest rate swap has a 25-year tenor, and its settlement is conditional upon the closing of project-level debt financing with respect to the proposed PA LNG Phase 1 project. We may elect to (i) cash settle the contingent interest rate swap five days after reaching the closing of project-level debt financing, or (ii) terminate the contingent interest rate swap and enter into new long-term interest rate swaps that are adjusted for the termination value of the contingent interest rate swap. We expect to close the project-level debt financing in the first quarter of 2023.

The following table presents the net notional amounts of our interest rate derivatives, excluding those in our equity method investments and the contingent interest rate swap.

INTEREST RATE DERIVATIVES

(Dollars in millions)

December 31, 2022

December 31, 2021

Notional debt

Maturities

Notional debt

Maturities

Sempra:

Cash flow hedges

294

2023-2034

462

2022-2034

FOREIGN CURRENCY DERIVATIVES

We utilize cross-currency swaps to hedge exposure related to Mexican peso-denominated debt at our Mexican subsidiaries and JVs. These cash flow hedges exchange our Mexican peso-denominated principal and interest payments into the U.S. dollar and swap Mexican fixed interest rates for U.S. fixed interest rates. From time to time, Sempra Infrastructure and its JVs may use other foreign currency derivatives to hedge exposures related to cash flows associated with revenues from contracts denominated in Mexican pesos that are indexed to the U.S. dollar.

We are also exposed to exchange rate movements at our Mexican subsidiaries and JVs, which have U.S. dollar-denominated cash balances, receivables, payables and debt (monetary assets and liabilities) that give rise to Mexican currency exchange rate movements for Mexican income tax purposes. They also have deferred income tax assets and liabilities denominated in the Mexican peso, which must be translated to U.S. dollars for financial reporting purposes. In addition, monetary assets and liabilities and certain nonmonetary assets and liabilities are adjusted for Mexican inflation for Mexican income tax purposes. We may utilize foreign currency derivatives as a means to manage the risk of exposure to significant fluctuations in our income tax expense and equity earnings from these impacts; however, we generally do not hedge our deferred income tax assets and liabilities or for inflation.

We also utilized foreign currency derivatives in 2020 to hedge exposure to fluctuations in the Peruvian sol and Chilean peso related to the sales of our operations in Peru and Chile, respectively.

The following table presents the net notional amounts of our foreign currency derivatives, excluding those in our equity method investments.


FOREIGN CURRENCY DERIVATIVES
(Dollars in millions)
	December 31, 2022			December 31, 2021
	Notional amount		Maturities	Notional amount		Maturities
Sempra:
Cross-currency swaps	$	306	2023	$	306	2022-2023
Other foreign currency derivatives	111		2023-2024	106		2022-2023

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FINANCIAL STATEMENT PRESENTATION

The Consolidated Balance Sheets reflect the offsetting of net derivative positions and cash collateral with the same counterparty when a legal right of offset exists. The following tables provide the fair values of derivative instruments on the Consolidated Balance Sheets, including the amount of cash collateral receivables that were not offset because the cash collateral was in excess of liability positions.


DERIVATIVE INSTRUMENTS ON THE CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	December 31, 2022
	Current assets: Fixed-price contracts and other derivatives(1)		Other long-term assets		Other current liabilities		Deferred credits and other
Sempra:
Derivatives designated as hedging instruments:
Interest rate instruments	$	10	$	33	$	—	$	—
Foreign exchange instruments	—		—		(7)		(1)
Interest rate and foreign exchange instruments	—		—		(105)		—
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery	480		133		(399)		(132)
Associated offsetting commodity contracts	(301)		(39)		301		39
Commodity contracts subject to rate recovery	138		27		(97)		(2)
Associated offsetting commodity contracts	(27)		(2)		27		2
Interest rate instrument	33		—		—		—
Net amounts presented on the balance sheet	333		152		(280)		(94)
Additional cash collateral for commodity contracts not subject to rate recovery	451		—		—		—
Additional cash collateral for commodity contracts subject to rate recovery	18		—		—		—
Total(2)	$	802	$	152	$	(280)	$	(94)
SDG&E:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	107	$	27	$	(13)	$	(2)
Associated offsetting commodity contracts	(12)		(2)		12		2
Net amounts presented on the balance sheet	95		25		(1)		—
Additional cash collateral for commodity contracts subject to rate recovery	17		—		—		—
Total(2)	$	112	$	25	$	(1)	$	—
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	31	$	—	$	(84)	$	—
Associated offsetting commodity contracts	(15)		—		15		—
Net amounts presented on the balance sheet	16		—		(69)		—
Additional cash collateral for commodity contracts subject to rate recovery	1		—		—		—
Total	$	17	$	—	$	(69)	$	—

(1) Included in Current Assets: Other for SoCalGas.

(2) Normal purchase contracts previously measured at fair value are excluded.

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DERIVATIVE INSTRUMENTS ON THE CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	December 31, 2021
	Current assets: Fixed-price contracts and other derivatives(1)		Other long-term assets		Other current liabilities		Deferred credits and other
Sempra:
Derivatives designated as hedging instruments:
Interest rate instruments	$	—	$	6	$	(6)	$	(2)
Foreign exchange instruments	1		1		(1)		—
Interest rate and foreign exchange instruments	—		—		(1)		(130)
Derivatives not designated as hedging instruments:
Commodity contracts not subject to rate recovery	136		11		(122)		(10)
Associated offsetting commodity contracts	(93)		(8)		93		8
Commodity contracts subject to rate recovery	38		52		(58)		—
Associated offsetting commodity contracts	(8)		—		8		—
Net amounts presented on the balance sheet	74		62		(87)		(134)
Additional cash collateral for commodity contracts not subject to rate recovery	58		—		—		—
Additional cash collateral for commodity contracts subject to rate recovery	46		—		—		—
Total(2)	$	178	$	62	$	(87)	$	(134)
SDG&E:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	34	$	52	$	(20)	$	—
Associated offsetting commodity contracts	(5)		—		5		—
Net amounts presented on the balance sheet	29		52		(15)		—
Additional cash collateral for commodity contracts subject to rate recovery	28		—		—		—
Total(2)	$	57	$	52	$	(15)	$	—
SoCalGas:
Derivatives not designated as hedging instruments:
Commodity contracts subject to rate recovery	$	4	$	—	$	(38)	$	—
Associated offsetting commodity contracts	(3)		—		3		—
Net amounts presented on the balance sheet	1		—		(35)		—
Additional cash collateral for commodity contracts subject to rate recovery	18		—		—		—
Total	$	19	$	—	$	(35)	$	—

(1) Included in Current Assets: Other for SoCalGas.

(2) Normal purchase contracts previously measured at fair value are excluded.

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The following table includes the effects of derivative instruments designated as cash flow hedges on the Consolidated Statements of Operations and in OCI and AOCI.


CASH FLOW HEDGE IMPACTS
(Dollars in millions)
	Pretax gain (loss) recognized in OCI							Pretax (loss) gain reclassified from AOCI into earnings
	Years ended December 31,							Years ended December 31,
	2022		2021		2020		Location	2022		2021		2020
Sempra:
Interest rate instruments	$	40	$	29	$	(34)	Interest Expense	$	(1)	$	(11)	$	(10)
Interest rate instruments	205		71		(185)		Equity Earnings(1)	(29)		(73)		(46)
Foreign exchange instruments	(8)		11		(4)		Revenues: Energy- Related Businesses	1		(1)		1
							Other Income (Expense), Net	(1)		—		—
Foreign exchange instruments	(5)		8		(3)		Equity Earnings(1)	—		—		—
Interest rate and foreign exchange instruments	25		(4)		(6)		Interest Expense	2		(1)		(1)
							Other Income (Expense), Net	12		(6)		(11)
Total	$	257	$	115	$	(232)		$	(16)	$	(92)	$	(67)
SoCalGas:
Interest rate instruments	$	—	$	—	$	—	Interest Expense	$	(1)	$	—	$	—

(1) Equity earnings at our foreign equity method investees are recognized after tax.

For Sempra, we expect that net gains before NCI of $31 million, which are net of income tax expense, that are currently recorded in AOCI (with net gains of $18 million attributable to NCI) related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. SoCalGas expects that $1 million of losses, net of income tax benefit, that are currently recorded in AOCI related to cash flow hedges will be reclassified into earnings during the next 12 months as the hedged items affect earnings. Actual amounts ultimately reclassified into earnings depend on the interest rates in effect when derivative contracts mature.

For all forecasted transactions, the maximum remaining term over which we are hedging exposure to the variability of cash flows at December 31, 2022 is approximately 12 years for Sempra. The maximum remaining term for which we are hedging exposure to the variability of cash flows at our equity method investees is 17 years.

The following table summarizes the effects of derivative instruments not designated as hedging instruments on the Consolidated Statements of Operations.


UNDESIGNATED DERIVATIVE IMPACTS
(Dollars in millions)
		Pretax (loss) gain on derivatives recognized in earnings
		Years ended December 31,
	Location	2022		2021		2020
Sempra:
Commodity contracts not subject to rate recovery	Revenues: Energy-Related Businesses	$	(1,116)	$	(203)	$	17
Commodity contracts subject to rate recovery	Cost of Natural Gas	(56)		(25)		(7)
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	202		31		88
Interest rate instrument	Interest Expense	33		—		—
Foreign exchange instruments	Other Income (Expense), Net	—		(22)		(56)
Total		$	(937)	$	(219)	$	42
SDG&E:
Commodity contracts subject to rate recovery	Cost of Electric Fuel and Purchased Power	$	202	$	31	$	88
SoCalGas:
Commodity contracts subject to rate recovery	Cost of Natural Gas	$	(56)	$	(25)	$	(7)

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CREDIT RISK RELATED CONTINGENT FEATURES

For Sempra, SDG&E and SoCalGas, certain of our derivative instruments contain credit limits which vary depending on our credit ratings. Generally, these provisions, if applicable, may reduce our credit limit if a specified credit rating agency reduces our ratings. In certain cases, if our credit ratings were to fall below investment grade, the counterparty to these derivative liability instruments could request immediate payment or demand immediate and ongoing full collateralization.

For Sempra, the total fair value of this group of derivative instruments in a liability position at December 31, 2022 and 2021 was $106 million and $88 million, respectively. For SoCalGas, the total fair value of this group of derivative instruments in a liability position at December 31, 2022 and 2021 was $69 million and $36 million, respectively. SDG&E did not have this group of derivative instruments in a liability position at December 31, 2022 or 2021. At December 31, 2022, if the credit ratings of Sempra or SoCalGas were reduced below investment grade, $106 million and $69 million, respectively, of additional assets could be required to be posted as collateral for these derivative contracts.

For Sempra, SDG&E and SoCalGas, some of our derivative contracts contain a provision that would permit the counterparty, in certain circumstances, to request adequate assurance of our performance under the contracts. Such additional assurance, if needed, is not material and is not included in the amounts above.

NOTE 12. FAIR VALUE MEASUREMENTS

RECURRING FAIR VALUE MEASURES

The three tables below, by level within the fair value hierarchy, set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis at December 31, 2022 and 2021. We classify financial assets and liabilities in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair-valued assets and liabilities, and their placement within the fair value hierarchy.

The fair value of commodity derivative assets and liabilities is presented in accordance with our netting policy, as we discuss in Note 11 under “Financial Statement Presentation.”

The determination of fair values, shown in the tables below, incorporates various factors, including but not limited to, the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits, letters of credit and priority interests).

Our financial assets and liabilities that were accounted for at fair value on a recurring basis in the tables below include the following:

▪Nuclear decommissioning trusts reflect the assets of SDG&E’s NDT, excluding accounts receivable and accounts payable. A third-party trustee values the trust assets using prices from a pricing service based on a market approach. We validate these prices by comparison to prices from other independent data sources. Securities are valued using quoted prices listed on nationally recognized securities exchanges or based on closing prices reported in the active market in which the identical security is traded (Level 1). Other securities are valued based on yields that are currently available for comparable securities of issuers with similar credit ratings (Level 2).

▪For commodity contracts, interest rate instruments and foreign exchange instruments, we primarily use a market or income approach with market participant assumptions to value these derivatives. Market participant assumptions include those about risk, and the risk inherent in the inputs to the valuation techniques. These inputs can be readily observable, market corroborated, or generally unobservable. We have exchange-traded derivatives that are valued based on quoted prices in active markets for the identical instruments (Level 1). We also may have other commodity derivatives that are valued using industry standard models that consider quoted forward prices for commodities, time value, current market and contractual prices for the underlying instruments, volatility factors, and other relevant economic measures (Level 2). Level 3 recurring items relate to CRRs and long-term, fixed-price electricity positions at SDG&E, as we discuss below in “Level 3 Information – SDG&E.”

▪Rabbi Trust investments include short-term investments that consist of money market and mutual funds that we value using a market approach based on closing prices reported in the active market in which the identical security is traded (Level 1).

▪As we discuss in Note 6, in July 2020, Sempra entered into a Support Agreement for the benefit of CFIN. We measure the Support Agreement, which includes a guarantee obligation, a put option and a call option, net of related guarantee fees, at fair value on a recurring basis. We use a discounted cash flow model to value the Support Agreement, net of related guarantee fees.

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Because some of the inputs that are significant to the valuation are less observable, the Support Agreement is classified as Level 3, as we describe below in “Level 3 Information – Sempra Infrastructure.”


RECURRING FAIR VALUE MEASURES – SEMPRA
(Dollars in millions)
	Fair value at December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	10	$	1	$	—	$	11
Equity securities	293		4		—		297
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		13		—		40
Municipal bonds	—		270		—		270
Other securities	—		227		—		227
Total debt securities	27		510		—		537
Total nuclear decommissioning trusts(1)	330		515		—		845
Short-term investments held in Rabbi Trust	55		—		—		55
Interest rate instruments	—		76		—		76
Commodity contracts not subject to rate recovery	—		273		—		273
Effect of netting and allocation of collateral(2)	451		—		—		451
Commodity contracts subject to rate recovery	82		19		35		136
Effect of netting and allocation of collateral(2)	12		—		6		18
Support Agreement, net of related guarantee fees	—		—		17		17
Total	$	930	$	883	$	58	$	1,871
Liabilities:
Foreign exchange instruments	$	—	$	8	$	—	$	8
Interest rate and foreign exchange instruments	—		105		—		105
Commodity contracts not subject to rate recovery	—		191		—		191
Commodity contracts subject to rate recovery	—		70		—		70
Total	$	—	$	374	$	—	$	374

(1) Excludes receivables (payables), net.

(2) Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

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RECURRING FAIR VALUE MEASURES – SEMPRA (CONTINUED)
(Dollars in millions)
	Fair value at December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	13	$	(10)	$	—	$	3
Equity securities	358		6		—		364
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	48		8		—		56
Municipal bonds	—		321		—		321
Other securities	—		260		—		260
Total debt securities	48		589		—		637
Total nuclear decommissioning trusts(1)	419		585		—		1,004
Short-term investments held in Rabbi Trust	81		—		—		81
Interest rate instruments	—		6		—		6
Foreign exchange instruments	—		2		—		2
Commodity contracts not subject to rate recovery	—		46		—		46
Effect of netting and allocation of collateral(2)	58		—		—		58
Commodity contracts subject to rate recovery	12		1		69		82
Effect of netting and allocation of collateral(2)	31		9		6		46
Support Agreement, net of related guarantee fees	—		—		7		7
Total	$	601	$	649	$	82	$	1,332
Liabilities:
Interest rate instruments	$	—	$	8	$	—	$	8
Foreign exchange instruments	—		1		—		1
Interest rate and foreign exchange instruments	—		131		—		131
Commodity contracts not subject to rate recovery	—		31		—		31
Commodity contracts subject to rate recovery	—		35		15		50
Total	$	—	$	206	$	15	$	221

(1) Excludes receivables (payables), net.

(2) Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

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RECURRING FAIR VALUE MEASURES – SDG&E
(Dollars in millions)
	Fair value at December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	10	$	1	$	—	$	11
Equity securities	293		4		—		297
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	27		13		—		40
Municipal bonds	—		270		—		270
Other securities	—		227		—		227
Total debt securities	27		510		—		537
Total nuclear decommissioning trusts(1)	330		515		—		845
Commodity contracts subject to rate recovery	82		3		35		120
Effect of netting and allocation of collateral(2)	11		—		6		17
Total	$	423	$	518	$	41	$	982
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	1	$	—	$	1
Total	$	—	$	1	$	—	$	1

	Fair value at December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Nuclear decommissioning trusts:
Short-term investments, primarily cash equivalents	$	13	$	(10)	$	—	$	3
Equity securities	358		6		—		364
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	48		8		—		56
Municipal bonds	—		321		—		321
Other securities	—		260		—		260
Total debt securities	48		589		—		637
Total nuclear decommissioning trusts(1)	419		585		—		1,004
Commodity contracts subject to rate recovery	12		—		69		81
Effect of netting and allocation of collateral(2)	22		—		6		28
Total	$	453	$	585	$	75	$	1,113
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	—	$	15	$	15
Total	$	—	$	—	$	15	$	15

(1) Excludes receivables (payables), net.

(2) Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

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RECURRING FAIR VALUE MEASURES – SOCALGAS
(Dollars in millions)
	Fair value at December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Commodity contracts subject to rate recovery	$	—	$	16	$	—	$	16
Effect of netting and allocation of collateral(1)	1		—		—		1
Total	$	1	$	16	$	—	$	17
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	69	$	—	$	69
Total	$	—	$	69	$	—	$	69

	Fair value at December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Commodity contracts subject to rate recovery	$	—	$	1	$	—	$	1
Effect of netting and allocation of collateral(1)	9		9		—		18
Total	$	9	$	10	$	—	$	19
Liabilities:
Commodity contracts subject to rate recovery	$	—	$	35	$	—	$	35
Total	$	—	$	35	$	—	$	35

(1) Includes the effect of the contractual ability to settle contracts under master netting agreements and with cash collateral, as well as cash collateral not offset.

Level 3 Information

SDG&E

The table below sets forth reconciliations of changes in the fair value of CRRs and long-term, fixed-price electricity positions classified as Level 3 in the fair value hierarchy for Sempra and SDG&E.


LEVEL 3 RECONCILIATIONS(1)
(Dollars in millions)
	2022		2021		2020
Balance at January 1	$	54	$	69	$	28
Realized and unrealized (losses) gains	(56)		(50)		19
Allocated transmission instruments	(4)		3		6
Settlements	41		32		16
Balance at December 31	$	35	$	54	$	69
Change in unrealized (losses) gains relating to instruments still held at December 31	$	(10)	$	(16)	$	34

(1) Excludes the effect of the contractual ability to settle contracts under master netting agreements.

Inputs used to determine the fair value of CRRs and fixed-price electricity positions are reviewed and compared with market conditions to determine reasonableness. SDG&E expects all costs related to these instruments to be recoverable through customer rates. As such, there is no impact to earnings from changes in the fair value of these instruments.

CRRs are recorded at fair value based almost entirely on the most current auction prices published by the California ISO, an objective source. Annual auction prices are published once a year, typically in the middle of November, and are the basis for valuing CRRs settling in the following year. For the CRRs settling from January 1 to December 31, the auction price inputs, at a given location, were in the following ranges for the years indicated below:


CONGESTION REVENUE RIGHTS AUCTION PRICE INPUTS

Settlement year		Price per MWh					Median price per MWh
2023	$	(3.09)	to	$	10.71	$	(0.56)
2022		(3.67)	to		6.96		(0.70)
2021		(1.81)	to		14.11		(0.12)

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The impact associated with discounting is negligible. Because these auction prices are a less observable input, these instruments are classified as Level 3. The fair value of these instruments is derived from auction price differences between two locations. Positive values between two locations represent expected future reductions in congestion costs, whereas negative values between two locations represent expected future charges. Valuation of our CRRs is sensitive to a change in auction price. If auction prices at one location increase (decrease) relative to another location, this could result in a significantly higher (lower) fair value measurement. We summarize CRR volumes in Note 11.

Long-term, fixed-price electricity positions that are valued using significant unobservable data are classified as Level 3 because the contract terms relate to a delivery location or tenor for which observable market rate information is not available. The fair value of the net electricity positions classified as Level 3 is derived from a discounted cash flow model using market electricity forward price inputs. The range and weighted-average price of these inputs at December 31 were as follows:


LONG-TERM, FIXED-PRICE ELECTRICITY POSITIONS PRICE INPUTS

Settlement year		Price per MWh					Weighted-average price per MWh
2022	$	33.45	to	$	274.70	$	85.64
2021		24.10	to		105.00		53.57

A significant increase (decrease) in market electricity forward prices would result in a significantly higher (lower) fair value. We summarize long-term, fixed-price electricity position volumes in Note 11.

Realized gains and losses associated with CRRs and long-term, fixed-price electricity positions, which are recoverable in rates, are recorded in Cost of Electric Fuel and Purchased Power on the Consolidated Statements of Operations. Because unrealized gains and losses are recorded as regulatory assets and liabilities, they do not affect earnings.

Sempra Infrastructure

The table below sets forth reconciliations of changes in the fair value of Sempra’s Support Agreement for the benefit of CFIN classified as Level 3 in the fair value hierarchy for Sempra.


LEVEL 3 RECONCILIATIONS
(Dollars in millions)
	2022		2021		2020
Balance at January 1	$	7	$	3	$	—
Realized and unrealized gains(1)	19		11		6
Settlements	(9)		(7)		(3)
Balance at December 31(2)	$	17	$	7	$	3
Change in unrealized gains relating to instruments still held at December 31	$	18	$	11	$	3

(1) Net gains are included in Interest Income and net losses are included in Interest Expense on Sempra’s Consolidated Statements of Operations.

(2) Balance at December 31, 2022 includes $7 in Other Current Assets and $10 in Other Long-Term Assets. Balances at December 31, 2021 and 2020 include $7 in Other Current Assets, offset by a negligible amount and $4, respectively, in Deferred Credits and Other on Sempra’s Consolidated Balance Sheets.

The fair value of the Support Agreement, net of related guarantee fees, is based on a discounted cash flow model using a probability of default and survival methodology. Our estimate of fair value considers inputs such as third-party default rates, credit ratings, recovery rates, and risk-adjusted discount rates, which may be readily observable, market corroborated or generally unobservable inputs. Because CFIN’s credit rating and related default and survival rates are unobservable inputs that are significant to the valuation, the Support Agreement, net of related guarantee fees, is classified as Level 3. We assigned CFIN an internally developed credit rating of A3 and relied on default rate data published by Moody’s to assign a probability of default. A hypothetical change in the credit rating up or down one notch could result in a significant change in the fair value of the Support Agreement.

Fair Value of Financial Instruments

The fair values of certain of our financial instruments (cash, accounts receivable, amounts due to/from unconsolidated affiliates with original maturities of less than 90 days, dividends and accounts payable, short-term debt and customer deposits) approximate their carrying amounts because of the short-term nature of these instruments. Investments in life insurance contracts that we hold

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in support of our Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans are carried at cash surrender values, which represent the amount of cash that could be realized under the contracts. The following table provides the carrying amounts and fair values of certain other financial instruments that are not recorded at fair value on the Consolidated Balance Sheets.


FAIR VALUE OF FINANCIAL INSTRUMENTS
(Dollars in millions)
	Carrying		Fair value
	amount		Level 1		Level 2		Level 3		Total
	December 31, 2022
Sempra:
Long-term note receivable(1)	$	318	$	—	$	—	$	286	$	286
Long-term amounts due to unconsolidated affiliates	301		—		263		—		263
Total long-term debt(2)	24,513		—		21,549		—		21,549
SDG&E:
Total long-term debt(3)	$	7,800	$	—	$	6,726	$	—	$	6,726
SoCalGas:
Total long-term debt(4)	$	6,059	$	—	$	5,538	$	—	$	5,538

	December 31, 2021
Sempra:
Long-term note receivable(1)	$	300	$	—	$	—	$	327	$	327
Long-term amounts due from unconsolidated affiliates(5)	640		—		642		—		642
Long-term amounts due to unconsolidated affiliates	287		—		295		—		295
Total long-term debt(2)	20,099		—		22,126		—		22,126
SDG&E:
Total long-term debt(3)	$	6,417	$	—	$	7,236	$	—	$	7,236
SoCalGas:
Total long-term debt(4)	$	4,759	$	—	$	5,367	$	—	$	5,367

(1) Before allowances for credit losses of $7 and $8 at December 31, 2022 and 2021, respectively. Excludes unamortized transaction costs of $5 at both December 31, 2022 and 2021.

(2) Before reductions of unamortized discount and debt issuance costs of $289 and $260 at December 31, 2022 and 2021, respectively, and excluding finance lease obligations of $1,343 and $1,335 at December 31, 2022 and 2021, respectively.

(3) Before reductions of unamortized discount and debt issuance costs of $70 and $61 at December 31, 2022 and 2021, respectively, and excluding finance lease obligations of $1,256 and $1,274 at December 31, 2022 and 2021, respectively.

(4) Before reductions of unamortized discount and debt issuance costs of $48 and $36 at December 31, 2022 and 2021, respectively, and excluding finance lease obligations of $87 and $61 at December 31, 2022 and 2021, respectively.

(5) Before allowances for credit losses of $1 at December 31, 2021. Includes $2 of accrued interest receivable at December 31, 2021 in Due From Unconsolidated Affiliate – Current.

We provide the fair values for the securities held in the NDT related to SONGS in Note 15.

NOTE 13. PREFERRED STOCK

Sempra and SDG&E are authorized to issue up to 50 million and 45 million shares of preferred stock, respectively. At December 31, 2022 and 2021, SDG&E had no preferred stock outstanding. The rights, preferences, privileges and restrictions for any new series of preferred stock would be established by each company’s board of directors at the time of issuance. We discuss SoCalGas preferred stock below.

SEMPRA MANDATORY CONVERTIBLE PREFERRED STOCK

On January 15, 2021, we converted 17,250,000 shares of series A preferred stock into 13,781,025 shares of our common stock based on a conversion rate of 0.7989 shares of our common stock for each issued and outstanding share of series A preferred stock. As a consequence, no shares of series A preferred stock were outstanding after January 15, 2021 and the 17,250,000 shares that were formerly series A preferred stock have returned to the status of authorized and unissued shares of preferred stock.

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As of July 15, 2021, we had converted, pursuant to either early conversions at the election of the holder or the mandatory conversion of all outstanding shares, all 5,750,000 shares of series B preferred stock into an aggregate of 4,256,720 shares of our common stock and a nominal amount of cash in lieu of fractional share interests, based on a conversion rate of 0.7403 shares of our common stock for each issued and outstanding share of series B preferred stock. As a consequence, no shares of series B preferred stock were outstanding after July 15, 2021 and the 5,750,000 shares that were formerly series B preferred stock have returned to the status of authorized and unissued shares of preferred stock.

SEMPRA SERIES C PREFERRED STOCK

At December 31, 2022 and 2021, Sempra had 900,000 shares of 4.875% fixed-rate reset cumulative redeemable perpetual preferred stock, series C (series C preferred stock) outstanding.

Liquidation Preference

Each share of series C preferred stock has a liquidation preference of $1,000 plus any accumulated and unpaid dividends (whether or not declared) on such share.

Redemption at the Option of Sempra

The shares of series C preferred stock are perpetual and have no maturity date. However, we may, at our option, redeem the series C preferred stock in whole or in part, from time to time, on any day during the period from and including the July 15 immediately preceding October 15, 2025 and October 15 of every fifth year after 2025 through and including such October 15 at a redemption price in cash equal to $1,000 per share. Additionally, in the event that a credit rating agency then publishing a rating for us makes certain amendments, clarifications or changes to the criteria it uses to assign equity credit to securities such as the series C preferred stock (Ratings Event), we may redeem the series C preferred stock, in whole but not in part, at any time within 120 days after the conclusion of any review or appeal process instituted by us following the occurrence of the Ratings Event or, if no such review or appeal process is available or sought, the occurrence of such Ratings Event, at a redemption price in cash equal to $1,020 per share (102% of the liquidation preference per share).

Dividends

Dividends on the series C preferred stock, when, as and if declared by our board of directors or an authorized committee thereof, are payable in cash, on a cumulative basis, semi-annually in arrears. Dividends on the series C preferred stock will be cumulative whether or not:

▪we have earnings;

▪the payment of such dividends is then permitted under California law;

▪such dividends are authorized or declared; and

▪any agreements to which we are a party prohibit the current payment of dividends, including any agreement relating to our indebtedness.

We accrue dividends on the series C preferred stock on a monthly basis. The dividend rate from and including June 19, 2020 to, but excluding, October 15, 2025 is 4.875% per annum of the $1,000 liquidation preference per share. The dividend rate will reset on October 15, 2025 and on October 15 of every fifth year after 2025 and, for each five-year period following such reset dates, will be a per annum rate equal to the Five-year U.S. Treasury Rate (as defined in the certificate of determination of preferences of the series C preferred stock) as of the second business day prior to such reset date, plus a spread of 4.550%, of the $1,000 liquidation preference per share.

Voting Rights

The holders of series C preferred stock do not have any voting rights, except with respect to any authorization, creation or increase in the authorized amount of any class or series of capital stock ranking senior to the series C preferred stock, certain amendments to the terms of the series C preferred stock, in certain other limited circumstances and as otherwise specifically required by California law. In addition, whenever dividends on any shares of series C preferred stock have not been declared and paid or have been declared but not paid for three or more dividend periods, whether or not consecutive, the authorized number of directors on our board of directors will automatically be increased by two and the holders of the series C preferred stock, voting together as a single class with holders of any and all other outstanding series of preferred stock of equal rank having similar voting rights, will be entitled to elect two directors who satisfy certain requirements to fill such two newly created directorships. This voting right will terminate when all accumulated and unpaid dividends on the series C preferred stock have been paid in full and, upon such termination and the termination of the same voting rights of all other holders of outstanding series of preferred

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stock that have such voting rights, the term of office of each director elected pursuant to such rights will terminate and the authorized number of directors will automatically decrease by two, subject to the revesting of such rights in the event of each subsequent nonpayment.

Ranking

The series C preferred stock ranks, with respect to dividend rights and distribution rights upon our liquidation, winding-up or dissolution:

▪senior to our common stock and each other class or series of our capital stock established in the future, unless the terms of such capital stock expressly provide otherwise;

▪on parity with each class or series of our capital stock established in the future, if the terms of such capital stock provide that it ranks on parity with the series C preferred stock;

▪junior to each class or series of our capital stock established in the future, if the terms of such capital stock provide that it ranks senior to the series C preferred stock;

▪junior to our existing and future indebtedness and other liabilities; and

▪structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries and capital stock of our subsidiaries held by third parties.

SOCALGAS PREFERRED STOCK

SoCalGas is authorized to issue up to an aggregate of 11 million shares of preferred stock, series preferred stock and preference stock. The table below presents preferred stock outstanding at SoCalGas:


PREFERRED STOCK OUTSTANDING
(Dollars in millions, except per share amounts)
	December 31,
	2022		2021
$25 par value, authorized 1,000,000 shares:
6% Series, 79,011 shares outstanding	$	3	$	3
6% Series A, 783,032 shares outstanding	19		19
SoCalGas - Total preferred stock	22		22
Less: 50,970 shares of the 6% Series outstanding owned by PE	(2)		(2)
Sempra - Total preferred stock of subsidiary	$	20	$	20

None of SoCalGas’ outstanding preferred stock is callable, and no shares are subject to mandatory redemption.

All outstanding shares have one vote per share, cumulative preferences as to dividends and liquidation preferences of $25 per share plus any unpaid dividends.

In addition to the outstanding preferred stock above, SoCalGas’ articles of incorporation authorize 5 million shares of series preferred stock and 5 million shares of preference stock, both without par value and with cumulative preferences as to dividends and liquidation value. The preference stock would rank junior to all series of preferred stock and series preferred stock. Other rights and privileges of any new series of such stock would be established by the SoCalGas board of directors at the time of issuance.

NOTE 14. SEMPRA – SHAREHOLDERS’ EQUITY AND EARNINGS PER COMMON SHARE

SEMPRA COMMON STOCK REPURCHASES

On September 11, 2007, our board of directors authorized the repurchase of shares of our common stock, provided that the amounts spent for such purpose do not exceed the greater of $2 billion or amounts spent to purchase no more than 40 million shares. On July 1, 2020, we entered into an ASR program under which we prepaid $500 million to repurchase shares of our common stock in a share forward transaction. The total number of shares purchased was determined by dividing the $500 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of July 2, 2020 through August 4, 2020, minus a fixed discount. The ASR program was completed on August 4,

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2020 with an aggregate of 4,089,375 shares of Sempra common stock repurchased at an average price of $122.27 per share. Following the completion of the ASR program, the aggregate dollar amount authorized by the September 11, 2007 share repurchase authorization was exhausted.

Beginning on November 17, 2021, we executed a series of open market repurchases for which we paid $300 million to repurchase shares of our common stock in the open market. The repurchases were completed on December 7, 2021 with an aggregate of 2,422,758 shares of Sempra common stock repurchased at a weighted-average purchase price of $123.83 per share, excluding commissions.

On January 11, 2022, we entered into an ASR program under which we prepaid $200 million to repurchase shares of our common stock in a share forward transaction. A total of 1,472,756 shares were purchased under this program at an average price of $135.80 per share. The total number of shares purchased was determined by dividing the $200 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of January 12, 2022 through February 11, 2022, minus a fixed discount. The ASR program was completed on February 11, 2022.

On April 6, 2022, we entered into an ASR program under which we prepaid $250 million to repurchase shares of our common stock in a share forward transaction. A total of 1,471,957 shares were purchased under this program at an average price of $169.84 per share. The total number of shares purchased was determined by dividing the $250 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of April 7, 2022 through April 25, 2022, minus a fixed discount. The ASR program was completed on April 25, 2022. As of February 28, 2023, a maximum of $1.25 billion and no more than 19,632,529 shares may yet be purchased under the July 6, 2020 repurchase authorization.

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EARNINGS PER COMMON SHARE

Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.


EARNINGS PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Years ended December 31,
	2022		2021		2020
Sempra:
Numerator for continuing operations:
Income from continuing operations, net of income tax	$	2,285	$	1,463	$	2,255
Earnings attributable to noncontrolling interests	(146)		(145)		(162)
Preferred dividends	(44)		(63)		(168)
Preferred dividends of subsidiary	(1)		(1)		(1)
Earnings from continuing operations attributable to common shares	$	2,094	$	1,254	$	1,924

Numerator for discontinued operations:
Income from discontinued operations, net of income tax	$	—	$	—	$	1,850
Earnings attributable to noncontrolling interests	—		—		(10)
Earnings from discontinued operations attributable to common shares	$	—	$	—	$	1,840

Numerator for earnings:
Earnings attributable to common shares	$	2,094	$	1,254	$	3,764

Denominator:
Weighted-average common shares outstanding for basic EPS(1)	315,159		311,755		291,077
Dilutive effect of stock options and RSUs(2)	1,219		752		1,175
Dilutive effect of mandatory convertible preferred stock	—		529		—
Weighted-average common shares outstanding for diluted EPS	316,378		313,036		292,252

Basic EPS:
Earnings from continuing operations	$	6.65	$	4.03	$	6.61
Earnings from discontinued operations	$	—	$	—	$	6.32
Earnings	$	6.65	$	4.03	$	12.93

Diluted EPS:
Earnings from continuing operations	$	6.62	$	4.01	$	6.58
Earnings from discontinued operations	$	—	$	—	$	6.30
Earnings	$	6.62	$	4.01	$	12.88

(1) Includes fully vested RSUs held in our Deferred Compensation Plan of 403 in 2022, 453 in 2021 and 537 in 2020. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.

(2) Due to market fluctuations of both Sempra common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10, dilutive RSUs may vary widely from period-to-period.

The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for 2022, 2021 and 2020 excludes potentially dilutive shares related to stock options and RSUs of 86,532, 211,155 and 187,028, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.

In 2021, the potentially dilutive impact from mandatory convertible preferred stock was calculated under the if-converted method until the mandatory conversion date. After the mandatory conversion date, the converted shares are included in weighted-average common shares outstanding for basic EPS. As we discuss in Note 13, we converted our series A preferred stock into common

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stock on January 15, 2021 and our series B preferred stock into common stock on July 15, 2021. The computation of diluted EPS for the years ended December 31, 2021 and 2020 excludes potentially dilutive shares related to our mandatory convertible preferred stock of 2,272,117 and 17,889,365, respectively, because to include them would be antidilutive for those periods.

We are authorized to issue 750 million shares of no par value common stock. The following table provides common stock activity for the last three years.


COMMON STOCK ACTIVITY

	2022	2021	2020
Sempra:
Common shares outstanding, January 1	316,919,782	288,470,244	291,712,925
Conversion of mandatory convertible preferred stock	—	18,037,745	—
Shares issued in IEnova exchange offer	—	12,306,777	—
RSUs vesting(1)	457,222	686,916	896,839
Stock options exercised	40,630	50,671	4,400
Savings plan issuance	—	—	201,431
Common stock investment plan(2)	—	—	42,955
Issuance of RSUs held in our Deferred Compensation Plan	65,013	102,238	103,552
Shares repurchased(3)	(3,147,969)	(2,734,809)	(4,491,858)
Common shares outstanding, December 31	314,334,678	316,919,782	288,470,244

(1) Includes dividend equivalents.

(2) Participants in the Direct Stock Purchase Plan may reinvest dividends to purchase newly issued shares.

(3) Includes shares repurchased under the repurchase programs that we discuss above. Generally, we purchase shares of our common stock or units from LTIP participants who elect to sell to us a sufficient number of vested RSUs to meet minimum statutory tax withholding requirements.

NOTE 15. SAN ONOFRE NUCLEAR GENERATING STATION

SDG&E has a 20% ownership interest in SONGS, a nuclear generating facility near San Clemente, California, which permanently ceased operations in June 2013 after an extended outage as a result of issues with the steam generators used in the facility. Edison, the majority owner and operator of SONGS, notified SDG&E that it had reached a decision to permanently retire SONGS and seek approval from the NRC to start the decommissioning activities for the entire facility. SONGS is subject to the jurisdiction of the NRC and the CPUC.

SDG&E, and each of the other owners, holds its undivided interest as a tenant in common in the property. Each owner is responsible for financing its share of costs. SDG&E’s share of operating expenses is included in Sempra’s and SDG&E’s Consolidated Statements of Operations.

NUCLEAR DECOMMISSIONING AND FUNDING

As a result of Edison’s decision to permanently retire SONGS Units 2 and 3, Edison began the decommissioning phase of the plant. Major decommissioning work began in 2020. We expect the majority of the decommissioning work to take approximately 10 years. Decommissioning of Unit 1, removed from service in 1992, is largely complete. The remaining work for Unit 1 will be completed once Units 2 and 3 are dismantled and the spent fuel is removed from the site. The spent fuel is currently being stored on-site, until the DOE identifies a spent fuel storage facility and puts in place a program for the fuel’s disposal, as we discuss below. SDG&E is responsible for approximately 20% of the total decommissioning cost.

The Samuel Lawrence Foundation filed a writ petition under the California Coastal Act in LA Superior Court in December 2019 seeking to invalidate the coastal development permit and to obtain injunctive relief to stop decommissioning work. The petition was denied in September 2021. In December 2021, the Samuel Lawrence Foundation filed a notice of appeal. In August 2022, the court dismissed the case based on the Samuel Lawrence Foundation’s request for dismissal, which finally resolves the writ petition. Decommissioning work was not interrupted as a result of this writ petition.

In accordance with state and federal requirements and regulations, SDG&E has assets held in the NDT to fund its share of decommissioning costs for SONGS Units 1, 2 and 3. Amounts that were collected in rates for SONGS’ decommissioning are invested in the NDT, which is comprised of externally managed trust funds. Amounts held by the NDT are invested in accordance

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with CPUC regulations. SDG&E classifies debt and equity securities held in the NDT as available-for-sale. The NDT assets are presented on the Sempra and SDG&E Consolidated Balance Sheets at fair value with the offsetting credits recorded in noncurrent Regulatory Liabilities.

Except for the use of funds for the planning of decommissioning activities or NDT administrative costs, CPUC approval is required for SDG&E to access the NDT assets to fund SONGS decommissioning costs for Units 2 and 3. In December 2022, the CPUC granted SDG&E authorization to access NDT funds of up to $81 million for forecasted 2023 costs.

In September 2020, the IRS and the U.S. Department of the Treasury published final regulations that clarify the definition of “nuclear decommissioning costs,” which are costs that may be paid for or reimbursed from a qualified trust fund. The final regulations adopted most of the provisions of the proposed regulations issued in December 2016. The final regulations apply to taxable years ending on or after September 4, 2020 and confirm that the definition of “nuclear decommissioning costs” includes amounts related to the storage of spent nuclear fuel at both on-site and off-site ISFSIs.

The final regulations also clarify that costs incurred for ISFSIs that may be or are expected to be reimbursed by the DOE may be paid or reimbursed from a qualified trust fund. Accordingly, the final regulations allow SDG&E the option to access qualified trust funds to recover spent fuel storage costs before Edison reaches final settlement with the DOE regarding the DOE’s reimbursement of these costs. Historically, the DOE’s reimbursements of spent fuel storage costs have not resulted in timely or complete recovery of these costs. We discuss the DOE’s responsibility for spent nuclear fuel below.

Nuclear Decommissioning Trusts

The following table shows the fair values and gross unrealized gains and losses for the securities held in the NDT on the Sempra and SDG&E Consolidated Balance Sheets. We provide additional fair value disclosures for the NDT in Note 12.


NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
	Cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
	December 31, 2022
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies(1)	$	40	$	1	$	(1)	$	40
Municipal bonds(2)	283		1		(14)		270
Other securities(3)	248		—		(21)		227
Total debt securities	571		2		(36)		537
Equity securities	111		194		(8)		297
Short-term investments, primarily cash equivalents	11		—		—		11
Receivables (payables), net	(4)		—		—		(4)
Total	$	689	$	196	$	(44)	$	841

	December 31, 2021
Debt securities:
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	$	56	$	—	$	—	$	56
Municipal bonds	309		13		(1)		321
Other securities	255		7		(2)		260
Total debt securities	620		20		(3)		637
Equity securities	104		262		(2)		364
Short-term investments, primarily cash equivalents	3		—		—		3
Receivables (payables), net	8		—		—		8
Total	$	735	$	282	$	(5)	$	1,012

(1) Maturity dates are 2023-2053.

(2) Maturity dates are 2023-2056.

(3) Maturity dates are 2023-2072.

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The following table shows the proceeds from sales of securities in the NDT and gross realized gains and losses on those sales.


SALES OF SECURITIES IN THE NUCLEAR DECOMMISSIONING TRUSTS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Proceeds from sales	$	639	$	961	$	1,439
Gross realized gains	18		67		156
Gross realized losses	(20)		(5)		(17)

Net unrealized gains and losses, as well as realized gains and losses that are reinvested in the NDT, are included in noncurrent Regulatory Liabilities on Sempra’s and SDG&E’s Consolidated Balance Sheets. We determine the cost of securities in the trusts on the basis of specific identification.

ASSET RETIREMENT OBLIGATION

The present value of SDG&E’s ARO related to decommissioning costs for all three SONGS units was $540 million at December 31, 2022 and is based on a cost study prepared in 2020 that is pending CPUC approval, which SDG&E expects to receive in 2023. The ARO for Units 2 and 3 reflects the acceleration of the start of decommissioning of these units as a result of the early closure of the plant. We expect SDG&E’s undiscounted SONGS decommissioning payments to be $92 million in 2023, $77 million in 2024, $46 million in 2025, $52 million in 2026, $32 million in 2027, and $686 million thereafter.

U.S. DEPARTMENT OF ENERGY NUCLEAR FUEL DISPOSAL

Spent nuclear fuel from SONGS is currently stored on-site in an ISFSI licensed by the NRC. The ISFSI will operate until 2051, when it is assumed that the DOE will have taken custody of all the SONGS spent fuel. The ISFSI would then be decommissioned, and the site restored to its original environmental state. Until then, SONGS owners are responsible for interim storage of spent nuclear fuel at SONGS.

The Nuclear Waste Policy Act of 1982 made the DOE responsible for accepting, transporting, and disposing of spent nuclear fuel. However, it is uncertain when the DOE will begin accepting spent nuclear fuel from SONGS. This delay will lead to increased costs for spent fuel storage. In November 2019, Edison filed a claim for spent fuel management costs in the U.S. Court of Federal Claims for the time period from January 2017 through July 2018, which is pending DOE approval. It is unclear when Edison will pursue litigation claims for spent fuel management costs incurred on or after August 1, 2018. SDG&E will continue to support Edison in its pursuit of claims on behalf of the SONGS co-owners against the DOE for its failure to timely accept the spent nuclear fuel.

NUCLEAR INSURANCE

SDG&E and the other owners of SONGS have insurance to cover claims from nuclear liability incidents arising at SONGS. Currently, this insurance provides $450 million in coverage limits, the maximum amount available, including coverage for acts of terrorism. In addition, the Price-Anderson Act provides an additional $110 million of coverage. If a nuclear liability loss occurs at SONGS and exceeds the $450 million insurance limit, this additional coverage would be available to provide a total of $560 million in coverage limits per incident.

The SONGS owners have nuclear property damage insurance of $130 million, which exceeds the minimum federal requirement of $50 million. This insurance coverage is provided through NEIL. The NEIL policies have specific exclusions and limitations that can result in reduced coverage. Insured members as a group are subject to retrospective premium assessments to cover losses sustained by NEIL under all issued policies. SDG&E could be assessed up to $4.1 million of retrospective premiums based on overall member claims.

The nuclear property insurance program includes an industry aggregate loss limit for non-certified acts of terrorism (as defined by the Terrorism Risk Insurance Act) of $3.24 billion. This is the maximum amount that will be paid to insured members who suffer losses or damages from these non-certified terrorist acts.

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NOTE 16. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

We accrue losses for a legal proceeding when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. However, the uncertainties inherent in legal proceedings make it difficult to reasonably estimate the costs and effects of resolving these matters. Accordingly, actual costs incurred may differ materially from amounts accrued, may exceed, and in some cases have exceeded, applicable insurance coverage and could materially adversely affect our business, results of operations, financial condition, cash flows and/or prospects. Unless otherwise indicated, we are unable to reasonably estimate possible losses or a range of losses in excess of any amounts accrued.

At December 31, 2022, loss contingency accruals for legal matters, including associated legal fees and regulatory matters related to the Leak, that are probable and estimable were $281 million for Sempra, including $205 million for SoCalGas. Amounts for Sempra and SoCalGas include $130 million for matters related to the Leak, which we discuss below. We discuss our policy regarding accrual of legal fees in Note 1.

SoCalGas

Aliso Canyon Natural Gas Storage Facility Gas Leak

From October 23, 2015 through February 11, 2016, SoCalGas experienced a natural gas leak from one of the injection-and-withdrawal wells, SS25, at its Aliso Canyon natural gas storage facility in Los Angeles County.

Litigation – Resolved. In September 2021, SoCalGas and Sempra entered into an agreement with counsel to resolve approximately 390 lawsuits including approximately 36,000 plaintiffs (the Individual Plaintiffs) pending against SoCalGas and Sempra related to the Leak (the Individual Plaintiff Litigation) for a payment of up to $1.8 billion.

These cases were coordinated before a single court in the LA Superior Court for pretrial management under a Third Amended Consolidated Master Case Complaint for Individual Actions filed in November 2017. The consolidated complaint asserts causes of action for negligence, negligence per se, private and public nuisance (continuing and permanent), trespass, inverse condemnation, strict liability, negligent and intentional infliction of emotional distress, fraudulent concealment, loss of consortium and wrongful death against SoCalGas and Sempra (the Individual Plaintiff Litigation). The complaint also asserted violations of Proposition 65, which were resolved in January 2022. The consolidated complaint seeks compensatory and punitive damages for personal injuries, lost wages and/or lost profits, property damage and diminution in property value, injunctive relief, costs of future medical monitoring, civil penalties, and attorneys’ fees.

The agreement governing the settlement of the Individual Plaintiff Litigation requires each plaintiff who agrees to participate in the settlement to release all such plaintiff’s claims against SoCalGas, Sempra and their respective affiliates related to the Leak and the Individual Plaintiff Litigation. The Individual Plaintiffs who do not participate in the settlement (the Remaining Individual Plaintiffs) will be able to continue to pursue their claims. Over 99% of the Individual Plaintiffs agreed to participate and submitted valid releases, and SoCalGas paid $1.79 billion in 2022 under the agreement. As of February 21, 2023, approximately 265 of the Remaining Individual Plaintiffs had not been located or had failed to respond, according to plaintiffs’ counsel.

In September 2021, SoCalGas and Sempra entered into an agreement to settle a class action on behalf of persons and businesses who owned or leased real property within a five-mile radius of the well where the Leak occurred for a total amount of $40 million. In April 2022, the LA Superior Court gave final approval of the settlement.

In October 2018 and October 2020, complaints on behalf of five property developers (the Developer Plaintiffs) were filed against SoCalGas and Sempra in connection with the Leak. The complaints alleged causes of action for strict liability, negligence per se, negligence, negligent interference, continuing nuisance, permanent nuisance, inverse condemnation and violation of the California Unfair Competition Law and California Public Utilities Code section 2106, and sought compensatory, statutory and punitive damages, injunctive relief and attorneys’ fees. In 2022, SoCalGas and Sempra settled the claims of all of the Developer Plaintiffs and their claims were dismissed.

Litigation – Unresolved. Four shareholder derivative actions were filed alleging breach of fiduciary duties against certain officers and certain directors of Sempra and/or SoCalGas. Three of the four shareholder derivative actions that were filed alleging breach of fiduciary duties against certain officers and certain directors of Sempra and/or SoCalGas were joined in an Amended Consolidated Shareholder Derivative Complaint filed in the coordinated proceeding in the LA Superior Court, which was

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dismissed with prejudice in January 2021. The plaintiffs have appealed this dismissal. The LA Superior Court dismissed the remaining fourth action with prejudice in November 2022. The plaintiffs have appealed this dismissal.

In addition, the Remaining Individual Plaintiffs referred to above will be able to continue to pursue their claims. Also, as of February 21, 2023, 14 new lawsuits on behalf of approximately 235 plaintiffs were filed since the September 2021 settlement.

Regulatory Proceedings – Subject to Agreements to Resolve. In June 2019, the CPUC opened an OII (the Leak OII) to investigate and consider, among other things, whether SoCalGas should be sanctioned for the Leak and what damages, fines or other penalties, if any, should be imposed for any violations, unreasonable or imprudent practices or failure to cooperate sufficiently with SED, as well as to determine the amount of various costs incurred by SoCalGas and other parties in connection with the Leak and the ratemaking treatment or other disposition of such costs, which could result in little or no recovery of such costs by SoCalGas. In October 2022, SoCalGas executed a settlement agreement with SED and the Public Advocates Office at the CPUC to resolve all aspects of the Leak OII. The settlement agreement provides for financial penalties, certain costs that SoCalGas will reimburse, a violation of California Public Utilities Code section 451, and costs previously incurred by SoCalGas for which it will not seek recovery from ratepayers, among other provisions. The settlement agreement was filed with and is subject to approval by the CPUC.

Regulatory Proceedings – Unresolved. In February 2017, the CPUC opened a proceeding pursuant to the SB 380 OII to determine the feasibility of minimizing or eliminating the use of the Aliso Canyon natural gas storage facility while still maintaining energy and electric reliability for the region, but excluding issues with respect to air quality, public health, causation, culpability or cost responsibility regarding the Leak. The first phase of the proceeding established a framework for the hydraulic, production cost and economic modeling assumptions for the potential reduction in usage or elimination of the Aliso Canyon natural gas storage facility, as well as evaluating the impacts of reducing or eliminating the Aliso Canyon natural gas storage facility using the established framework and models. The next phase of the proceeding included engaging a consultant to analyze alternative means for meeting or avoiding the demand for the facility’s services if it were eliminated in either the 2027 or 2035 timeframe, and to address potential implementation of alternatives to the Aliso Canyon natural gas storage facility if the CPUC determines that the Aliso Canyon natural gas storage facility should be permanently closed. The CPUC also added all California IOUs as parties to the proceeding and encouraged all load serving entities in the Los Angeles Basin to join the proceeding.

In November 2021, the CPUC issued a decision on the interim range of gas inventory levels at the Aliso Canyon natural gas storage facility, setting an interim range of gas inventory levels of up to 41.16 Bcf. The CPUC may issue future changes to this interim range of authorized gas inventory levels before issuing a final inventory determination within the SB 380 OII proceeding.

Cost Estimate, Insurance and Accounting and Other Impacts. SoCalGas has incurred significant costs related to the Leak, primarily to defend against and settle civil and criminal litigation and regulatory proceedings arising from the Leak; for temporary relocation of community residents; to control the well and stop the Leak; to mitigate the natural gas released; to purchase natural gas to replace what was lost through the Leak; to pay the costs of the government-ordered response to the Leak, including the costs for a root cause analysis; to respond to various government and agency investigations regarding the Leak; and to comply with increased regulation imposed as a result of the Leak. At December 31, 2022, SoCalGas estimates these costs related to the Leak are $3,486 million (the cost estimate), including $1,279 million of costs recovered from insurance. Other than insurance for directors’ and officers’ liability, we have exhausted all of our insurance for this matter. We continue to pursue other sources of insurance coverage for costs related to this matter, but we may not be successful in obtaining additional insurance recovery for any of these costs. At December 31, 2022, $129 million of the cost estimate is accrued in Reserve for Aliso Canyon Costs and $4 million of the cost estimate is accrued in Deferred Credits and Other on SoCalGas’ and Sempra’s Consolidated Balance Sheets.

SoCalGas recorded total charges of $259 million ($199 million after tax), $1.59 billion ($1.15 billion after tax) and $307 million ($233 million after tax) in the years ended December 31, 2022, 2021 and 2020, respectively, in Aliso Canyon Litigation and Regulatory Matters on the SoCalGas and Sempra Consolidated Statements of Operations related to the litigation and regulatory proceedings that we describe above. These charges are included in the cost estimate.

Except for the amounts paid or estimated to settle certain legal and regulatory matters as described above, the cost estimate does not include any amounts necessary to resolve the matters that we describe above in “Litigation – Unresolved” and “Regulatory Proceedings – Unresolved,” threatened litigation, other potential litigation or other costs, in each case to the extent it is not possible to predict at this time the outcome of these actions or reasonably estimate the possible costs or a range of possible costs.

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Further, we are not able to reasonably estimate the possible loss or a range of possible losses in excess of the amounts accrued. The costs or losses not included in the cost estimate could be significant.

An adverse outcome with respect to (i) the litigation described above under “Litigation – Unresolved,” (ii) threatened or other potential litigation related to the Leak, (iii) the Leak OII if approval of the negotiated settlement is not obtained, or (iv) the unresolved proceeding pursuant to the SB 380 OII, could have a material adverse effect on SoCalGas’ and Sempra’s results of operations, financial condition, cash flows and/or prospects.

Sempra Infrastructure

Energía Costa Azul

We describe below certain land and customer disputes and permit challenges affecting our ECA Regas Facility. Certain of these land disputes involve land on which portions of the ECA LNG liquefaction facilities under construction and in development are expected to be situated or on which portions of the ECA Regas Facility that would be necessary for the operation of such ECA LNG liquefaction facilities are situated. One or more unfavorable final decisions on these disputes or challenges could materially adversely affect our existing natural gas regasification operations and proposed natural gas liquefaction projects at the site of the ECA Regas Facility and have a material adverse effect on Sempra’s business, results of operations, financial condition, cash flows and/or prospects.

Land Disputes – Unresolved. Sempra Infrastructure has been engaged in a long-running land dispute relating to property adjacent to its ECA Regas Facility that allegedly overlaps with land owned by the ECA Regas Facility (the facility, however, is not situated on the land that is the subject of this dispute), as follows:

▪A claimant to the adjacent property filed complaints in the federal Agrarian Court challenging the refusal of SEDATU in 2006 to issue title to him for the disputed property. In November 2013, the federal Agrarian Court ordered that SEDATU issue the requested title to the claimant and cause it to be registered. Both SEDATU and Sempra Infrastructure challenged the ruling due to lack of notification of the underlying process. In May 2019, a federal court in Mexico reversed the ruling and ordered a retrial, which is pending resolution.

▪In a separate proceeding, the claimant filed suit to reinitiate an administrative procedure at SEDATU to obtain the property title that was previously dismissed. In April 2021, the Agrarian Court ordered that the administrative procedure be restarted. The proceeding in the Agrarian Court has concluded; however, the administrative procedure at SEDATU may continue if SEDATU decides to reopen the matter.

In addition, a case involving an area of real property on which part of the ECA Regas Facility is situated is subject to a claim in the federal Agrarian Court, in which the plaintiff seeks to annul the property title for a portion of the land on which the ECA Regas Facility is situated and to obtain possession of a different parcel that allegedly overlaps with the site of the ECA Regas Facility. The proceeding, which seeks an order that SEDATU annul the ECA Regas Facility’s competing property title, was initiated in 2006 and, in July 2021, a decision was issued in favor of the ECA Regas Facility. The plaintiff appealed, and in February 2022, the appellate court confirmed the ruling in favor of the ECA Regas Facility and dismissed the appeal. The plaintiff filed a federal appeal against the appellate court ruling. A ruling from the Federal Collegiate Circuit Court is pending.

Land Disputes – Resolved. Three cases involving an area of real property on which part of the ECA Regas Facility is situated, each brought by a single plaintiff or her descendants, were filed against the facility. The disputed area, which is a parcel adjacent to the ECA Regas Facility that allegedly overlaps with land on which the ECA Regas Facility is situated and also adjacent to the parcel subject to the unresolved Agrarian Court proceeding described in the preceding paragraph, is subject to a claim in the federal Agrarian Court and two claims in Mexican civil courts. The ECA Regas Facility first bought the property from the federal government in 2003; however, to resolve an ownership controversy, in 2008, the ECA Regas Facility reached a financial settlement with the plaintiff to eliminate an adverse claim to its title. Nevertheless, the plaintiff sued in 2013 for the nullity of both titles. The Agrarian Court ruled in favor of the plaintiff in May 2021, nullifying the first property title. Sempra Infrastructure appealed the ruling in July 2021. In May 2022, Sempra Infrastructure won the appeal and the plaintiff’s claims were dismissed, thereby concluding the Agrarian Court proceeding. The ECA Regas Facility continues to hold the second property title to the land. The two civil court proceedings seek to invalidate the contract by which the ECA Regas Facility purchased for the second time the applicable parcel of land on which the ECA Regas Facility is situated on the grounds that the purchase price was allegedly unfair. In the first civil case, initiated in 2013, the court ruled in favor of the ECA Regas Facility, and the final decision was affirmed on a federal appeal, thereby concluding the first civil case. The descendants of the same plaintiff filed the second civil case in 2019, which was dismissed by the court. However, the dismissal was appealed. In April 2022, the ECA Regas Facility entered into a settlement agreement with the plaintiff, whereby the plaintiff has agreed to recognize the ECA Regas Facility as the sole owner of the property and waive any current or future rights over the property, or any other properties related

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to the ECA Regas Facility. The settlement agreement has been approved by the court, thereby concluding the remaining civil case.

Environmental and Social Impact Permits – Unresolved. Several administrative challenges are pending before Mexico’s Secretariat of Environment and Natural Resources (the Mexican environmental protection agency) and Federal Tax and Administrative Courts, seeking revocation of the environmental impact authorization issued to the ECA Regas Facility in 2003. These cases generally allege that the conditions and mitigation measures in the environmental impact authorization are inadequate and challenge findings that the activities of the terminal are consistent with regional development guidelines.

In 2018 and 2021, three related claimants filed separate challenges in the federal district court in Ensenada, Baja California in relation to the environmental and social impact permits issued by each of ASEA and SENER to ECA LNG authorizing natural gas liquefaction activities at the ECA Regas Facility, as follows:

▪In the first case, the court issued a provisional injunction in September 2018. In December 2018, ASEA approved modifications to the environmental permit that facilitate the development of the proposed natural gas liquefaction facility in two phases. In May 2019, the court canceled the provisional injunction. The claimant appealed the court’s decision canceling the injunction but was not successful. The claimant’s underlying challenge to the permits remains pending.

▪In the second case, the initial request for a provisional injunction was denied. That decision was reversed on appeal in January 2020, resulting in the issuance of a new injunction against the permits that were issued by ASEA and SENER. This injunction has uncertain application absent clarification by the court. The claimants petitioned the court to rule that construction of natural gas liquefaction facilities violated the injunction, and in February 2022, the court ruled in favor of the ECA Regas Facility, holding that the natural gas liquefaction activities did not violate the injunction. The claimants have appealed this ruling.

▪In the third case, a group of residents filed a complaint in June 2021 against various federal and state authorities alleging deficiencies in the public consultation process for the issuance of the permits. The request for an initial injunction was denied and the claimants have appealed, which is pending the appellate court’s ruling.

Customer Dispute – Resolved. In May 2020, the two third-party capacity customers at the ECA Regas Facility, Shell Mexico and Gazprom, asserted that a 2019 update of the general terms and conditions for service at the facility, as approved by the CRE, resulted in a breach of contract by Sempra Infrastructure and a force majeure event. In July 2020, Shell Mexico submitted a request for arbitration of the dispute, and Gazprom joined the proceeding, and a hearing was held in October 2021. The International Court of Arbitration issued a final, non-appealable decision in April 2022 in favor of Sempra Infrastructure dismissing all claims and confirming the contracts remain in force. In August 2022, the International Court of Arbitration issued an additional decision dismissing a request by Shell Mexico and Gazprom to consider additional arguments.

Citing the alleged breach, Shell Mexico stopped making payments under its LNG storage and regasification agreement. Due to nonpayment, Sempra Infrastructure drew against Shell Mexico’s letters of credit provided as payment security until they were fully exhausted in March 2022. In September 2022, Shell Mexico paid its invoices from March 2022 through August 2022, bringing its account to current, resumed paying invoices as they come due, and renewed its letters of credit. Although Gazprom had previously been making regular monthly payments under its LNG storage and regasification agreement, Sempra Infrastructure drew against and fully exhausted Gazprom’s letters of credit in April 2022 due to Gazprom’s non-renewal of such letters of credit as required under the agreement. Gazprom did not pay its invoices from March 2022 through July 2022, so funds drawn from the letters of credit were used to fully offset such nonpayment. In September 2022, Gazprom paid its August 2022 invoice, bringing its account to current, and resumed paying invoices as they come due. Subsequent invoices, if not paid by Gazprom, will be offset by funds drawn from the letters of credit. In November 2022, the German government nationalized the parent company of Gazprom, Gazprom Germania (rebranded as “Securing Energy for Europe”), to help stabilize Gazprom’s finances.

In addition to the arbitration proceeding, Shell Mexico also filed constitutional claims against the CRE’s approval of the general terms and conditions for service at the facility and against the issuance of the liquefaction permit. Shell Mexico’s request for an injunction against the general terms and conditions was denied, and the ruling was upheld on appeal. The request for an injunction against the liquefaction permit was denied, and the decision was vacated and remanded on appeal to the First District Court in Administrative Matters, which again denied the injunction. The case on the injunction request was then heard again by the appellate court and was denied, making the decision final.

Sonora Pipeline

Guaymas-El Oro Segment – Unresolved. Sempra Infrastructure’s Sonora natural gas pipeline consists of two segments, the Sasabe-Puerto Libertad-Guaymas segment and the Guaymas-El Oro segment. Each segment has its own service agreement with the CFE. In 2015, the Yaqui tribe, with the exception of some members living in the Bácum community, granted its consent and a right-of-way easement agreement for the construction of the Guaymas-El Oro segment of the Sonora natural gas pipeline that

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crosses its territory. Representatives of the Bácum community filed a legal challenge in Mexican federal court demanding the right to withhold consent for the project, the stoppage of work in the Yaqui territory and damages. In 2016, the judge granted a suspension order that prohibited the construction of such segment through the Bácum community territory. Because the pipeline does not pass through the Bácum community, Sempra Infrastructure did not believe the 2016 suspension order prohibited construction in the remainder of the Yaqui territory. Construction of the Guaymas-El Oro segment was completed, and commercial operations began in May 2017.

Following the start of commercial operations of the Guaymas-El Oro segment, Sempra Infrastructure reported damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory that has made that section inoperable since August 2017 and, as a result, Sempra Infrastructure declared a force majeure event. In 2017, an appellate court ruled that the scope of the 2016 suspension order encompassed the wider Yaqui territory, which has prevented Sempra Infrastructure from making repairs to put the pipeline back in service. In July 2019, a federal district court ruled in favor of Sempra Infrastructure and held that the Yaqui tribe was properly consulted and that consent from the Yaqui tribe was properly received. Representatives of the Bácum community appealed this decision, causing the suspension order preventing Sempra Infrastructure from repairing the damage to the Guaymas-El Oro segment of the Sonora pipeline in the Yaqui territory to remain in place until the appeals process is exhausted. In December 2021, the court of appeals referred the matter to Mexico’s Supreme Court. In June 2022, the Supreme Court remanded the case back to the court of appeals for final resolution. The CFE asked the court of appeals to dismiss the Bácum community’s appeal based on the plan to re-route the portion of the pipeline that is in the Yaqui territory. In December 2022, the court of appeals reversed the federal district court’s ruling and ordered the district court to issue a new ruling that takes into account the planned re-routing of the pipeline.

Sempra Infrastructure exercised its rights under the contract, which included seeking force majeure payments for the two-year period such force majeure payments were required to be made, which ended in August 2019.

In July 2019, the CFE filed a request for arbitration generally to nullify certain contract terms that provide for fixed capacity payments in instances of force majeure and made a demand for substantial damages in connection with the force majeure event. In September 2019, the arbitration process ended when Sempra Infrastructure and the CFE reached an agreement to restart natural gas transportation service in January 2020 as the new service start date, and to modify the tariff structure and extend the term of the contract by 10 years. Subsequently, Sempra Infrastructure and the CFE agreed to extend the service start date multiple times, most recently to May 31, 2023. Under the revised agreement, the CFE will resume making payments only when the damaged section of the Guaymas-El Oro segment of the Sonora pipeline is back in service. If the pipeline is not back in service or the parties do not agree on a new service start date by May 31, 2023, Sempra Infrastructure retains the right to terminate the contract and seek to recover its reasonable and documented costs and lost profits. Discussions with the CFE regarding the future of the pipeline are underway in accordance with a non-binding MOU announced in January 2022 that, among other matters, addresses efforts to restart service on the pipeline. In July 2022, Sempra Infrastructure and the CFE entered into a Shareholders’ Agreement that establishes a framework for a JV between the parties to work on restarting service on the pipeline, including the re-routing of a portion of the pipeline. This agreement is subject to a number of conditions to be satisfied before it becomes effective, including regulatory and corporate authorizations.

At December 31, 2022, Sempra Infrastructure had $420 million in PP&E, net, related to the Guaymas-El Oro segment of the Sonora pipeline, which could be subject to impairment if Sempra Infrastructure is unable to re-route a portion of the pipeline (which has not been agreed to by the parties, but is subject to negotiation pursuant to a non-binding MOU and a Shareholders’ Agreement, as described above) and resume operations or if Sempra Infrastructure terminates the contract and is unable to obtain recovery, which in each case could have a material adverse effect on Sempra’s business, results of operations, financial condition, cash flows and/or prospects.

Sasabe-Puerto Libertad-Guaymas Segment – Resolved. In June 2014, Sempra Infrastructure and a landowner agreed to enter into a voluntary right-of-way easement agreement for the construction and operation of a seven-mile section of the 314-mile Sasabe-Puerto Libertad-Guaymas segment of the Sonora natural gas pipeline on the landowner’s property. However, in 2015, the landowner filed a complaint demanding the easement agreement be nullified. In September 2021, a definitive and non-appealable judgment was issued declaring the easement agreement nullified and ordering the removal of the pipeline from the landowner’s property. The execution of the judgment was suspended as a result of an amparo lawsuit filed by the CFE as an interested third party that did not participate in the litigation. Sempra Infrastructure filed a special judicial action asking the civil court to acknowledge the existence of the easement and to determine the consideration the landowner should receive in exchange for the easement. In July 2022, Sempra Infrastructure and the landowner entered into a new easement agreement approved by the court for the seven-mile section on the landowner’s property, thus bringing this case to definitive conclusion.

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Litigation Related to Regulatory and Other Actions by the Mexican Government – Unresolved

Amendments to Mexico’s Electricity Industry Law. In March 2021, the Mexican government published a decree with amendments to Mexico’s Electricity Industry Law that include some public policy changes, including establishing priority of dispatch for CFE plants over privately owned plants. According to the decree, these amendments were to become effective on March 10, 2021, and SENER, the CRE and Centro Nacional de Control de Energía (Mexico’s National Center for Energy Control) were to have 180 calendar days to modify, as necessary, all resolutions, policies, criteria, manuals and other regulations applicable to the power industry to conform with this decree. However, a Mexican court issued a suspension of the amendments on March 19, 2021. In April 2022, the Mexican Supreme Court resolved an action of unconstitutionality filed by a group of senators against the amended Electricity Industry Law, but the qualified majority of eight votes out of 11 as is required in matters involving constitutionality was not reached and the proceeding was dismissed, which means that the Mexican Supreme Court did not issue a binding precedent and the amended Electricity Industry Law remains in force. Sempra Infrastructure filed three lawsuits against the amendments to the Electricity Industry Law and, in each of them, Sempra Infrastructure obtained a favorable judgment in the lower courts, which has been appealed. If the proposed amendments are affirmed by the lower courts or by the Mexican Supreme Court (which in these cases would only require a simple majority vote), the CRE may be required to revoke self-supply permits granted under the former electricity law, which were grandfathered when the new Electricity Industry Law was enacted, under a legal standard that is ambiguous and not well defined under the law. If such self-supply permits granted under the former electricity law are revoked, it may result in increased costs for Sempra Infrastructure and its customers, may adversely affect our ability to develop new projects, may result in decreased revenues and cash flows, and may negatively impact our ability to recover the carrying values of our investments in Mexico, any of which could have a material adverse effect on Sempra’s business, results of operations, financial condition, cash flows and/or prospects.

Litigation Related to Regulatory and Other Actions by the Mexican Government – Resolved

Transmission Rates for Legacy Generation Facilities. In May 2020, the CRE approved an update to the transmission rates included in legacy renewable and cogeneration energy contracts based on the claim that the legacy transmission rates did not reflect fair and proportional costs for providing the applicable services and, therefore, created inequitable competitive conditions. Three of Sempra Infrastructure’s renewable energy facilities (Don Diego Solar, Border Solar and Ventika) are currently holders of contracts with such legacy rates, and under the terms of these contracts any increases in the transmission rates would be passed through directly to their customers. These renewable energy facilities sought and obtained injunctive relief but were required to guarantee the difference in tariffs. The three facilities obtained favorable resolutions from a lower court and the CRE appealed those decisions, which were definitively affirmed in favor of the Don Diego Solar, Border Solar and Ventika facilities, whereby the injunctions were made permanent, the regulations were declared unconstitutional, and the guarantee was determined to not be required. There are no further opportunities to appeal and therefore these resolutions are final.

Offtakers of Legacy Generation Permits. In October 2020, the CRE approved a resolution to amend the rules for the inclusion of new offtakers of legacy generation and self-supply permits (the Offtaker Resolution), which became effective immediately. The Offtaker Resolution prohibits self-supply permit holders from adding new offtakers that were not included in the original development or expansion plans, making modifications to the amount of energy allocated to the named offtakers, and including load centers that have entered into a supply arrangement under Mexico’s Electricity Industry Law. Don Diego Solar, Border Solar and Ventika are holders of self-supply permits, and the two solar facilities are currently affected by the Offtaker Resolution. In January 2022, Don Diego Solar and Border Solar obtained injunctive relief and a favorable resolution from a Mexican federal district court and the CRE appealed that decision. In December 2022, the court of appeals definitively resolved the case by confirming the federal district court’s judgment in favor of Don Diego Solar and Border Solar and there are no further opportunities to appeal and therefore this resolution is final.

Amendments to Mexico’s Hydrocarbons Law. In May 2021, amendments to Mexico’s Hydrocarbons Law were published and became effective. The amendments grant SENER and the CRE additional powers to suspend and revoke permits related to the midstream and downstream sectors. Suspension of permits will be determined by SENER or the CRE when a danger to national security, energy security, or to the national economy is foreseen. Likewise, new grounds for the revocation of permits are in place if the permit holder (i) carries out its activity with illegally imported products; (ii) fails, on more than one occasion, to comply with the provisions applicable to quantity, quality and measurement of the products; or (iii) modifies the technical conditions of its infrastructure without authorization. Additionally, in the case of existing permits, authorities will revoke those permits that fail to comply with the minimum storage requirements established by SENER or fail to comply with requirements or violate provisions established by the amended Hydrocarbons Law. All the Sempra Infrastructure entities participating in the Mexico hydrocarbons sector filed lawsuits against the initiative to reform the Hydrocarbons Law. In 2021, district courts issued judgments that the amendments do not affect the interests of the companies at this time and, as a result, dismissed the amparo lawsuits, including the lawsuits filed by the Sempra Infrastructure entities. The Sempra Infrastructure entities have appealed these

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judgments. The Circuit Courts upheld the dismissal of the amparo lawsuits and there are no further opportunities to appeal, thereby concluding the amparo lawsuits.

Other Litigation – Unresolved

RBS Sempra Commodities

Sempra holds an equity method investment in RBS Sempra Commodities, a limited liability partnership in the process of being liquidated. In 2015, liquidators filed a claim in the High Court of Justice against RBS (now NatWest Markets plc, our partner in the JV) and Mercuria Energy Europe Trading Limited (the Defendants) on behalf of 10 companies (the Liquidating Companies) that engaged in carbon credit trading via chains that included a company that traded directly with RBS SEE, a subsidiary of RBS Sempra Commodities. The claim alleges that the Defendants’ participation in the purchase and sale of carbon credits resulted in the Liquidating Companies’ carbon credit trading transactions creating a VAT liability they were unable to pay, and that the Defendants are liable to provide for equitable compensation due to dishonest assistance and compensation under the U.K. Insolvency Act of 1986. Trial on the matter was held in June and July of 2018. In March 2020, the High Court of Justice rendered its judgment mostly in favor of the Liquidating Companies and awarded damages of approximately £45 million (approximately $54 million in U.S. dollars at December 31, 2022), plus costs and interest. In October 2020, the High Court of Justice assessed costs and interest to be approximately £21 million (approximately $25 million in U.S. dollars at December 31, 2022) as of that date, with interest continuing to accrue. The Defendants appealed and, in May 2021, the Court of Appeal set aside the High Court of Justice’s decision and ordered a retrial. In July 2022, the Supreme Court of the U.K. denied the Liquidating Companies application for permission to appeal the Court of Appeal’s decision. No date has been scheduled for the retrial. J.P. Morgan Chase & Co., which acquired RBS SEE and later sold it to Mercuria Energy Group, Ltd., previously notified us that Mercuria Energy Group, Ltd. has sought indemnity for the claim, and J.P. Morgan Chase & Co. has in turn sought indemnity from Sempra and RBS.

We recorded $100 million in equity losses from our investment in RBS Sempra Commodities in Equity Earnings on Sempra’s Consolidated Statement of Operations in 2020, which represented an estimate of our obligations to settle pending VAT matters and related legal costs. In 2021, we reduced this estimate by $50 million based on a related settlement with HMRC on the First-Tier Tribunal case and revised assumptions on the High Court of Justice case.

Asbestos Claims Against EFH Subsidiaries

Certain EFH subsidiaries that we acquired as part of the merger of EFH with an indirect subsidiary of Sempra were defendants in personal injury lawsuits brought in state courts throughout the U.S. These cases alleged illness or death as a result of exposure to asbestos in power plants designed and/or built by companies whose assets were purchased by predecessor entities to the EFH subsidiaries, and generally assert claims for product defects, negligence, strict liability and wrongful death. They sought compensatory and punitive damages. As of February 21, 2023, two lawsuits are pending. Additionally, in connection with a December 2015 deadline in the EFH bankruptcy proceeding, approximately 28,000 proofs of claim were filed on behalf of persons who allege exposure to asbestos under similar circumstances and assert the right to file such lawsuits in the future. None of these claims or lawsuits were discharged in the EFH bankruptcy proceeding. The costs to defend or resolve these lawsuits or claims and the amount of damages that may be imposed or incurred could have a material adverse effect on Sempra’s results of operations, financial condition, cash flows and/or prospects.

Ordinary Course Litigation

We are also defendants in ordinary routine litigation incidental to our businesses, including personal injury, employment litigation, product liability, property damage and other claims. Juries have demonstrated an increasing willingness to grant large awards, including punitive damages, in these types of cases.

LEASES

A lease exists when a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. We determine if an arrangement is or contains a lease at inception of the contract.

Some of our lease agreements contain nonlease components, which represent activities that transfer a separate good or service to the lessee. As the lessee for both operating and finance leases, we have elected to combine lease and nonlease components as a single lease component for real estate, fleet vehicles, power generating facilities and pipelines, whereby fixed or in-substance fixed payments allocable to the nonlease component are accounted for as part of the related lease liability and ROU asset. As the lessor, we have elected to combine lease and nonlease components as a single lease component for real estate and refined products

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terminals if the timing and pattern of transfer of the lease and nonlease components are the same and the lease component would be classified as an operating lease if accounted for separately.

Lessee Accounting

We have operating and finance leases for real and personal property (including office space, land, fleet vehicles, machinery and equipment, warehouses and other operational facilities) and PPAs with renewable energy, energy storage and peaker plant facilities.

Some of our leases include options to extend the lease terms for up to 25 years, or to terminate the lease within one year. Our lease liabilities and ROU assets are based on lease terms that may include such options when it is reasonably certain that we will exercise the option.

Certain of our contracts are short-term leases, which have a lease term of 12 months or less at lease commencement. We do not recognize a lease liability or ROU asset arising from short-term leases for all existing classes of underlying assets. In such cases, we recognize short-term lease costs on a straight-line basis over the lease term. Our short-term lease costs for the period reasonably reflect our short-term lease commitments.

Certain of our leases contain escalation clauses requiring annual increases in rent ranging from 2% to 7% or based on the Consumer Price Index. The rentals payable under these leases may increase by a fixed amount each year or by a percentage of a base year. Variable lease payments that are based on an index or rate are included in the initial measurement of our lease liability and ROU asset based on the index or rate at lease commencement and are not remeasured because of changes to the index or rate. Rather, changes to the index or rate are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred.

Similarly, PPAs for the purchase of renewable energy at SDG&E require lease payments based on a stated rate per MWh produced by the facilities, and we are required to purchase substantially all the output from the facilities. SDG&E is required to pay additional amounts for capacity charges and actual purchases of energy that exceed the minimum energy commitments. Under these contracts, we do not recognize a lease liability or ROU asset for leases for which there are no fixed lease payments. Rather, these variable lease payments are recognized separately as variable lease costs. SDG&E estimates these variable lease payments to be $297 million in each of 2023 and 2024, $296 million in 2025, $290 million in 2026, $289 million in 2027 and $2,496 million thereafter.

As of the lease commencement date, we recognize a lease liability for our obligation to make future lease payments, which we initially measure at present value using our incremental borrowing rate at the date of lease commencement, unless the rate implicit in the lease is readily determinable. We determine our incremental borrowing rate based on the rate of interest that we would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. We also record a corresponding ROU asset, initially equal to the lease liability and adjusted for lease payments made at or before lease commencement, lease incentives, and any initial direct costs. We test ROU assets for recoverability whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of the ROU assets.

For our operating leases, our non-regulated entities recognize a single lease cost on a straight-line basis over the lease term in operating expenses. SDG&E and SoCalGas recognize this single lease cost on a basis that is consistent with the recovery of such costs in accordance with U.S. GAAP governing rate-regulated operations.

For our finance leases, the interest expense on the lease liability and amortization of the ROU asset are accounted for separately. Our non-regulated entities use the effective interest rate method to account for the imputed interest on the lease liability and amortize the ROU asset on a straight-line basis over the lease term. SDG&E and SoCalGas recognize amortization of the ROU asset on a basis that is consistent with the recovery of such costs in accordance with U.S. GAAP governing rate-regulated operations.

Our leases do not contain any material residual value guarantees, restrictions or covenants.

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Classification of ROU assets and lease liabilities and the weighted-average remaining lease term and discount rate associated with operating and finance leases are summarized in the table below.


LESSEE INFORMATION ON THE CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
	Sempra						SDG&E						SoCalGas
	December 31,
	2022			2021			2022			2021			2022			2021
ROU assets:
Operating leases:
ROU assets	$	655		$	594		$	281		$	185		$	42		$	57

Finance leases:
PP&E	1,529			1,473			1,395			1,381			133			92
Accumulated depreciation	(186)			(138)			(140)			(107)			(46)			(31)
PP&E, net	1,343			1,335			1,255			1,274			87			61
Total ROU assets	$	1,998		$	1,929		$	1,536		$	1,459		$	129		$	118

Lease liabilities:
Operating leases:
Other current liabilities	$	53		$	49		$	32		$	26		$	11		$	15
Deferred credits and other	528			470			249			159			29			41
	581			519			281			185			40			56
Finance leases:
Current portion of long-term debt and finance leases	57			43			39			32			18			11
Long-term debt and finance leases	1,286			1,292			1,217			1,242			69			50
	1,343			1,335			1,256			1,274			87			61
Total lease liabilities	$	1,924		$	1,854		$	1,537		$	1,459		$	127		$	117

Weighted-average remaining lease term (in years):
Operating leases	14			14			11			11			4			4
Finance leases	16			17			17			17			6			7
Weighted-average discount rate:
Operating leases	6.21		%	5.45		%	4.06		%	3.22		%	1.80		%	1.98		%
Finance leases	14.04		%	14.25		%	14.35		%	14.48		%	4.14		%	2.91		%

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The components of lease costs were as follows:


LESSEE INFORMATION ON THE CONSOLIDATED STATEMENTS OF OPERATIONS(1)
(Dollars in millions)
	Sempra						SDG&E						SoCalGas
	Years ended December 31,
	2022		2021		2020		2022		2021		2020		2022		2021		2020

Operating lease costs	$	83	$	89	$	92	$	45	$	32	$	31	$	18	$	20	$	24

Finance lease costs:
Amortization of ROU assets(2)	48		39		35		33		27		23		15		12		12
Interest on lease liabilities	184		186		188		181		184		186		2		2		2
Total finance lease costs	232		225		223		214		211		209		17		14		14

Short-term lease costs(3)	3		7		7		2		1		3		—		—		—
Variable lease costs(3)	411		432		477		399		422		467		11		10		10
Total lease costs	$	729	$	753	$	799	$	660	$	666	$	710	$	46	$	44	$	48

(1) Includes costs capitalized in PP&E.

(2) Included in O&M, except for $25 at Sempra, $24 at SDG&E and $1 at SoCalGas in 2022, $22 at Sempra, $21 at SDG&E and $1 at SoCalGas in 2021, and $18 at Sempra and SDG&E in 2020, which is included in Depreciation and Amortization Expense.

(3) Short-term leases with variable lease costs are recorded and presented as variable lease costs.

Cash paid for amounts included in the measurement of lease liabilities and supplemental noncash information were as follows:


LESSEE INFORMATION ON THE CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Sempra						SDG&E						SoCalGas
	Years ended December 31,
	2022		2021		2020		2022		2021		2020		2022		2021		2020
Operating activities:
Cash paid for operating leases	$	88	$	78	$	79	$	45	$	32	$	31	$	18	$	20	$	24
Cash paid for finance leases	169		171		173		166		169		171		2		2		2
Financing activities:
Cash paid for finance leases	48		39		35		33		27		23		15		12		12
Increase (decrease) in operating lease obligations for ROU assets	142		116		20		134		112		(1)		1		1		1
Increase in finance lease obligations for investment in PP&E	57		43		77		16		24		30		41		19		47

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The table below presents the maturity analysis of our lease liabilities and reconciliation to the present value of lease liabilities:


LESSEE MATURITY ANALYSIS OF LIABILITIES
(Dollars in millions)
	December 31, 2022
	Sempra				SDG&E				SoCalGas
	Operating leases(1)		Finance leases(2)		Operating leases(1)		Finance leases(2)		Operating leases		Finance leases
2023	$	74	$	222	$	34	$	201	$	13	$	21
2024	80		212		40		195		11		17
2025	70		206		33		190		10		16
2026	67		204		32		190		8		14
2027	55		202		30		189		—		13
Thereafter	558		2,111		177		2,094		—		17
Total undiscounted lease payments	904		3,157		346		3,059		42		98
Less: imputed interest	(323)		(1,814)		(65)		(1,803)		(2)		(11)
Total lease liabilities	581		1,343		281		1,256		40		87
Less: current lease liabilities	(53)		(57)		(32)		(39)		(11)		(18)
Long-term lease liabilities	$	528	$	1,286	$	249	$	1,217	$	29	$	69

(1) Includes $12 in each of 2023 through 2027 and $94 thereafter related to purchased-power contracts.

(2) Substantially all amounts are related to purchased-power contracts.

Leases That Have Not Yet Commenced

SDG&E has entered into two energy storage tolling agreements, of which SDG&E expects one will commence in the first quarter of 2023 and one will commence in the third quarter of 2023. SDG&E expects the future minimum lease payments to be $12 million in 2023, $15 million in each of 2024 through 2027 and $78 million thereafter until expiration in 2033.

SoCalGas has entered into a fleet vehicle agreement, under which SoCalGas expects leases will commence in the first quarter of 2023 through the fourth quarter of 2023. SoCalGas expects the future minimum lease payments to be $1 million in 2023, $2 million in each of 2024 through 2027 and $9 million thereafter until expiration in 2031.

Lessor Accounting

Sempra Infrastructure is a lessor for certain of its natural gas and ethane pipelines, compressor stations, LPG storage facilities, a rail facility and refined products terminals, which we account for as operating or sales-type leases. These leases expire at various dates from 2026 through 2042.

Over the lease term, we monitor the underlying assets in operating leases for impairment, and we evaluate the net investment in sales-type leases for expected credit losses. Sempra Infrastructure expects to continue to derive value from the underlying assets associated with its pipelines following the end of their respective lease terms based on the expected remaining useful life, expected market conditions and plans to re-market and re-contract the underlying assets.

Generally, we recognize operating lease income on a straight-line basis over the lease term, and sales-type lease income based on the effective interest method over the lease term. Certain of our leases contain rate adjustments or are based on foreign currency exchange rates that may result in lease payments received that vary in amount from one period to the next. In addition to minimum fixed payments, our refined products terminals receive variable lease payments for barrels delivered that exceed minimum delivery requirements.

In July 2021, a rail facility agreement commenced, which Sempra Infrastructure is accounting for as a sales-type lease. The rail facility is being used by the lessee to transport refined products out of the Veracruz terminal. The lessee has the right to direct the use of the rail facility and will obtain substantially all of the economic benefits of the rail facility. At lease commencement, Sempra Infrastructure derecognized the $44 million carrying value of the rail facility from PP&E and recognized a net investment in sales-type lease asset of $62 million and a selling profit of $18 million. The agreement expires in 2041 and will automatically renew for successive five-year terms unless written notice is provided by Sempra Infrastructure or the lessee. Fixed lease payments are payable in the first five years of the agreement, which the lessee is required to pay even in the event of lease termination.

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LESSOR INFORMATION – SEMPRA
(Dollars in millions)
	December 31,
	2022		2021
Assets subject to operating leases:
Property, plant and equipment:
Pipelines and storage	$	1,026	$	1,018
Refined products terminals	611		405
Other	76		76
Total	1,713		1,499
Accumulated depreciation	(330)		(276)
Property, plant and equipment, net	$	1,383	$	1,223

	December 31, 2022
Maturity analysis of lease payments:	Operating leases		Sales-type leases
2023	$	300	$	16
2024	300		17
2025	300		17
2026	300		9
2027	300		—
Thereafter	3,091		—
Total undiscounted cash flows	$	4,591	59
Present value of lease payments (recognized as lease receivable)(1)			50
Difference between undiscounted cash flows and discounted cash flows			$	9

(1) Includes $10 in Other Current Assets and $40 in Other Long-Term Assets on the Consolidated Balance Sheet.


LESSOR INFORMATION ON THE CONSOLIDATED STATEMENTS OF OPERATIONS – SEMPRA
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sales-type leases:
Income recognized at lease commencement	$	—	$	18	$	1
Interest income	8		4		1
Total revenues from sales-type leases(1)	$	8	$	22	$	2

Operating leases:
Fixed lease payments	$	290	$	256	$	195
Variable lease payments	10		10		1
Total revenues from operating leases(1)	$	300	$	266	$	196

Depreciation expense	$	54	$	48	$	39

(1) Included in Revenues: Energy-Related Businesses on the Consolidated Statements of Operations.

CONTRACTUAL COMMITMENTS

Natural Gas Contracts

SoCalGas has responsibility for procuring natural gas for both SDG&E’s and SoCalGas’ core customers in a combined portfolio. SoCalGas buys natural gas under short-term and long-term contracts for this portfolio from various producing regions in the southwestern U.S., U.S. Rockies and Canada.

SoCalGas transports natural gas primarily under long-term firm interstate pipeline capacity agreements that provide for annual reservation charges, which are recovered in rates. SoCalGas has commitments with interstate pipeline companies for firm pipeline capacity under contracts that expire at various dates through 2032.

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Sempra Infrastructure has various capacity agreements for natural gas storage and transportation that expire at various dates through 2059. Transportation costs on these agreements vary based on pipeline capacity.

Payments on our natural gas contracts could exceed the minimum commitment based on portfolio needs. At December 31, 2022, the future minimum payments under existing natural gas contracts and natural gas storage and transportation contracts are as follows:


FUTURE MINIMUM PAYMENTS
(Dollars in millions)
	Sempra						SoCalGas
	Storage and transportation		Natural gas(1)		Total(1)		Transportation		Natural gas		Total
2023	$	202	$	139	$	341	$	132	$	4	$	136
2024	184		49		233		114		22		136
2025	144		31		175		77		21		98
2026	141		—		141		75		—		75
2027	138		—		138		72		—		72
Thereafter	795		—		795		240		—		240
Total minimum payments	$	1,604	$	219	$	1,823	$	710	$	47	$	757

(1) Excludes amounts related to the LNG purchase agreement that we discuss below.

Total payments under natural gas contracts and natural gas storage and transportation contracts as well as payments to meet additional portfolio needs at Sempra and SoCalGas were as follows:


PAYMENTS UNDER NATURAL GAS CONTRACTS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra	$	2,536	$	1,691	$	989
SoCalGas	2,492		1,590		935

LNG Purchase Agreement

Sempra Infrastructure has an SPA for the supply of LNG to the ECA Regas Facility. The commitment amount is calculated using a predetermined formula based on estimated forward prices of the index applicable from 2023 to 2029. Although this agreement specifies a number of cargoes to be delivered, under its terms, the supplier may divert certain cargoes, which would reduce amounts paid under the agreement by Sempra Infrastructure.

At December 31, 2022, the following LNG commitment amounts are based on the assumption that all LNG cargoes, less those already confirmed to be diverted as of February 21, 2023, under the agreement are delivered:


LNG COMMITMENT AMOUNTS
(Dollars in millions)
Sempra:
2023	$	1,068
2024	797
2025	802
2026	796
2027	787
Thereafter	1,307
Total	$	5,557

Actual LNG purchases were approximately $108 million in 2022, $27 million in 2021 and $16 million in 2020 due to the supplier electing to divert cargoes as allowed by the agreement.

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Purchased-Power Contracts

Payments on SDG&E’s purchased-power contracts could exceed the minimum commitments based on energy needs. These purchased-power contracts expire on various dates through 2042. At December 31, 2022, the future minimum payments under long-term purchased-power contracts for Sempra and SDG&E are as follows:


FUTURE MINIMUM PAYMENTS – PURCHASED-POWER CONTRACTS(1)
(Dollars in millions)
2023	$	175
2024	150
2025	95
2026	91
2027	73
Thereafter	578
Total minimum payments	$	1,162

(1) Excludes purchase agreements accounted for as operating leases and finance leases.

Payments on these contracts represent capacity charges and minimum energy and transmission purchases that exceed the minimum commitment. SDG&E is required to pay additional amounts for actual purchases of energy that exceed the minimum energy commitments. SDG&E estimates these variable payments to be $77 million in each of 2023 through 2027 and $564 million thereafter. Total payments under purchased-power contracts for Sempra and SDG&E were $484 million in 2022, $495 million in 2021 and $534 million in 2020.

Construction and Development Projects

Sempra has various capital projects in progress in the U.S. and Mexico. Our total contractual commitments at December 31, 2022 under these projects are approximately $241 million, requiring future payments of $87 million in 2023, $24 million in 2024, $20 million in 2025, $20 million in 2026, $19 million in 2027 and $71 million thereafter. The following is a summary by segment of contractual commitments and contingencies related to such projects.

SDG&E

At December 31, 2022, SDG&E has commitments to make future payments of $33 million for construction projects that include:

▪$25 million related to spent fuel management at SONGS; and

▪$8 million for infrastructure improvements for electric transmission and distribution systems.

SDG&E expects future payments under these contractual commitments to be $10 million in 2023, $1 million in each of 2024 through 2026, $2 million in 2027 and $18 million thereafter.

SoCalGas

At December 31, 2022, SoCalGas has commitments to make future payments of $12 million for an information technology software project. SoCalGas expects future payments under this contractual commitment to be $4 million in each of 2023 and 2024 and $2 million in each of 2025 and 2026.

Sempra Infrastructure

At December 31, 2022, Sempra Infrastructure has commitments to make future payments of $196 million for construction and development projects that include:

▪$16 million for refined products terminals;

▪$174 million for natural gas pipelines and ongoing maintenance services; and

▪$6 million for renewables and other projects.

Sempra Infrastructure expects future payments under these contractual commitments to be $73 million in 2023, $19 million in 2024, $17 million in each of 2025 through 2027 and $53 million thereafter.

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OTHER COMMITMENTS

SDG&E

We discuss nuclear insurance and nuclear fuel disposal related to SONGS in Note 15.

Fire Mitigation Fund

In connection with the completion of the Sunrise Powerlink project in 2012, the CPUC required that SDG&E establish a fire mitigation fund to minimize the risk of fire as well as reduce the potential wildfire impact on residences and structures near the Sunrise Powerlink. The future payments for these contractual commitments, for which a liability has been recorded, are expected to be $4 million per year in 2023 through 2027 and $271 million thereafter, subject to escalation of 2% per year, ending in 2069. At December 31, 2022, the present value of these future payments of $123 million has been recorded as a regulatory asset as the amounts represent a cost that we expect will be recovered from customers in the future.

Franchise Agreements

In July 2021, SDG&E’s natural gas and electric franchise agreements for the City of San Diego went into effect. These franchise agreements provide SDG&E the opportunity to serve the City of San Diego for a period of 20 years, consisting of 10-year agreements that will automatically renew for an additional 10 years unless the City Council voids the automatic renewals with a supermajority vote. At December 31, 2022, SDG&E has commitments to make future principal and interest payments as consideration for the franchise agreements of $14 million in 2023, $15 million in each of 2024 and 2025, $4 million in 2026, $2 million in 2027 and $50 million thereafter. The consideration paid will not be recovered from customers and will be amortized over 20 years.

In 2021, two lawsuits were filed in the California Superior Court challenging various aspects of the natural gas and electric franchise agreements granted by the City of San Diego to SDG&E. Both lawsuits ultimately sought to void the franchise agreements. In one of the cases, judgment was granted in favor of SDG&E and the City of San Diego. A final ruling is pending on the second case.

SoCalGas

In May 2022, SoCalGas’ new gas franchise agreement with the City of Los Angeles (City of LA) went into effect. This franchise agreement provides SoCalGas a gas system franchise to install, retain, operate and maintain its gas system within the City of LA for 21 years, consisting of a 13-year term that will automatically renew for an additional eight years unless the City of LA exercises its option to terminate the renewal term. At December 31, 2022, SoCalGas has one remaining future payment obligation of $11 million to be paid within 30 days of commencement of the eight-year renewal term in 2035 (if the renewal term is not terminated by the City of LA). This future payment obligation would not be recovered from customers and would be amortized over eight years.

Sempra Infrastructure

Additional consideration for a 2006 comprehensive legal settlement with California to resolve the Continental Forge litigation included an agreement that, for a period of 18 years beginning in 2011, Sempra Infrastructure would sell to SDG&E and SoCalGas, subject to annual CPUC approval, up to 500 MMcf per day of regasified LNG from Sempra Infrastructure’s ECA Regas Facility that is not delivered or sold in Mexico at the price indexed to the California border minus $0.02 per MMBtu. There are no specified minimums required, and to date, Sempra Infrastructure has not been required to deliver any natural gas pursuant to this agreement.

ENVIRONMENTAL ISSUES

Our operations are subject to federal, state and local environmental laws. We also are subject to regulations related to hazardous wastes, air and water quality, land use, solid waste disposal and the protection of wildlife. These laws and regulations require that we investigate and correct the effects of the release or disposal of materials at sites associated with our past and our present operations. These sites include those at which we have been identified as a PRP under the federal Superfund laws and similar state laws.

In addition, we are required to obtain numerous governmental permits, licenses and other approvals to construct facilities and operate our businesses. The related costs of environmental monitoring, pollution control equipment, cleanup costs, and emissions fees are significant. Increasing national and international concerns regarding global warming and mercury, carbon dioxide, nitrogen oxide and sulfur dioxide emissions could result in requirements for additional pollution control equipment or significant

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emissions fees or taxes that could adversely affect Sempra Infrastructure. SDG&E’s and SoCalGas’ costs to operate their facilities in compliance with these laws and regulations generally have been recovered in customer rates.

We disclose any proceeding under environmental laws to which a government authority is a party when the potential monetary sanctions, exclusive of interest and costs, exceed the lesser of $1 million or 1% of current assets, which was $59 million for Sempra, $16 million for SDG&E and $21 million for SoCalGas at December 31, 2022.

We discuss environmental matters related to the natural gas leak at SoCalGas’ Aliso Canyon natural gas storage facility above in “Legal Proceedings – SoCalGas – Aliso Canyon Natural Gas Storage Facility Gas Leak.”

Other Environmental Issues

We generally capitalize the significant costs we incur to mitigate or prevent future environmental contamination or extend the life, increase the capacity, or improve the safety or efficiency of property used in current operations. The following table shows our capital expenditures (including construction work in progress) in order to comply with environmental laws and regulations:


CAPITAL EXPENDITURES FOR ENVIRONMENTAL ISSUES
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Sempra	$	87	$	95	$	76
SDG&E	31		32		39
SoCalGas	56		63		37

We have not identified any significant environmental issues outside the U.S.

At SDG&E and SoCalGas, costs that relate to current operations or an existing condition caused by past operations are generally recorded as a regulatory asset due to the probability that these costs will be recovered in rates.

The environmental issues currently facing us, except for those related to the Leak as we discuss above or resolved during the last three years, include (1) investigation and remediation of SDG&E’s and SoCalGas’ manufactured-gas sites, (2) cleanup of third-party waste-disposal sites used by SDG&E and SoCalGas at which we have been identified as a PRP and (3) mitigation of damage to the marine environment caused by the cooling-water discharge from SONGS.

The table below shows the status at December 31, 2022 of SDG&E’s and SoCalGas’ manufactured-gas sites and the third-party waste-disposal sites for which we have been identified as a PRP:


STATUS OF ENVIRONMENTAL SITES

	# Sites complete(1)	# Sites in process
SDG&E:
Manufactured-gas sites	3	—
Third-party waste-disposal sites	2	1
SoCalGas:
Manufactured-gas sites	39	3
Third-party waste-disposal sites	5	2

(1) There may be ongoing compliance obligations for completed sites, such as regular inspections, adherence to land use covenants and water quality monitoring.

We record environmental liabilities when our liability is probable and the costs can be reasonably estimated. In many cases, however, investigations are not yet at a stage where we can determine whether we are liable or, if the liability is probable, to reasonably estimate the amount or range of amounts of the costs. Estimates of our liability are further subject to uncertainties such as the nature and extent of site contamination, evolving cleanup standards and imprecise engineering evaluations. We review our accruals periodically and, as investigations and cleanups proceed, we make adjustments as necessary.

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The following table shows our accrued liabilities for environmental matters at December 31, 2022. Of the total liability, $14 million at SoCalGas is recorded on a discounted basis, with a weighted-average discount rate of 0.4%.


ACCRUED LIABILITIES FOR ENVIRONMENTAL MATTERS
(Dollars in millions)
	Manufactured- gas sites		Waste disposal sites (PRP)(1)		Other hazardous waste sites		Total(2)
SDG&E(3)	$	—	$	5	$	11	$	16
SoCalGas(4)	38		3		1		42
Other	—		1		—		1
Total Sempra(3)(4)	$	38	$	9	$	12	$	59

(1) Sites for which we have been identified as a PRP.

(2) Includes $5, $1 and $4 classified as current liabilities and $54, $15 and $38 classified as noncurrent liabilities on Sempra’s, SDG&E’s and SoCalGas’ Consolidated Balance Sheets, respectively.

(3) Does not include SDG&E’s liability for SONGS marine environment mitigation.

(4) Does not include SoCalGas’ liability for environmental matters for the Leak. We discuss matters related to the Leak above in “Legal Proceedings – SoCalGas – Aliso Canyon Natural Gas Storage Facility Gas Leak.”

We expect future payments related to our environmental liabilities on an undiscounted basis to be $5 million in 2023, $11 million in 2024, $10 million in 2025, $1 million in 2026, $17 million in 2027 and $15 million thereafter.

In connection with the issuance of operating permits, SDG&E and the other owners of SONGS previously reached an agreement with the California Coastal Commission to mitigate the damage to the marine environment caused by the cooling-water discharge from SONGS during its operation. SONGS’ early retirement, described in Note 15, does not reduce SDG&E’s mitigation obligation. SDG&E’s share of the estimated mitigation costs is $144 million, of which $54 million has been incurred through December 31, 2022 and $90 million is accrued for remaining costs through 2059, which is recoverable in rates and included in noncurrent Regulatory Assets on Sempra’s and SDG&E’s Consolidated Balance Sheets.

NOTE 17. SEGMENT INFORMATION

We have four separately managed reportable segments, as follows:

▪SDG&E provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County.

▪SoCalGas is a natural gas distribution utility, serving customers throughout most of Southern California and part of central California.

▪Sempra Texas Utilities holds our investment in Oncor Holdings, which owns an 80.25% interest in Oncor, a regulated electric transmission and distribution utility serving customers in the north-central, eastern, western and panhandle regions of Texas; and our indirect, 50% interest in Sharyland Holdings, which owns Sharyland Utilities, a regulated electric transmission utility serving customers near the Texas-Mexico border.

▪Sempra Infrastructure includes the operating companies of our subsidiary, SI Partners, as well as a holding company and certain services companies. Sempra Infrastructure develops, builds, operates and invests in energy infrastructure to help enable the energy transition in North American markets and globally. Sempra Infrastructure owns a 70% interest in SI Partners, which held a 100% ownership interest in Sempra LNG Holding, LP and a 99.9% ownership interest in IEnova at December 31, 2022.

As we discuss in Note 5, the financial information related to our businesses that constituted the Sempra South American Utilities segment is presented as discontinued operations for all periods presented. The information in the tables below excludes amounts from discontinued operations unless otherwise noted. We completed the sales of our discontinued operations in the second quarter of 2020.

We evaluate each segment’s performance based on its contribution to Sempra’s reported earnings and cash flows. SDG&E and SoCalGas operate in essentially separate service territories, under separate regulatory frameworks and rate structures set by the CPUC and, in the case of SDG&E, the FERC. We describe the accounting policies of all of our segments in Note 1.

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The cost of common services shared by the business segments is assigned directly or allocated based on various cost factors, depending on the nature of the service provided. Interest income and expense is recorded on intercompany loans. The loan balances and related interest are eliminated in consolidation.

The following tables show selected information by segment from our Consolidated Statements of Operations and Consolidated Balance Sheets. We provide information about our equity method investments by segment in Note 6. Amounts labeled as “All other” in the following tables consist primarily of activities of parent organizations and include certain nominal amounts from our South American businesses that did not qualify for treatment as discontinued operations.


SEGMENT INFORMATION
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
REVENUES
SDG&E	$	5,838	$	5,504	$	5,313
SoCalGas	6,840		5,515		4,748
Sempra Infrastructure	1,919		1,997		1,400
All other	1		5		2
Adjustments and eliminations	(1)		(1)		(3)
Intersegment revenues(1)	(158)		(163)		(90)
Total	$	14,439	$	12,857	$	11,370
DEPRECIATION AND AMORTIZATION
SDG&E	$	982	$	889	$	801
SoCalGas	761		716		654
Sempra Infrastructure	268		239		198
All other	8		11		13
Total	$	2,019	$	1,855	$	1,666
INTEREST INCOME
SDG&E	$	5	$	1	$	2
SoCalGas	6		1		2
Sempra Infrastructure	44		75		141
All other	20		3		7
Intercompany eliminations	—		(11)		(56)
Total	$	75	$	69	$	96
INTEREST EXPENSE
SDG&E	$	449	$	412	$	413
SoCalGas	198		157		158
Sempra Infrastructure	104		205		174
All other	306		444		390
Intercompany eliminations	(3)		(20)		(54)
Total	$	1,054	$	1,198	$	1,081
INCOME TAX EXPENSE (BENEFIT)
SDG&E	$	182	$	201	$	190
SoCalGas	138		(310)		96
Sempra Texas Utilities	—		—		1
Sempra Infrastructure	249		238		149
All other	(13)		(30)		(187)
Total	$	556	$	99	$	249
EARNINGS (LOSSES) ATTRIBUTABLE TO COMMON SHARES
SDG&E	$	915	$	819	$	824
SoCalGas	599		(427)		504
Sempra Texas Utilities	736		616		579
Sempra Infrastructure	310		682		580
Discontinued operations	—		—		1,840
All other	(466)		(436)		(563)
Total	$	2,094	$	1,254	$	3,764

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SEGMENT INFORMATION (CONTINUED)
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
EXPENDITURES FOR PROPERTY, PLANT & EQUIPMENT
SDG&E	$	2,473	$	2,220	$	1,942
SoCalGas	1,993		1,984		1,843
Sempra Infrastructure	884		802		879
All other	7		9		12
Total	$	5,357	$	5,015	$	4,676
GEOGRAPHIC INFORMATION
Long-lived assets(2):
United States	$	55,035	$	50,657	$	46,902
Mexico	8,423		7,708		6,929
Asia	1		1		—
Total	$	63,459	$	58,366	$	53,831
Revenues(3):
United States	$	13,015	$	11,154	$	10,205
Mexico	1,424		1,703		1,165
Total	$	14,439	$	12,857	$	11,370

			December 31,
			2022		2021
ASSETS
SDG&E			$	26,422	$	24,058
SoCalGas			22,346		20,324
Sempra Texas Utilities			13,781		13,047
Sempra Infrastructure			15,760		14,408
All other			1,376		1,399
Intersegment receivables			(1,111)		(1,191)
Total			$	78,574	$	72,045

(1)Revenues for reportable segments include intersegment revenues of $15, $100, and $43 for 2022; $10, $98, and $55 for 2021; and $5, $88, and $(3) for 2020 for SDG&E, SoCalGas, and Sempra Infrastructure, respectively.

(2)Includes net PP&E and investments.

(3)Amounts are based on where the revenue originated, after intercompany eliminations.

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SCHEDULE I – SEMPRA ENERGY
INDEX TO CONDENSED FINANCIAL INFORMATION OF PARENT

Condensed Statements of Operations for the years ended December 31, 2022, 2021 and 2020			S-2

C ondensed Statements of Comprehensive Income (Loss) for the years ended December 31 , 2022 , 2021 a nd 2020			S-3

Condensed Balance Sheets at December 31, 2022 and 2021			S-4

Condensed Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020			S-5

Notes to Condensed Financial Information of Parent
Note 1. Basis of Presentation			S-6
Note 2. New Accounting Standards			S-6
Note 3. Debt and Credit Facility			S-6
Note 4. Commitments and Contingencies			S-7

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SEMPRA ENERGY
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Years ended December 31,
	2022		2021		2020
Interest income	$	35	$	11	$	4
Interest expense	(326)		(576)		(495)
Operating expenses	(92)		(92)		(86)
Other (expense) income, net	(58)		20		(38)
Income tax benefit	111		190		176
Loss before equity in earnings of subsidiaries	(330)		(447)		(439)
Equity in earnings of subsidiaries, net of income taxes	2,468		1,764		4,371
Net income	2,138		1,317		3,932
Preferred dividends	(44)		(63)		(168)
Earnings	$	2,094	$	1,254	$	3,764

Basic EPS:
Earnings	$	6.65	$	4.03	$	12.93
Weighted-average common shares outstanding	315,159		311,755		291,077

Diluted EPS:
Earnings	$	6.62	$	4.01	$	12.88
Weighted-average common shares outstanding	316,378		313,036		292,252

See Notes to Condensed Financial Information of Parent.

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SEMPRA ENERGY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Years ended December 31, 2022, 2021 and 2020
	Pretax amount		Income tax benefit (expense)		Net-of-tax amount
2022:
Net income	$	2,027	$	111	$	2,138
Other comprehensive income (loss):
Foreign currency translation adjustments	11		—		11
Financial instruments	221		(55)		166
Pension and other postretirement benefits	3		(6)		(3)
Total other comprehensive income	235		(61)		174
Comprehensive income	$	2,262	$	50	$	2,312
2021:
Net income	$	1,127	$	190	$	1,317
Other comprehensive income (loss):
Foreign currency translation adjustments	(6)		—		(6)
Financial instruments	191		(47)		144
Pension and other postretirement benefits	28		(6)		22
Total other comprehensive income	213		(53)		160
Comprehensive income	$	1,340	$	137	$	1,477
2020:
Net income	$	3,756	$	176	$	3,932
Other comprehensive income (loss):
Foreign currency translation adjustments	547		—		547
Financial instruments	(146)		33		(113)
Pension and other postretirement benefits	11		1		12
Total other comprehensive income	412		34		446
Comprehensive income	$	4,168	$	210	$	4,378

See Notes to Condensed Financial Information of Parent.

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SEMPRA ENERGY
CONDENSED BALANCE SHEETS
(Dollars in millions)
	December 31,
	2022		2021
Assets:
Cash and cash equivalents	$	219	$	186
Restricted cash	1		2
Due from affiliates	102		446
Income taxes receivable, net	104		—
Other current assets	17		31
Total current assets	443		665

Investments in subsidiaries	35,209		33,308
Due from affiliates	20		21
Deferred income taxes	233		626
Other long-term assets	1,050		1,090
Total assets	$	36,955	$	35,710

Liabilities and shareholders’ equity:
Short-term debt	$	454	$	1,240
Due to affiliates	226		185
Other current liabilities	566		535
Total current liabilities	1,246		1,960

Long-term debt	7,215		5,969
Due to affiliates	776		1,151
Other long-term liabilities	603		649

Commitments and contingencies (Note 4)

Shareholders’ equity	27,115		25,981
Total liabilities and shareholders’ equity	$	36,955	$	35,710

See Notes to Condensed Financial Information of Parent.

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SEMPRA ENERGY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in millions)
	Years ended December 31,
	2022		2021		2020
Net cash provided by (used in) operating activities	$	775	$	(255)	$	(978)

Expenditures for property, plant and equipment	(7)		(8)		(9)
Capital contributions to investees	(661)		(1,005)		(364)
Disbursement for note receivable	—		(305)		—
Distributions from investments	—		1,552		3,616
Purchases of trust assets	(114)		—		—
Proceeds from sales of trust assets	123		—		—
(Increase) decrease in loans to affiliates, net	(92)		(20)		2
Other	(3)		—		—
Net cash (used in) provided by investing activities	(754)		214		3,245

Common dividends paid	(1,430)		(1,331)		(1,174)
Preferred dividends paid	(44)		(99)		(157)
Issuances of preferred stock, net	—		—		891
Issuances of common stock, net	4		5		11
Repurchases of common stock	(478)		(339)		(566)
Issuances of debt (maturities greater than 90 days)	1,569		990		1,599
Payments on debt (maturities greater than 90 days)	(322)		(3,200)		(3,700)
(Decrease) increase in short-term debt	(785)		1,240		—
(Decrease) increase in loans from affiliates, net	(226)		1,092		1,194
Purchases of noncontrolling interests	—		(217)		—
Proceeds from sale of noncontrolling interests	1,732		1,846		—
Equity transaction costs with third parties	—		—		(4)
Make-whole premiums related to early redemptions of debt	—		(121)		—
Other	(8)		(2)		(1)
Net cash provided by (used in) financing activities	12		(136)		(1,907)

Effect of exchange rate changes on cash and cash equivalents	(1)		(1)		—

Increase (decrease) in cash and cash equivalents	32		(178)		360
Cash and cash equivalents, January 1	188		366		6
Cash, cash equivalents and restricted cash, December 31	$	220	$	188	$	366

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock in exchange for NCI and related AOCI	$	—	$	1,373	$	—
Common dividends declared but not paid	360		349		301
Conversion of mandatory convertible preferred stock	—		2,258		—
Preferred dividends declared but not paid	11		11		47
Equitization of amounts due from affiliates	93		4,351		—

See Notes to Condensed Financial Information of Parent.

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NOTES TO CONDENSED FINANCIAL INFORMATION OF PARENT

NOTE 1. BASIS OF PRESENTATION

The condensed financial information of Sempra Energy has been prepared in accordance with SEC Regulation S-X Rule 5-04 and Rule 12-04. We apply the same accounting policies as in the consolidated financial statements of Sempra, except that Sempra Energy accounts for the earnings of its subsidiaries under the equity method in this unconsolidated financial information. This financial information should be read in conjunction with Sempra’s consolidated financial statements and the accompanying notes thereto included in this Form 10-K.

Sempra Energy received cash dividends from its subsidiaries totaling $832 million, $375 million and $300 million in 2022, 2021 and 2020, respectively.

NOTE 2. NEW ACCOUNTING STANDARDS

We describe in Note 2 of the Notes to Consolidated Financial Statements recent pronouncements that have had or may have a significant effect on Sempra Energy’s results of operations, financial condition, cash flows or disclosures.

NOTE 3. DEBT AND CREDIT FACILITY

SHORT-TERM DEBT

Committed Line of Credit

At December 31, 2022, Sempra Energy had capacity of $4.0 billion under a committed line of credit with available unused credit of $3.5 billion, which provides liquidity and supports its commercial paper program.

The principal terms of Sempra Energy’s committed line of credit include the following:

▪The facility has a syndicate of 23 lenders. No single lender has greater than a 6% share in the facility.

▪The facility provides for the issuance of $200 million of letters of credit. Subject to obtaining commitments from existing or new lenders and satisfaction of other specified conditions, Sempra Energy has the right to increase its letter of credit commitment to up to $500 million. No letters of credit were outstanding at December 31, 2022.

▪Borrowings bear interest at a benchmark rate plus a margin that varies with Sempra Energy’s credit rating.

▪Sempra Energy must maintain a ratio of indebtedness to total capitalization (as defined in its credit facility) of no more than 65% at the end of each quarter. At December 31, 2022, Sempra Energy was in compliance with this ratio under its credit facility.

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LONG-TERM DEBT

The following table shows the detail and maturities of uncollateralized long-term debt outstanding.


LONG-TERM DEBT
(Dollars in millions)
	December 31,
	2022		2021
3.3% Notes April 1, 2025	$	750	$	—
3.25% Notes June 15, 2027	750		750
3.4% Notes February 1, 2028	1,000		1,000
3.7% Notes April 1, 2029	500		—
3.8% Notes February 1, 2038	1,000		1,000
6% Notes October 15, 2039	750		750
4% Notes February 1, 2048	800		800
4.125% Junior Subordinated Notes April 1, 2052(1)	1,000		1,000
5.75% Junior Subordinated Notes July 1, 2079(1)	758		758
	7,308		6,058
Unamortized discount on long-term debt	(28)		(37)
Unamortized debt issuance costs	(65)		(52)
Total long-term debt	$	7,215	$	5,969

(1) Callable long-term debt not subject to make-whole provisions.

In March 2022, we issued $750 million aggregate principal amount of 3.30% senior unsecured notes due in full upon maturity on April 1, 2025 and received proceeds of $745 million (net of debt discount, underwriting discounts and debt issuance costs of $5 million), and $500 million of 3.70% senior unsecured notes due in full upon maturity on April 1, 2029 and received proceeds of $494 million (net of debt discount, underwriting discounts and debt issuance costs of $6 million). Each series of the notes is redeemable prior to maturity, subject to their terms, and in certain circumstances subject to make-whole provisions. We used the net proceeds for general corporate purposes and repayment of commercial paper.

At December 31, 2022, Sempra Energy had long-term debt maturities of $750 million in 2025, $750 million in 2027 and $5.8 billion thereafter.

Additional information on Sempra Energy’s short-term and long-term debt is provided in Note 7 of the Notes to Consolidated Financial Statements.

NOTE 4. COMMITMENTS AND CONTINGENCIES

Sempra Energy has an operating lease commitment related to its corporate headquarters building of approximately $241 million. Sempra Energy expects payments for its operating lease to be $12 million in each of 2023 and 2024, $13 million in each of 2025 through 2027 and $178 million thereafter.

For other contingencies and guarantees related to Sempra Energy, refer to Notes 6 and 16 of the Notes to Consolidated Financial Statements.

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Document

Exhibit 4.2

SEMPRA ENERGY

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

At December 31, 2022, Sempra Energy (“Sempra,” “we,” “us” or “our”) had the following two classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (“Exchange Act”):

Capital Stock:

▪Common Stock, no par value (the “common stock”)

Debt Securities:

▪5.75% Junior subordinated notes due 2079 (the “notes”)

At December 31, 2022, Sempra also had outstanding shares of 4.875% Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, Series C, no par value (the “series C preferred stock”), which are not registered under Section 12 of the Exchange Act. However, because the rights of the series C preferred stock in many cases impact the rights of our common stock, we have included the material terms of the series C preferred stock in this description. In this exhibit, we use the term “preferred stock” to describe our series C preferred stock or the class of preferred stock generally, as the context requires.

DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our amended and restated articles of incorporation (as they may be amended from time to time and including any Certificate of Determination of Preferences that has been filed and is then in effect, the “Articles of Incorporation”) and bylaws (as they may be amended from time to time, the “Bylaws”), each of which is an exhibit to the Annual Report on Form 10-K with which this Exhibit 4.2 is filed or incorporated by reference, as well as applicable provisions of California law. We encourage you to read our Articles of Incorporation and Bylaws and applicable provisions of California law for additional information. Our Articles of Incorporation were most recently amended and restated effective May 23, 2008, and our Bylaws were most recently amended on April 14, 2020.

The total number of shares of all classes of capital stock that Sempra is authorized to issue is 800,000,000, of which 750,000,000 are shares of common stock and 50,000,000 are shares of preferred stock. Shares of preferred stock may be issued from time to time in one or more series as determined by the Board of Directors. Of such preferred stock, at December 31, 2022, 17,250,000 shares were designated as 6% Mandatory Convertible Preferred Stock, Series A, no par value, none of which were outstanding or registered under Section 12 of the Exchange Act, 5,750,000 shares were designated as 6.75% Mandatory Convertible Preferred Stock, Series B, no par value, none of which were outstanding or registered under Section 12 of the Exchange Act, and 900,000 shares were designated as series C preferred stock. No other classes of capital stock are authorized under our Articles of Incorporation.

Common Stock

Dividend Rights

The holders of our common stock are entitled to receive, ratably, such dividends as the Board of Directors may from time to time declare, subject to any rights of holders of outstanding shares of any series of our preferred stock to receive dividends before dividends may be paid on our common stock.

Liquidation Rights

In the event of any liquidation, dissolution or winding up of Sempra, whether voluntary or involuntary, the holders of shares of our common stock are entitled, subject to any rights of the holders of outstanding shares of any series of our preferred stock to

receive distributions in such event before any distributions are made to holders of our common stock, to receive, ratably, any of our remaining assets after the discharge of our liabilities.

Voting Rights

Except as otherwise provided by law, each holder of our common stock is entitled to one vote per share on each matter submitted to a vote of our shareholders, subject to the voting rights, if any, of holders of outstanding shares of any series of our preferred stock, which could include the right to vote separately as a class or series, or the right to vote together with the common stock as a single class.

At each annual meeting of our shareholders, directors will be elected to hold office until the next annual meeting of shareholders and until their successors have been elected and qualified or until their earlier resignation or removal. Pursuant to our Bylaws, directors standing for election in an uncontested election (as defined below) will be elected by the affirmative vote of a majority of the shares entitled to vote for them represented and voting at a duly held meeting at which a quorum is present (and such affirmative votes must also represent more than 25% of the outstanding shares entitled to vote in the election of such directors). In any election of directors that is not an uncontested election, the candidates receiving the highest number of affirmative votes of the shares entitled to vote for them, up to the number of directors to be elected by those shares, will be elected and votes against a director and votes withheld will have no effect. The rights of holders of our common stock to elect directors are subject to the voting rights, if any, of holders of outstanding shares of any series of our preferred stock, which could include: (i) voting as a separate class or series, the right to elect one or more directors, or (ii) voting together with our common stock as a single class, the right to vote in the election of directors generally. Our Bylaws define an “uncontested election” as, in general, an election of directors in which the number of candidates for election does not exceed the number of directors to be elected by our shareholders at that election, determined at the times specified in our Bylaws. None of our shareholders may cumulate votes in the election of directors.

Other Rights

Our common stock does not contain any conversion rights or sinking fund or redemption provisions. Holders of our common stock are not entitled to preemptive rights to subscribe for or purchase any part of any new or additional issue of stock or securities convertible into stock.

Bylaws

The Board of Directors is expressly authorized to make, amend or repeal the Bylaws, without any action on the part of the shareholders, except as otherwise required by applicable California law, solely by the affirmative vote of at least two-thirds of the authorized number of directors. The Bylaws may also be amended or repealed by the shareholders, by the approval of the outstanding shares (as defined in Section 152 of the General Corporation Law of the State of California) of Sempra.

Listing

Our common stock is listed on the New York Stock Exchange under the trading symbol SRE and the Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de C.V.) under the trading symbol SRE.MX.

Preferred Stock

Ranking

Our series C preferred stock ranks with respect to dividend rights and distribution rights upon our liquidation, winding-up or dissolution:

▪senior to our common stock and each other class or series of our capital stock established after the original issue date of shares of the series C preferred stock, unless the terms of such capital stock expressly provide otherwise (collectively, “junior stock”);

▪on parity with each class or series of our capital stock established after the original issue date of shares of the series C preferred stock, if the terms of such class or series expressly provide for such parity ranking (collectively, “parity stock”);

▪junior to each class or series of our capital stock established after the original issue date of shares of the series C preferred stock, if the terms of such class or series expressly provide for such senior ranking (collectively, “senior stock”);

▪junior to our existing and future indebtedness and other liabilities; and

▪structurally subordinated to any existing and future indebtedness and other liabilities of our subsidiaries and capital stock of our subsidiaries held by third parties.

Redemption at the Option of Sempra

We may, at our option, redeem the series C preferred stock in whole or in part, from time to time, on any day during the period from and including the July 15 immediately preceding October 15, 2025 and July 15 of every fifth year after 2025 through and including such October 15, at a redemption price in cash equal to $1,000 per share. Additionally, in the event that a credit rating agency then publishing a rating for us makes certain amendments, clarifications or changes to the criteria it uses to assign equity credit to securities such as the series C preferred stock (a “Ratings Event”), we may redeem the series C preferred stock, in whole but not in part, at any time within 120 days after the conclusion of any review or appeal process instituted by us following the occurrence of the Ratings Event or, if no such review or appeal process is available or sought, the occurrence of such Ratings Event, at a redemption price in cash equal to $1,020 per share (102% of the Liquidation Preference (as defined below)).

Dividend Rights

Dividends on our series C preferred stock are payable semi-annually in cash on a cumulative basis when, as and if declared by the Board of Directors, or an authorized committee thereof, out of funds legally available for payment, at a resetting fixed-rate equal to 4.875% per annum of the Liquidation Preference from and including June 19, 2020 to, but excluding, October 15, 2025 and, for each five-year period following October 15, 2025 and October 15 of every fifth year after 2025, a per annum rate equal to the Five-year U.S. Treasury Rate (as defined in the Certificate of Determination of Preferences of the series C preferred stock) as of the second U.S. business day prior to such reset date, plus a spread of 4.550% of the Liquidation Preference.

So long as any share of series C preferred stock remains outstanding, no dividend or distribution will be declared or paid on common stock or any other junior stock, and no common stock or any other junior stock will be purchased, redeemed or otherwise acquired for consideration by us or any of our subsidiaries unless, in each case, all accumulated and unpaid dividends for all preceding dividend periods have been declared and paid, or a sufficient sum of cash or number of shares of common stock has been set apart for the payment of such dividends, on all outstanding shares of series C preferred stock. The foregoing limitation will not apply to (i) any dividend or distribution payable in shares of common stock or other junior stock, together with cash in lieu of any fractional share; (ii) purchases, redemptions or other acquisitions of common stock or other junior stock in connection with the administration of any benefit or other incentive plan, including any employment contract, in the ordinary course of business, including, without limitation, (x) purchases to offset the share dilution amount pursuant to a publicly announced repurchase plan; provided that any purchases to offset the share dilution amount will in no event exceed the share dilution amount; (y) the forfeiture of unvested shares of restricted stock or share withholdings or other surrender of shares to which the holder may otherwise be entitled upon exercise, delivery or vesting of equity awards (whether in payment of applicable taxes, the exercise price or otherwise); and (z) the payment of cash in lieu of fractional shares; (iii) purchases of fractional interests in shares of common stock or other junior stock pursuant to the conversion or exchange provisions of such shares of other junior stock or any securities exchangeable for or convertible into shares of common stock or other junior stock, (iv) any dividends or distributions of rights or common stock or junior stock in connection with a shareholders’ rights plan or any redemption or repurchase of rights pursuant to any shareholders’ rights plan; (v) purchases of common stock or other junior stock pursuant to a contractually binding requirement to buy common stock or other junior stock existing prior to the preceding dividend period, including under a contractually binding stock repurchase plan; (vi) the deemed purchase or acquisition of fractional interests in shares of common stock or other junior stock pursuant to the conversion or exchange provisions of such shares or the security being converted or exchanged; (vii) the acquisition by us or any of our subsidiaries of record ownership in common stock or other junior stock or parity stock for the beneficial ownership of any other persons (other than for us or any of our subsidiaries), including as trustees or custodians, and the payment of cash in lieu of fractional shares; and (viii) the exchange or conversion of junior stock for or into other junior stock or of parity stock for or into other parity stock (with the

same or lesser aggregate liquidation amount) or junior stock and the payment of cash in lieu of fractional shares. The phrase “share dilution amount” means the increase in the number of diluted shares outstanding (determined in accordance with accounting principles generally accepted in the United States of America and as measured from the initial issue date) resulting from the grant, vesting or exercise of equity-based compensation to directors, employees and agents and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.

When dividends on shares of series C preferred stock (A) have not been declared and paid in full on any dividend payment date; or (B) have been declared but a sum of cash sufficient for payment thereof has not been set aside for the benefit of the holders thereof on the applicable record date, no dividends may be declared or paid on any parity stock unless dividends are declared on the shares of series C preferred stock such that the respective amounts of such dividends declared on the shares of series C preferred stock and such parity stock bear the same ratio to each other as all accumulated dividends and all declared and unpaid dividends per share on the shares of series C preferred stock and such parity stock bear to each other; provided, however, that any unpaid dividends will continue to accumulate.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors, or an authorized committee thereof, may be declared and paid on any securities, including common stock, from time to time out of any funds legally available for such payment, and holders of our series C preferred stock will not be entitled to participate in any such dividends declared on securities other than the series C preferred stock.

Liquidation Rights

In the event of our liquidation, winding up or dissolution, whether voluntary or involuntary, each holder of our series C preferred stock will be entitled to receive $1,000 per share (the “Liquidation Preference”) of such preferred stock, plus an amount (the “Liquidation Dividend Amount”) equal to accumulated and unpaid dividends on such shares to (but excluding) the date fixed for liquidation, winding-up or dissolution to be paid out of our assets legally available for distribution to our shareholders, after satisfaction of debt and other liabilities owed to our creditors and holders of shares of any senior stock and before any payment or distribution is made to holders of any junior stock, including, without limitation, common stock.

If, upon our voluntary or involuntary liquidation, winding-up or dissolution, the amounts payable with respect to (i) the Liquidation Preference plus the Liquidation Dividend Amount on the shares of series C preferred stock and (ii) the liquidation preference of, and the amount of accumulated and unpaid dividends (to, but excluding, the date fixed for liquidation, winding-up or dissolution) on, all other parity stock are not paid in full, the holders of our series C preferred stock and all holders of any such other parity stock will share equally and ratably in any distribution of our assets in proportion to the respective liquidation preferences and amounts equal to the accumulated and unpaid dividends to which they are entitled.

After the payment to any holder of our series C preferred stock of the full amount of the Liquidation Preference and the Liquidation Dividend Amount for each of such holder’s shares of such preferred stock, such holder as such will have no right or claim to any of our remaining assets.

Neither the sale, lease or exchange of all or substantially all of our assets, nor our merger or consolidation into or with any other person, will be deemed to be our voluntary or involuntary liquidation, winding-up or dissolution.

Voting Rights

The holders of the series C preferred stock do not have voting rights with respect to their preferred stock, except as described below and as specifically required by applicable California law from time to time.

Whenever dividends on the series C preferred stock have not been declared or paid or have been declared but not paid for three or more semi-annual dividend periods, whether or not consecutive, the authorized number of directors on the Board of Directors will automatically be increased by two and the holders of the series C preferred stock, voting together as a single class with holders of any and all other outstanding preferred stock of equal rank having similar voting rights, will be entitled to elect two directors who satisfy certain requirements to fill such newly created directorships. Such directors will stand for reelection annually, and at each subsequent annual meeting of shareholders, so long as the holders of preferred stock continue to have this voting right. This right will terminate with respect to the series C preferred stock when all accumulated and unpaid dividends on

such preferred stock have been paid in full, subject to the revesting of the right in the event of each subsequent nonpayment for three or more semi-annual dividend periods. Upon the termination of this voting right for all series of preferred stock, the term of office of each director elected pursuant to the right will terminate and the authorized number of directors will automatically decrease by two.

So long as any shares of series C preferred stock are outstanding, we must obtain the affirmative vote or consent of the holders of at least two-thirds of the outstanding shares of such preferred stock, voting together as a single class, in order to, subject to certain exceptions and limitations, amend or alter our Articles of Incorporation so as to authorize, create or increase the authorized amount of any class or series of senior stock or adversely affect the special rights, preferences, privileges or voting powers of the series C preferred stock, consummate a binding share exchange or reclassification involving the shares of the series C preferred stock or consummate a merger or consolidation of us with another entity; provided that if any such amendment, alteration, repeal, share exchange, reclassification, merger or consolidation would adversely affect one or more but not all series of preferred stock, then only the series of preferred stock adversely affected and entitled to vote will so vote as a class. We may amend, alter, supplement or repeal any terms of the series C preferred stock without the vote or consent of the holders thereof, so long as such action does not adversely affect the special rights, preferences, privileges, voting powers, limitations or restrictions of such preferred stock, to cure any ambiguity or mistake, to correct or supplement any provision that may be defective or inconsistent with any other provision in the Certificate of Determination of Preferences of the series C preferred stock, to make any provision with respect to matters or questions relating to the series C preferred stock that is not inconsistent with the provisions of our Articles of Incorporation or to waive any of our rights with respect thereto.

Terms of Conversion

The series C preferred stock is not convertible to any other security.

Other Rights

Our series C preferred stock does not contain any sinking fund or redemption provisions. Holders of our series C preferred stock are not entitled to preemptive rights to subscribe for or purchase any part of any new or additional issue of stock or securities convertible into stock.

Listing

Our series C preferred stock is not listed on any securities exchange or trading facility or included in any automated dealer quotation system.

Anti-Takeover Effects of our Articles of Incorporation and Bylaws

Certain provisions of our Articles of Incorporation and Bylaws could have the effect of delaying, deterring or preventing another party from acquiring or seeking to acquire control of us. These provisions are intended to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage anyone seeking to acquire control of us to negotiate first with the Board of Directors. However, these provisions could also delay, deter or prevent a change of control or other takeover of our company that our shareholders might consider to be in their best interests, including transactions that might result in a premium being paid over the market prices of our common stock and any outstanding preferred stock, and may also limit the prices that investors are willing to pay in the future for our common stock and any outstanding preferred stock. These provisions may also have the effect of preventing changes in our management. Our Articles of Incorporation and Bylaws include anti-takeover provisions that:

▪authorize the Board of Directors, without a vote or other action by our shareholders, to cause the issuance of preferred stock in one or more series and, with respect to each series, to fix the number of shares constituting that series and to establish the rights, preferences, privileges and restrictions of that series, which may include, among other things, dividend and liquidation rights and preferences, rights to convert such shares into common stock, voting rights and other rights which may dilute or otherwise adversely affect the voting or other rights and the economic interests of holders of our common stock or one or more other series of our preferred stock, if any, then outstanding;

▪establish advance notice requirements and procedures for shareholders to submit nominations of candidates for election to the Board of Directors and to propose other business to be brought before a shareholders’ meeting;

▪provide that vacancies in the Board of Directors, including vacancies created by the removal of any director, may be filled by a majority of the directors then in office or by a sole remaining director;

▪provide that no shareholder may cumulate votes in the election of directors, which means that the holders of a majority of our outstanding shares of common stock can elect all directors standing for election by our common shareholders;

▪require that any action to be taken by our shareholders must be taken either (i) at a duly called annual or special meeting of shareholders, or (ii) by the unanimous written consent of all of our shareholders, unless the Board of Directors, by resolution adopted by two-thirds of the authorized number of directors, waives the foregoing provision in any particular circumstance; and

▪require action by shareholders holding not less than 1/10th of the voting power of our capital stock in order for our shareholders to call a special meeting of shareholders.

DESCRIPTION OF DEBT SECURITIES

The following description of the notes is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to the subordinated indenture, dated as of June 26, 2019 (the “indenture”), between Sempra and the U.S. Bank National Association, as trustee (the “trustee”). The indenture is an exhibit to the Annual Report on Form 10-K with which this Exhibit 4.2 is filed or incorporated by reference. We encourage you to read the indenture, as supplemented, for additional information.

The notes constitute a separate series of our subordinated debt securities under the indenture and were issued in the aggregate principal amount of $758 million, which remained the aggregate principal amount outstanding as of December 31, 2022.

Maturity

The maturity date of the notes is July 1, 2079. The notes are subject to early redemption at our option as described under “Redemption – Optional Redemption” below.

Interest

The notes bear interest at the rate of 5.75% per year. Subject to our right to defer interest payments as described below, interest on the notes is payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year.

So long as no event of default under the indenture with respect to the notes has occurred and is continuing, we may, at our option, defer interest payments on the notes, from time to time, for one or more deferral periods of up to 40 consecutive quarterly interest payment periods each (each such deferral period, commencing on the interest payment date on which the first such deferred interest payment otherwise would have been made, an “optional deferral period”), except that no such optional deferral period may extend beyond the final maturity date of the notes. In other words, we may declare at our discretion up to a 10-year interest payment moratorium on the notes and we may choose to do that on more than one occasion, except that we cannot begin a new optional deferral period until we have paid all accrued and unpaid interest on the notes from any previous optional deferral period. No interest on the notes will be payable during any optional deferral period unless we elect, at our option, to redeem notes during such optional deferral period, in which case accrued and unpaid interest will be paid on the notes, and only on the notes, being redeemed, or unless the principal of and interest on the notes has been declared due and payable as a result of an event of default under the indenture with respect to the notes, in which case accrued and unpaid interest will be paid on all of the notes. We may elect, at our option, to extend the length of any optional deferral period that is shorter than 40 consecutive quarterly interest payment periods (but not beyond the final maturity date of the notes) and to shorten the length of any optional deferral period.

During any optional deferral period, interest on the notes will continue to accrue at the rate of 5.75% per year and interest on deferred interest will accrue at the rate of 5.75% per year, compounded quarterly, to the extent permitted by applicable law. In addition, during any optional deferral period, we are prohibited from taking certain specified actions as set forth in the indenture, including, subject to certain exceptions and limitations, declaring or paying any dividends or distributions on our capital stock; redeeming, purchasing, acquiring or making a liquidation payment with respect to our capital stock; paying any principal, interest or premium on, or repaying, repurchasing or redeeming, any of our indebtedness that ranks equal with or junior to the notes in right of payment; or making any payments with respect to any guarantees by us of any indebtedness if such guarantees rank equal with or junior to the notes in right of payment.

Redemption

At our option, we may redeem some or all of the notes before their maturity, as follows:

▪on or after October 1, 2024, at any time in whole or from time to time in part, at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus, subject to certain interest payment procedures as set forth in the indenture, accrued and unpaid interest on the notes to be redeemed to the redemption date;

▪before October 1, 2024, in whole but not in part, following the occurrence and during the continuance of a Tax Event (as defined below), at a redemption price equal to 100% of the principal amount of the notes, plus, subject to certain interest payment procedures as set forth in the indenture, accrued and unpaid interest on the notes to the redemption date; or

▪before October 1, 2024, in whole but not in part, following the occurrence and during the continuance of a Rating Agency Event (as defined below), at a redemption price equal to 102% of the principal amount of the notes, plus, subject to certain interest payment procedures as set forth in the indenture, accrued and unpaid interest on the notes to the redemption date.

A “Tax Event” means that we have received an opinion of counsel experienced in such matters to the effect that, as a result of:

▪any amendment to, clarification of, or change, including any announced prospective change, in the laws or treaties of the United States or any of its political subdivisions or taxing authorities, or any regulations under those laws or treaties;

▪an administrative action, which means any judicial decision or any official administrative pronouncement, ruling, regulatory procedure, notice or announcement including any notice or announcement of intent to issue or adopt any administrative pronouncement, ruling, regulatory procedure or regulation;

▪any amendment to, clarification of, or change in the official position or the interpretation of any administrative action or judicial decision or any interpretation or pronouncement that provides for a position with respect to an administrative action or judicial decision that differs from the previously generally accepted position, in each case by any legislative body, court, governmental authority or regulatory body, regardless of the time or manner in which that amendment, clarification or change is introduced or made known; or

▪a threatened challenge asserted in writing in connection with a tax audit of us or any of our subsidiaries, or a publicly-known threatened challenge asserted in writing against any other taxpayer that has raised capital through the issuance of securities that are substantially similar to the notes,

which amendment, clarification or change is effective or the administrative action is taken or judicial decision, interpretation or pronouncement is issued or threatened challenge is asserted or becomes publicly-known after June 13, 2019, there is more than an insubstantial risk that interest payable by us on the notes is not deductible, or within 90 days would not be deductible, in whole or in part, by us for United States federal income tax purposes.

“Rating Agency Event” means a change in the methodology published by any nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Exchange Act that published a rating for Sempra as of June 13, 2019 (a “rating agency”) in assigning equity credit to securities such as the notes, as such methodology was in effect on June 13, 2019 (the “current methodology”), that results in (i) any shortening of the length of time for which equity credit pertaining to the notes by such rating agency would have been in effect had the current methodology not been changed or (ii) a lower equity credit being assigned by such rating agency to the notes as of the date of such change than the equity credit that would have been assigned to the notes by such rating agency had the current methodology not been changed.

Subordination and Security

The notes are our unsecured obligations. The notes rank junior and subordinate in right of payment to our existing and future Senior Indebtedness (as defined below), to the extent and in the manner described below. At December 31, 2022, we had outstanding Senior Indebtedness of approximately $9 billion. The notes rank equally in right of payment with any existing and future unsecured indebtedness if the terms of such indebtedness provide that it ranks equally with the notes in right of payment. The notes are effectively subordinated in right of payment to any secured indebtedness that we have or may incur and to all indebtedness and other liabilities of our subsidiaries. At December 31, 2022, we had no outstanding secured indebtedness and our subsidiaries had outstanding total indebtedness and liabilities owed to unaffiliated third parties of approximately $41 billion and total liabilities owed to us of approximately $607 million.

The notes are subordinated in right of payment to the prior payment in full of all our Senior Indebtedness. This means that upon:

(a)any payment by, or distribution of the assets of, Sempra upon our dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings; or

(b)a failure to pay any interest, principal or other monetary amounts due on any of our Senior Indebtedness when due and continuance of that default beyond any applicable grace period; or

(c)acceleration of the maturity of any Senior Indebtedness as a result of a default;

the holders of all of our Senior Indebtedness will be entitled to receive:

▪in the case of clause (a) above, payment of all amounts due or to become due on all Senior Indebtedness; or

▪in the case of clauses (b) and (c) above, payment of all amounts due on all Senior Indebtedness,

before the holders of the notes are entitled to receive any payment. So long as any of the events in clauses (a), (b), or (c) above has occurred and is continuing, any amounts payable or assets distributable on the notes will instead be paid or distributed, as the case may be, directly to the holders of Senior Indebtedness to the extent necessary to pay, in the case of clause (a) above, all amounts due or to become due upon all such Senior Indebtedness, or, in the case of clauses (b) and (c) above, all amounts due on all such Senior Indebtedness, and, if any such payment or distribution is received by the trustee under the indenture or the holders of any of the notes before all Senior Indebtedness due and to become due or due, as applicable, is paid, such payment or distribution must be paid over to the holders of the unpaid Senior Indebtedness. Subject to paying the Senior Indebtedness due and to become due in the case of clause (a) or the Senior Indebtedness due in the case of clauses (b) and (c), the holders of the notes will be subrogated to the rights of the holders of the Senior Indebtedness to receive payments applicable to the Senior Indebtedness until the notes are paid in full.

Neither the notes nor the indenture limit our ability to incur Senior Indebtedness or our or any of our subsidiaries’ ability to incur other secured and unsecured indebtedness or liabilities.

“Senior Indebtedness” means, with respect to the notes, (i) indebtedness of Sempra, whether outstanding at the date of the indenture or incurred, created or assumed after such date, (a) in respect of money borrowed by Sempra (including any financial derivative, hedging or futures contract or similar instrument, to the extent any such item is primarily a financing transaction) and (b) evidenced by debentures, bonds, notes, credit or loan agreements or other similar instruments or agreements issued or entered into by Sempra; (ii) all finance lease obligations of Sempra; (iii) all obligations of Sempra issued or assumed as the deferred purchase price of property, all conditional sale obligations of Sempra and all obligations of Sempra under any title retention agreement (but excluding, for the avoidance of doubt, trade accounts payable arising in the ordinary course of business and long-term purchase obligations); (iv) all obligations of Sempra for the reimbursement of any letter of credit, banker’s acceptance, security purchase facility or similar credit transaction; and (v) all obligations of the type referred to in clauses (i) through (iv) above of other persons for the payment of which Sempra is responsible or liable as obligor, guarantor or otherwise, except for any obligations, instruments or agreements of the type referred to in any of clauses (i) through (v) above that, by the terms of the instruments or agreements creating or evidencing the same or pursuant to which the same is outstanding, are subordinated or equal in right of payment to the notes.

Events of Default

An “event of default” occurs with respect to the notes if:

▪we do not pay any interest on any note when it becomes due and payable and such default continues for 30 days (whether or not such payment is prohibited by the subordination provisions applicable to the notes);

▪we do not pay any principal of or premium, if any, on any note when it becomes due and payable (whether or not such payment is prohibited by the subordination provisions applicable to the notes);

▪we remain in breach of any other covenant or warranty (excluding covenants and warranties solely applicable to one or more other series of subordinated debt securities issued under the indenture) in the indenture or the notes for 60 days after there has been given to us, by registered or certified mail, a written notice of default sent by either the trustee or registered holders of at least 25% of the principal amount of the outstanding notes that specifies the default or breach and requires remedy of the default or breach; or

▪we file for bankruptcy or other specified events of bankruptcy, insolvency, receivership or reorganization occur with respect to us.

No event of default with respect to the notes will necessarily constitute an event of default with respect to the subordinated debt securities of any other series issued under the indenture, and no event of default with respect to any such other series of subordinated debt securities issued under the indenture will necessarily constitute an event of default with respect to the notes.

Under the terms of the indenture, we furnish the trustee with an annual statement as to our compliance with the conditions and covenants in the indenture.

Modification

Without Registered Holder Consent. Without the consent of any registered holders of debt securities outstanding under the indenture, Sempra and the trustee may enter into one or more supplemental indentures to such indenture for any of the following purposes:

▪to evidence the succession of another entity to Sempra;

▪to add one or more covenants for the benefit of the holders of all or any series of debt securities issued under such indenture or to surrender any right or power conferred upon Sempra;

▪to add any additional events of default for all or any series of debt securities issued under such indenture;

▪to add or change any of the provisions of such indenture to the extent necessary to permit or facilitate the issuance of debt securities in bearer form or to facilitate the issuance of debt securities in uncertificated form;

▪to change or eliminate any provision of such indenture so long as the change or elimination does not apply to any debt securities entitled to the benefit of such provision or to add any new provision to such indenture provided that any such addition does not apply to any outstanding debt securities issued under such indenture;

▪to provide security for the debt securities of any series issued under such indenture;

▪to establish the form or terms of debt securities of any series issued under such indenture, as permitted by such indenture;

▪to evidence and provide for the acceptance of appointment of a separate or successor trustee;

▪to cure any ambiguity, defect or inconsistency, or to make any other changes that do not adversely affect the interests of the holders of debt securities of any series under such indenture in any material respect; or

▪in the case of subordinated debt of any series, to conform the terms of such debt securities, any officers’ certificate or supplemental indenture establishing the form or terms of such debt securities or, insofar as relates to such debt securities, the subordinated indenture to any terms set forth in the description of such debt securities appearing in the offering memorandum, prospectus supplement or other like offering document relating to the initial offering of the debt securities.

With Registered Holder Consent. Subject to the following sentence, Sempra and the trustee may, with some exceptions, amend or modify the applicable indenture with the consent of the registered holders of at least a majority in aggregate principal amount of the debt securities of each series affected by the amendment or modification. However, no amendment or modification may, without the consent of the registered holder of each outstanding debt security affected thereby:

▪change the stated maturity of the principal or interest on any debt security or reduce the principal amount, interest or premium payable or change any place of payment where or the currency in which any debt security is payable, or impair the right to bring suit to enforce any payment, or, if Sempra has the right to extend or defer the payment of interest on such debt security, to increase the maximum time period of any such extension or deferral or increase the maximum number of times Sempra may extend or defer any such interest payment;

▪reduce the percentages of registered holders whose consent is required for any supplemental indenture or waiver;

▪modify certain provisions in the applicable indenture relating to supplemental indentures and waivers of certain covenants and past defaults; or

▪in the case of the subordinated indenture, modify, delete or supplement any of the subordination provisions or the definition of Senior Indebtedness applicable to the subordinated debt securities of any series then outstanding in a manner adverse to the holders of such subordinated debt securities.

Consolidation, Merger or Conveyance of Assets

We have agreed not to consolidate or merge with or into any other entity, or to sell, transfer, lease or otherwise convey our properties and assets as an entirety or substantially as an entirety to any entity, unless:

•(i) in the case of a merger, we are the continuing entity, or (ii) the successor entity formed by any such consolidation or into which we are merged or which acquires by sale, transfer, lease or other conveyance our properties and assets as an entirety or substantially as an entirety, is a corporation organized and existing under the laws of the United States of America

or any State thereof or the District of Columbia and expressly assumes, by supplemental indenture, the due and punctual payment of the principal, premium and interest on all of the notes outstanding under the indenture and the performance of all of the covenants under the indenture; and

•immediately after giving effect to the transaction, no event of default, and no event which after notice or lapse of time or both would become an event of default under the indenture, has or will have occurred and be continuing.

Defeasance, Satisfaction and Discharge

The indenture provides that we may, upon satisfying several conditions, be discharged from our obligations, with some exceptions, with respect to the notes, which we refer to as “defeasance”. One such condition is the irrevocable deposit with the trustee, in trust, of money and/or government obligations that, through the scheduled payment of principal and interest on those obligations, would provide sufficient moneys to pay the principal of and any premium and interest on the notes on the maturity dates of the payments or upon redemption. In addition, we would be required to deliver an opinion of counsel to the effect that a holder of the notes would not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and would be subject to federal income tax on the same amounts, at the same times and in the same manner as if that defeasance had not occurred. The opinion of counsel must be based upon a ruling of the Internal Revenue Service or a change in law after the date of the indenture.

The indenture will cease to be of further effect with respect to the notes, and we will be deemed to have satisfied and discharged all of our obligations under the indenture with respect to the notes, except as noted below, when all outstanding notes have become due or will become due within one year at their stated maturity or on a redemption date and we deposit with the trustee, in trust, funds that are sufficient to pay and discharge all remaining indebtedness on the notes. We will remain obligated to pay all other amounts due under the indenture and to perform certain ministerial tasks as described in the indenture.

Other Rights

The notes do not contain any conversion rights or sinking fund provisions.

Trustee

U.S. Bank National Association is the trustee under the indenture governing the notes. U.S. Bank National Association is a national banking association that provides trust services and acts as indenture trustee for numerous corporate securities issuances, including for other series of notes of which we or our affiliates are the issuer. In addition, affiliates of U.S. Bank National Association may perform various commercial banking and investment banking services for us and our subsidiaries from time to time in the ordinary course of business.

Listing

The notes are listed on the New York Stock Exchange under the trading symbol “SREA.”

Document

Exhibit 4.40

This Supplemental Indenture is, among other things,
A MORTGAGE OF CHATTELS

Southern California Gas Company

American Trust Company
TRUSTEE

SUPPLEMENTAL INDENTURE

DATED AS OF JULY 1, 1947


TABLE OF CONTENTS*
		Page
PARTIES		1
RECITALS:
	Execution of Original Indenture	1
	Bonds heretofore issued	1
	Creation of Series 2⅞% Series due 1977	2
	Form of Coupon Bond of 2⅞% Series due 1977	3
	Form of Interest Coupon	6
	Form of Registered Bond 2⅞% Series due 1977	7
	Form of Trustee’s Certificate of Authentication	10
	Purpose of Supplemental Indenture	10
	Fulfillment of Conditions Precedent	10
GRANTING CLAUSE:
	Los Angeles County Real Property	11
	San Bernardino County Real Property	22
	Riverside County Real Property	22
	Tulare County Real Property	23
	Kern County Real Property	24
	Kings County Real Property	25
	Fresno County Real Property	25
	Other Properties now or hereafter owned	26
	Excepted Properties	27
HABENDUM AND DECLARATION OF TRUST		27
DEFINITION OF TERM “CORPORATION”		27
CERTAIN COVENANTS AND AGREEMENTS, INCLUDING ACCEPTANCE OF TRUST		27
TESTIMONIUM		28
SIGNATURES AND SEALS		29
ACKNOWLEDGMENTS		29

* This Table of Contents is not to be deemed to be a part of this Supplemental Indenture.

This Supplemental Indenture Is, Among Other Things,

A MORTGAGE OF CHATTELS

THIS SUPPLEMENTAL INDENTURE, dated as of the 1st day of July, 1947, made and entered into by and between SOUTHERN CALIFORNIA GAS COMPANY, a corporation duly organized and existing under the laws of the State of California, and having its principal place of business in the City of Los Angeles, State of California (hereinafter sometimes called the “Corporation”), party of the first part, and AMERICAN TRUST COMPANY, a corporation duly organized and existing under and by virtue of the laws of California, and having its principal place of business in the City and County of San Francisco, in said State (hereinafter sometimes called the “Trustee”), party of the second part,

WITNESSETH:

WHEREAS, the Corporation has· heretofore executed and delivered to the Trustee a certain Indenture (hereinafter sometimes called the “Original Indenture’’) dated October 1, 1940, to secure bonds of the Corporation designated generally as its “First Mortgage Bonds” to he issued from time. to time in one or more series; the Original Indenture being recorded· in . the offices of the County Recorders of the Counties in the State of California as follows:


County	Reference
Los Angeles	Book	17886, page	1, Official Records
Kern	Book	971, page	6, Official Records
Tulare	Vol.	912, page	268, Official Records
Kings	Vol.	236, page	78, Official Records
Ventura	Vol.	623, page	508, Official Records
Fresno	Vol.	1859, page	1, Official Records
Orange	Book	1067, page	1, Official Records
Riverside	Book	472, page	356, Official Records
San Bernardino	Book	1435, page	13, Official Records

and being filed in the offices of the Registrars of Title of the Counties of the State of California and there given document numbers and endorsed on certificates of title as follows:


County	Document Number	Certificate of Title
Los Angeles	14779-J	JT–87581 JT–87583 JV–88156 N–235
San Bernardino	17740	5879

WHEREAS, bonds of the Corporation of the series designated as its “First Mortgage Bonds, 3¼% Series due 1970,” have heretofore been issued as a part of the First Mortgage Bonds referred to in the Original Indenture and are now outstanding, such series of bonds, unless and until the taking of further appropriate action by the Board of Directors of the Corporation, being without limitation as to aggregate authorized principal amount; and

WHEREAS, pursuant to the provisions of Section 2.02 of the Original Indenture, the Board of Directors of the Corporation has, by resolution duly adopted, created and fixed the terms and provisions of a new series of bonds, designated as “First Mortgage Bonds, 2⅞% Series due 1977", as a part of the First Mortgage Bonds referred to in the Original Indenture, which new series of bonds, unless and until the taking of further appropriate action by the Board of Directors of the Corporation, are to be without limitation as to aggregate authorized principal amount and of which series bonds in the aggregate principal amount of $12,000,000 are to be presently issued; and

WHEREAS, the coupon bonds of said 2⅞% Series due 1977, and interest coupons to be attached thereto, and the registered bonds of said series without coupons, and the Trustee’s Certificate to be endorsed thereon, are to be in substantially the forms following, respectively, namely:

(Form of Coupon Bond, 2⅞% Series due 1977)

SOUTHERN CALIFORNIA GAS COMPANY

(Incorporated under the laws of the State of California)
First Mortgage Bond, 2⅞% Series Due 1977

No. ………….. $1,000

ONE THOUSAND DOLLARS

($1000) in lawful money of the United States of America, and to pay interest thereon from the first day of July, 1947, at the rate of two and seven-eighths per cent (2⅞%) per annum in like lawful money, payable semi-annually, on the first days of January and July in each year, until the Corporation’s obligation with respect to the payment of such principal shall be discharged as provided in the Indenture hereinafter mentioned, but only, in case of interest due on or before maturity, according to the tenor and upon presentation and surrender of the respective coupons therefor hereto attached as they severally mature. Both the principal of and interest on this bond will be paid at the principal office of American Trust Company, or its successor trustee under said Indenture, in the City and County of San Francisco, State of California, or, at the option of the bearer of such coupons, interest will be paid at the office or agency of the Corporation in The City of New York, State of New York.

This bond is one of a duly authorized issue of bonds of the Corporation (herein called the “bonds”), of the series hereinafter specified, all issued and to be issued under and all equally and ratably secured (except in so far as any sinking or other fund established in accordance with the provisions of the Indenture hereinafter mentioned may afford additional security for the bonds of any particular series) by a mortgage and deed of trust (herein called the “Indenture”), dated October 1, 1940, executed by the Corporation to American Trust Company, as Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property conveyed in trust, mortgaged and pledged, the nature and extent of the security, the rights of the bearers or registered owners of the bonds and of the Trustee or trustees in respect thereof, the terms and conditions upon which the bonds are, and are to be, secured and the circumstances under which additional bonds may be issued. The bonds may be issued for various principal sums, and may be issued in series, which may mature at different times, may bear interest at different rates and may otherwise vary as in the Indenture provided. This bond is one of a series designated as the “First Mortgage Bonds, 2⅞% Series due 1977" (herein called “bonds of 2⅞% Series due 1977") of the Corporation, issued under and secured, by the Indenture, and an indenture or indentures supplemental thereto.

indenture, consented to by the holders of at least two-thirds (⅔) in principal amount of the bonds of such series so affected, the Indenture or any indenture supplemental thereto, and the rights and obligations of the Corporation and the holders of bonds and coupons, may be modified or altered from time to time, as provided in the Indenture; provided, however, (a) that the right of any holder of any bond to receive payment of the principal of and interest on such bond, on or after the respective due dates expressed in such bond, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected by any such supplemental indenture without the consent of such holder, and (b) that no such modification or alteration shall reduce the proportions of bondholders’ consents required as aforesaid; such proportions to be determined in each case as provided in the Indenture.

The bonds of the 2⅞% Series due 1977 are subject to redemption at any time or from time to time prior to maturity, at the option of the Corporation, either as a whole or in part by lot, upon payment of accrued interest to the date fixed for the redemption thereof, plus that percentage of the principal amount thereof applicable to such date in accordance with the following (wherein all dates are inclusive), namely: from date of issue to June 30, 1952, 108%; July 1, 1952, to June 30, 1953, 105%; July 1, 1953, to June 30, 1955, 104¾%; July 1, 1955, to June 30, 1957, 104½%; July 1, 1957, to June 30, 1958, 104¼%; July 1, 1958, to June 30, 1960, 104%; July 1, 1960, to June 30, 1961, 103¾%; July 1, 1961, to June 30, 1962, 103½%; July 1, 1962, to June 30, 1964, 103¼%; July 1, 1964, to June 30, 1965, 103%; July 1, 1965, to June 30, 1966, 102¾%; July 1, 1966, to June 30, 1967, 102½%; July 1, 1967, to June 30, 1968, 102¼%; July 1, 1968, to June 30, 1969, 102%; July 1, 1969, to June 30, 1971, 101¾%; July 1, 1971, to June 30, 1972, 101½%; July 1, 1972, to June 30, 1973, 101¼%; July 1, 1973, to June 30, 1974, 101%; July 1, 1974, to June 30, 1975, 100¾%; July 1, 1975, to June 30, 1976, 100½%; July 1, 1976, to June 30, 1977, 100%; upon notice given by publication once in each of three separate calendar weeks in one daily newspaper printed in the English language of general circulation in the Borough of Manhattan, City and State of New York, and in one similarly printed daily newspaper of general circulation in San Francisco, California (the first of such publications to be not less than thirty and not more than sixty days before the redemption date), or, if all of the bonds to be redeemed are in fully registered form, notice of any such redemption may be mailed to the registered owners of the bonds to be redeemed not less than thirty nor more than sixty days before the redemption date, in lieu of such notice being given by publication, all subject to the conditions and as more fully set forth in the Indenture, including the condition that failure to give notice of any such redemption by mail, if required, or any defect therein or in the mailing thereof shall not affect the validity of the proceedings for the redemption of any bonds so to be redeemed if notice by publication, if required, is duly given. If this bond is called for redemption and payment duly provided as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for such redemption.

The bonds are entitled to the benefit of the Maintenance and Sinking Fund as provided in the Indenture.

In case an event of default, as defined in the Indenture, shall occur, the principal of all bonds then outstanding under the Indenture may be declared or become due and payable upon the conditions and in the manner and with the effect provided in the Indenture.

This bond is transferable by delivery.

No recourse shall be had for the payment of the principal of or the interest on this bond or for any claim based hereon or on the Indenture or any indenture supplemental thereto, against any incorporator, stockholder, director or officer, past, present or future, of the Corporation, or of any predecessor or successor corporation, either directly or through the Corporation, or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability being waived and released by every bearer hereof by the acceptance of this bond and as part of the consideration for the issue hereof, and being likewise waived and released by the terms of the Indenture.

Neither this bond nor any interest coupon hereto appertaining shall become valid or obligatory for any purpose or be entitled to any benefit under the Indenture until American Trust Company, or its successor as Trustee under the Indenture, shall have signed the form of certificate endorsed hereon.

IN WITNESS WHEREOF, SOUTHERN CALIFORNIA GAS COMPANY has caused this bond to be signed in its corporate name by its President or a Vice-President and its corporate seal to be hereto affixed and attested by its Secretary or an Assistant Secretary, and interest coupons bearing the facsimile signature of its Treasurer to be attached hereto, all as of the first day of July, 1947.


SOUTHERN CALIFORNIA GAS COMPANY
By
									President.
(Corporate Seal)

ATTEST:

									Secretary.

(Form of Interest Coupon, 2⅞% Series due 1977)
(January Coupons)

No. ………….. $14.38

On the first day of January, 19….., unless the bond herein mentioned shall have been duly called for previous redemption and payment thereof duly provided, Southern California Gas Company will pay to bearer, upon surrender of this coupon at the principal office of American Trust Company in the City and County of San Francisco, California, or at the office or agency of Southern California Gas Company in The City of New York, New York, Fourteen and 38/100 Dollars in lawful money of the United States of America, being six (6) months’ interest then due on its First Mortgage Bond, 2⅞% Series due 1977 No. …………...



						Treasurer.

(July Coupons)

No. ………….. $14.37

On the first day of July, 19….., unless the bond herein mentioned shall have been duly called for previous redemption and payment thereof duly provided, SOUTHERN CALIFORNIA GAS COMPANY will pay to bearer, upon surrender of this coupon at the principal office of American Trust Company in the City and County of San Francisco, California, or at the office or agency of Southern California Gas Company in The City of New York, New York, Fourteen and 37/100 Dollars in lawful money of the United States of America, being six (6) months’ interest then due on its First Mortgage Bond, 2⅞% Series due 1977 No. …………...



						Treasurer.

(Form of Registered Bond Without Coupons, 2⅞% Series due 1977)

SOUTHERN CALIFORNIA GAS COMPANY
(Incorporated under the laws of the State of California)

First Mortgage Bond, 2⅞% Series Due 1977

No. ………….. $…………..

SOUTHERN CALIFORNIA GAS COMPANY, a corporation organized and existing under the laws of the State of California (hereinafter called the “Corporation”, which term shall include any successor corporation, as defined in the Indenture hereinafter referred to), for value received, hereby promises to pay to …………..…………..………….., or registered assigns, on the first day of July, 1977, the sum of …………..………….. DOLLARS ($…………..) in lawful money of the United States of America, and to pay interest thereon to the registered owner hereof from the date of this bond, at the rate of two and seven-eighths per cent (2⅞%) per annum in like lawful money, payable semi-annually, on the first days of January and July in each year, until the Corporation’s obligation with respect to the payment of such principal shall be discharged as provided in the Indenture hereinafter mentioned. Both the principal of and interest on this bond will be paid at the principal office of American Trust Company, or its successor trustee under said Indenture, in the City and County of San Francisco, State of California, or, at the option of the registered owner hereof, interest will be paid at the office or agency of the Corporation in The City of New York, State of New York.

This bond is one of a duly authorized issue of bonds of the Corporation (herein called the “bonds”), of the series hereinafter specified, all issued and to be issued under and all equally and ratably secured (except in so far as any sinking or other fund established in accordance with the provisions of the Indenture hereinafter mentioned may afford additional security for the bonds of any particular series) by a mortgage and deed of trust (herein called the “Indenture”), dated October 1, 1940, executed by the Corporation to American Trust Company, as Trustee, to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the property conveyed in trust, mortgaged and pledged, the nature and extent of the security, the rights of the bearers or registered owners of the bonds and of the Trustee or trustees in respect thereof, the terms and conditions upon which the bonds are, and are to be, secured and the circumstances under which additional bonds may be issued. The bonds may be issued for various principal sums, and may be issued in series, which may mature at different times, may bear interest at different rates and may otherwise vary as in the Indenture provided. This bond is one of a series designated as the “First Mortgage Bonds, 2⅞% Series due 1977" (herein called “bonds of 2⅞% Series due 1977") of the Corporation, issued under and secured by the Indenture, and an indenture or indentures supplemental thereto.

As provided in the Indenture, by any indenture or indentures supplemental thereto executed by the Corporation and the Trustee and consented to by the holders of not less than two-thirds (⅔) in principal amount of the bonds at the time outstanding, and, in case one or more, but less than all, of the series of bonds then outstanding are affected by such supplemental indenture, consented to by the holders of at least two-thirds (⅔) in principal amount of the bonds of such series so affected, the Indenture or any indenture supplemental thereto, and the rights and obligations of the Corporation and the holders of bonds and coupons, may be modified or altered

from time to time, as provided in the Indenture; provided, however, (a) that the right of any holder of any bond to receive payment of the principal of and interest on such bond, on or after the respective due dates expressed in such bond, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected by any such supplemental indenture without the consent of such holder, and (b) that no such modification or alteration shall reduce the proportions of bondholders’ consents required as aforesaid; such proportions to be determined in each case as provided in the Indenture.

The bonds of the 2⅞% Series due 1977 are subject to redemption at any time or from time to time prior to maturity, at the option of the Corporation, either as a whole or in part by lot, upon payment of accrued interest to the date fixed for the redemption thereof, plus that percentage of the principal amount thereof applicable to such date in accordance with the following (wherein all dates are inclusive), namely: from date of issue to June 30, 1952, 108%; July 1, 1952, to June 30, 1953, 105%; July 1, 1953, to June 30, 1955, 104¾%; July 1, 1955, to June 30, 1957, 104½%; July 1, 1957, to June 30, 1958, 104¼%; July 1, 1958, to June 30, 1960, 104%; July 1, 1960, to June 30, 1961, 103¾%; July 1, 1961, to June 30, 1962, 103½%; July 1, 1962, to June 30, 1964, 103¼%; July 1, 1964, to June 30, 1965, 103%; July 1, 1965, to June 30, 1966, 102¾%; July 1, 1966, to June 30, 1967, 102½%; July 1, 1967, to June 30, 1968, 102¼%; July 1, 1968, to June 30, 1969, 102%; July 1, 1969, to June 30, 1971, 101¾%; July 1, 1971, to June 30, 1972, 101½%; July 1, 1972, to June 30, 1973, 101¼%; July 1, 1973, to June 30, 1974, 101%; July 1, 1974, to June 30, 1975, 100¾%; July 1, 1975, to June 30, 1976, 100½%; July 1, 1976, to June 30, 1977, 100%; upon notice given by publication once in each of three separate calendar weeks in one daily newspaper printed in the English language of general circulation in the Borough of Manhattan, City and State of New York, and in one similarly printed daily newspaper of general circulation in San Francisco, California (the first of such publications to be not less than thirty and not more than sixty days before the redemption date), or, if all of the bonds to be redeemed are in fully registered form, notice of any such redemption may be mailed to the registered owners of the bonds to be redeemed not less than thirty nor more than sixty days before the redemption date, in lieu of such notice being given by publication, all subject to the conditions and as more fully set forth in the Indenture, including the condition that failure to give notice of any such redemption by mail, if required, or any defect therein or in the mailing thereof shall not affect the validity of the proceedings for the redemption of any bonds so to be redeemed if notice by publication, if required, is duly given. If this bond, or any portion hereof ($1,000 or a multiple thereof), is called for redemption and payment duly provided as specified in the Indenture, interest shall cease to accrue on this bond or such portion hereof from and after the date fixed for such redemption.

The bonds are entitled to the benefit of the Maintenance and Sinking Fund as provided in the Indenture.

In case an event of default, as defined in the Indenture, shall occur, the principal of all bonds then outstanding under the Indenture may.be declared or become due and payable upon the conditions and in the manner and with the effect provided in the Indenture.

This bond is transferable by the registered owner hereof, in person or by duly authorized attorney, at the offices or agencies of the Corporation in said City and County of San Francisco and also in said The City of New York, upon surrender and cancellation of this bond and on presentation of a duly executed instrument of transfer, and thereupon a new registered bond or

bonds, without coupons, of the same series, of authorized denominations, for a like aggregate principal amount, will be issued to the transferee or transferees in exchange herefor; and this bond, with or without others of the same series, may in like manner be exchanged for one or more new registered bonds, without coupons, of the same series of other authorized denominations but of the same aggregate principal amount; or the registered owner of this bond, at his option, may surrender the same at any of said offices or agencies of the Corporation for cancellation in exchange for a like aggregate principal amount of coupon bonds of the same series, of the denomination of $1000 each, with coupons attached maturing on and after the next ensuing interest date; all upon payment of the charges and subject to the terms and conditions set forth in the Indenture. The Corporation is not, however, required to make any exchange or transfer of any registered bond without coupons for a period of ten days next preceding any interest payment date for such bond or after the first publication or mailing, whichever is earlier, of notice of redemption thereof.

No recourse shall be had for the payment of the principal of or the interest on this bond or for any claim based hereon or on the Indenture or any indenture supplemental thereto, against any incorporator, stockholder, director or officer, past, present or future, of the Corporation, or of any predecessor or successor corporation, either directly or through the Corporation, or any such predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability being waived and released by every registered owner hereof by the acceptance of this bond and as part of the consideration for the issue hereof, and being likewise waived and released by the terms of the Indenture.

This bond shall not become valid or obligatory for any purpose or be entitled to any benefit under the Indenture until American Trust Company, or its successor as Trustee under the Indenture, shall have signed the form of certificate endorsed hereon.

IN WITNESS WHEREOF, SOUTHERN CALIFORNIA GAS COMPANY has caused this bond to be signed in its corporate name by its President or a Vice-President and its corporate seal to be hereto affixed and attested by its Secretary or an Assistant Secretary, all as of the ………….. day of …………..………….., 19…...


SOUTHERN CALIFORNIA GAS COMPANY
By
									President.
(Corporate Seal)

ATTEST:

									Secretary.

(Form of Trustee’s Certificate)

This bond is one of the bonds, of the series designated therein, described in the within-mentioned Indenture.


(Name of Authenticating Trustee), Trustee,
By
									Authorized Officer.

WHEREAS, it is provided in the Original Indenture that all the business, franchises and properties, real, personal, and mixed, of every kind and nature whatsoever and wheresoever situate, which might thereafter be acquired by the Corporation, shall be as fully embraced within the lien thereof as if said properties were owned by the Corporation at the date of the Original Indenture and were particularly described therein and specifically conveyed thereby, excepting certain properties expressly excepted by the provisions thereof; and

WHEREAS, subsequent to the execution of the Original Indenture the Corporation has acquired properties hereinafter mentioned or referred to which, although not specifically described in the Original Indenture, upon the acquisition thereof by the Corporation became and now are subject to the lien, operation and effect of the Original Indenture by virtue of the after-acquired property clause or other clauses thereof; but the Corporation, nevertheless, desires to execute, acknowledge, deliver and cause to be recorded this Supplemental Indenture for the purposes, among others, of expressly and specifically subjecting such after-acquired properties to the lien of the Original Indenture and of further assuring and confirming the lien of the Original Indenture on all of the properties of every kind and character, whether real or personal and regardless of the date of acquisition thereof by the Corporation, intended to be subjected to the lien thereof; and

WHEREAS, Section 16.01 of the Original Indenture provides that the Corporation may, for any purpose not inconsistent with the terms of the Original Indenture, execute and file with the Trustee, and the Trustee at the request of the Corporation shall join in, indentures supplemental thereto and which shall thereafter form a part thereof; and

WHEREAS, for and in consideration of the premises the Corporation is obligated and desires to execute this Supplemental Indenture; and

WHEREAS, the making, executing, delivering and recording of this Supplemental Indenture has been duly authorized by proper corporate action of the Corporation; and

WHEREAS, the execution and delivery of this Supplemental Indenture has been authorized and approved by the Public Utilities Commission of the State of California;

NOW, THEREFORE, in consideration of the premises and of the sum of one dollar ($1), lawful money of the United States of America, duly paid by the Trustee to the Corporation, and of other good and valuable considerations, receipt of which is hereby acknowledged, and in order further to secure the payment of both the principal of and interest on the bonds of the Corporation now or at any time hereafter outstanding under the Original Indenture and/or any indenture supplemental thereto, including specifically, but without limitation, $31,743,000 aggregate principal amount of said First Mortgage Bonds now outstanding and said $12,000,000

aggregate principal amount of First Mortgage Bonds, 2⅞% Series due 1977, according to their tenor and effect, and further to secure the observance and performance of all of the covenants, agreements and conditions contained in the Original Indenture or in any indenture supplemental thereto, and without in any way limiting the generality or effect of the Original Indenture in so far as by any provision thereof any of the property therein or hereafter described or referred to is now subject or intended to be subject to the lien and operation thereof, but to such extent confirming such lien and operation, the Corporation has executed and delivered this Supplemental Indenture and has granted, bargained, sold, released, conveyed, mortgaged, assigned, transferred, pledged, set over and confirmed, and does hereby grant, bargain, sell, release, convey, mortgage, assign, transfer, pledge, set over and confirm unto American Trust Company, the Trustee, and to its successor or successors in the trust created by the Original Indenture and/or any indenture supplemental thereto, and to its and their assigns, forever, with power of sale, subject, to the extent applicable by the terms of the Original Indenture to any of the properties hereinafter referred to or described, to the exceptions, reservations, conditions, terms and provisions provided in the Original Indenture with respect to properties subject or intended to be subject thereto, all of the properties and assets of the Corporation, real, personal and mixed, of every kind and character, whether now or hereafter owned by the Corporation and wheresoever situated, including, without in any way limiting or modifying the generality or effect of the foregoing, all and singular, the following properties:

FIRST: All of the following lots, pieces and parcels of land situate in the Counties of Los Angeles, San Bernardino, Riverside, Tulare, Kern, Kings and Fresno, State of California:

I. COUNTY OF LOS ANGELES

Those certain lots, pieces and parcels of land situate in the County of Los Angeles, State of California, described as follows (the captions not constituting a part of the property descriptions, but being used as a convenient identification of the several parcels described):

(Aliso Street Station: Additional Land)

Parcel No. 1: A parcel of land in the City of Los Angeles, County of Los Angeles, State of California, including portions of Lots 11, 13, 15, all of Lot 17, and portions of Lots 19, 21, 23, 25, 27, 29, 31 and 33 in Block “B” of the Subdivision of the Aliso Tract as shown on the map recorded in Book 4, Pages 12 and 13 of Miscellaneous Records in the office of the County Recorder of said County; and portions of Lots 76, 77, 78 and 79, all of Lot 80, and portions of Lots 81 and 82 of the Subdivision of the Ballesteros Vineyard Tract as shown on the map recorded in Book 1, Pages 505 and 506 of said Miscellaneous Records, described as a whole as follows:

Beginning at the intersection of the Northwesterly line of Keller Street, 80 feet wide, with a line that is parallel with and distant Westerly 50 feet measured at right angles from the center line of the main passenger track of The Atchison, Topeka and Santa Fe Railway Company, said center line being described as a straight line which passes through a point on the center line of Aliso Street as located by the City Engineer of said City of Los Angeles, distant 65.32 feet Easterly from the intersection of said center line of Aliso Street, 96 feet wide, and the center line of said Keller Street as located by said City Engineer and a point on the line established by the said City Engineer 10 feet Northerly of the present center line of Macy Street, said point being

Westerly 41.10 feet from the intersection of said offset line with the center line of Center Street, as said center of main passenger track is defined in various deeds of record in said County; said point of beginning being located North 41° 56'' 10" East 72.46 feet along said Northwesterly line of Keller Street from the Northerly line of Aliso Street, 114 feet wide; thence along said parallel line North 13° 01' 15" East 620.68 feet to the Southeasterly line of Center Street as shown on said map of Ballesteros Vineyard Tract; thence along said Street North 41° 56' 05" East 186.42 feet to the intersection of the Northwesterly line of said Lot 81, with the Southerly line of Macy Street; thence along said Southerly line of Macy Street South 63° 35' 00" East 25.94 feet to the most Easterly corner of the land described in the deed to W. G. Nevin, Trustee, recorded in Book 1214, Page 231 of Deeds, Records of said County; thence Southerly in a straight line to a point in the Southerly line of said Lot 82 that is distant Southeasterly 81.80 feet from the most Westerly corner of said Lot 81; thence along the Northeasterly line of Lot 80 of said Ballesteros Vineyard Tract South 48° 03' 55" East 18.20 feet, more or less, to the most Easterly corner of said Lot 80; thence along the Southeasterly line of said Lot, South 41° 56' 05" West to a point in a line that is parallel with and distant Easterly 50 feet at right angles from the above described center line of main passenger track; thence South 13° 01' 15" West along said parallel line to the Southwesterly line of said Lot 15 in Block “B”; thence South 48° 03' 50" East 121.92 feet, more or less, to the most Easterly comer of said Lot 17; thence along said Keller Street South 41° 56' 10" West 427.54 feet to the point of beginning.

(Beverly Hills Distribution Station: Additional Land)

Parcel No. 2: The East 100 feet of the West 200 feet of Lot 4 in Block 15 of Tract No. 5647, in the City of Beverly Hills, as per map recorded in Book 60, Page 88 of Maps in the office of the County Recorder of Los Angeles County.

(Burbank Office)

Parcel No. 3: Lot “J” of Tract No. 817, in the City of Burbank, County of Los Angeles, State of California, as per map recorded in Book 16, Page 85 of Maps in the office of the County Recorder of said County.

(Compton Holder Site)

Parcel No. 4: A parcel of land in the City of Compton, being those portions of the West one-half of Lot 4, Range 2, and of Lot 5, Range 2, Temple and Gibson Tract, as per map recorded in Book 2, Pages 540 and 541 of Miscellaneous Records in the office of the County Recorder of Los Angeles County, bounded by the following described lines:

Beginning at the intersection of the Easterly prolongation of the Southerly line, of Tract No. 5684, as shown on map recorded in Book 71, Page 85 of Maps, Records of said County of Los Angeles, with the Easterly line of the West one-half of Lot 4, Range 2, of said Temple and Gibson Tract, said point of intersection being North 89° 46' 25" East 348.32 feet from the Southwest corner of Lot 19 of said Tract No. 5684; thence South 3° 15' 37" East along the Easterly line of the West one-half of Lot 4 and the Easterly line of the Westerly one-half of Lot 5, Range 2, of said Temple and Gibson Tract, 339.52 feet; thence South 89° 46' 25" West 541.89 feet to a point in the Easterly line of the Easterly roadway of Alameda Street, 61 feet in width; thence North 7° 24' 21" West along the Easterly line of the Easterly roadway of said Alameda

Street, 341.72 feet to a point in the Westerly prolongation of the Southerly line of said Tract No. 5684; thence North 89° 46' 25" East along a line which is the Southerly line of said Tract No. 5684 and its Westerly and Easterly prolongations, 566.63 feet to the point of beginning:

EXCEPT that portion of said land included within the boundaries of the West half of Lot 4, Range 2, of Temple and Gibson Tract, as per map recorded in Book 2, Pages 540 and 541 of Miscellaneous Records of said County.

(Daly Street Office: Additional Land)

Parcel No. 5: The Northerly two (2) feet of that certain parcel of land deeded on March 15, 1883 by William Lacy to C. H. Creciat, as recorded in Book 112, Page 518 of Deeds, Records of Los Angeles County, and more particularly described as follows:

Commencing at a point on the east line of Daly Street, North 15¼° West, distant 762.00 feet from the Northeasterly corner of Downey Avenue and Daly Street, running thence North 15¼° West, 97.00 feet; thence North 74¾° East, 165.00 feet; thence South 15¼° East, 97.00 feet; thence South 74¾° West, 165.00 feet to the point of beginning, being the Southwest corner of Lot 2 of Griffins Addition to East Los Angeles (according to a map of survey thereof made by Frank Lecouvereur, recorded in Book 3, Pages 194, 195, Miscellaneous Records, Records of Los Angeles County) having a frontage of 97.00 feet on Daly Street and a uniform depth of 165.00 feet.

(Ducommon Street Compressor Station: Additional Land)

Parcel No. 6: (a) Lots 1 to 8, both inclusive, and Lots 11 to 20, both inclusive, in Block “G” of the Aliso Tract in the City of Los Angeles, as per map recorded in Book 4, Pages 12 and 13, Miscellaneous Records in the Office of the County Recorder of Los Angeles County, except the Northerly 10 feet of Lots 2, 4, 6, 8 and 10 thereof condemned for the widening of Aliso Street.

(b) Also Lot 20 and the West half of Lot 18 of Block “L” of the Aliso Tract in the City of Los Angeles, as per map recorded in Book 4, Pages 12 and 13, Miscellaneous Records in the office of the County Recorder of Los Angeles County.

(c) Also Lots 15, 16, 17, 19, Lot 18 except the North 69.5 feet of the Westerly 20 feet thereof, and Lot 20 except the North 69.25 feet thereof, all in Block “O” of the Aliso Tract in the City of Los Angeles, as per map recorded in Book 4, Pages 12 and 13, Miscellaneous Records in the Office of the County Recorder of Los Angeles County.

(General Office: Additional Land)

Parcel No, 7: Lot “A” of Tract No. 1396, in the City of Los Angeles, as per map recorded in Book 18, Page 89 of Maps in the office of the County Recorder of Los Angeles County.

(General Office: Additional Land)

Parcel No. 8: Lot 16 in Block 56 of the Huber Tract in the City of Los Angeles, as per map recorded in Book 2, Page 280 of Miscellaneous Records, in the office of the County Recorder of Loa Angeles County.

(Haskell Avenue Station: Additional Land)

Parcel No, 9: The North 65 feet of that portion of Lot 1 in Block 27 of Tract 2955, in the City of Los Angeles, as per map recorded in Book 31, Pages 62 to 70, inclusive, of Maps, in the office of the County Recorder of Los Angeles County, described as follows:

Beginning at a point in the Southerly line of said Lot 1; said point being North 80° 39' West, 633.04 feet from the Southeast corner of said lot; thence North 0° 3' 30" West, 358.27 feet, more or less, to the Northwesterly corner of the land conveyed to Henry Frankfurt and wife, by deed recorded in Book 5471, Page 110 of Official Records; thence North 89° 43' 30" West, 190.06 feet to a point in the Westerly line of said lot; thence along said West line, South 0° 03' 30" East, 100 feet; thence South 89° 43' 30" East, 126.79 feet; thence South 0° 30' 30" East to the Southerly line of said lot; thence along said Southerly line, South 80° 39' East to the point of beginning.

(Haskell Avenue Station: Additional Land)

Parcel No. 10: The South 35 feet of the North 100 feet of the West 126.79 feet of that portion of Lot 1 in Block 27 of Tract No. 2955, in the City of Los Angeles, as per map recorded in Book 31, Pages 62 to 70 inclusive of Maps in the office of the County Recorder of Los Angeles County, described as follows;

Beginning at a point in the Southerly line of said Lot 1; said point being North 80° 39' West 633.04 feet from the Southeast corner of said lot; thence North 0° 3' 30" West 358.27 feet, more or less, to the Northwesterly corner of the land conveyed to Henry Frankfurt and wife, by deed recorded in Book 5471, Page 110, Official Records; thence North 89° 43' 30" West 190.06 feet to a point in the Westerly line of said lot; thence South 0° 3' 30" East 297.47 feet; thence 50.47 feet along the arc of a curve concave to the Northeast and having a radius of 35.88 feet; thence along the Southerly line of said lot, South 80° 39' East 162.22 feet to the point of beginning.

(Huntington Park Distribution Station)

Parcel No, 11: A parcel of land in the City of Huntington Park, being that portion of Block 3, Second Addition to Huntington Park, as shown on the plat recorded in Book 9, Page 37 of Maps, in the office of the County Recorder of Los Angeles County, bounded by the following described line:

Beginning at the northwesterly corner of said Block 3; thence North 89° 55' 25" East along the northerly line of said Block 3, 436.21 feet to the northeasterly corner thereof; thence South 0° 04' 15" East along the easterly line of said Block 3, 253.50 feet; thence South 89° 55' 25" West parallel to the northerly line thereof, 328.79 feet to a point on a curve concave northeasterly, having a radius of 260 feet and a radial line through said point hearing South 41° 27' 15" West; thence northwesterly along said curve through a central angle of 33° 37' 05"

152.554 feet; thence North 14° 55' 40" West, 68.99 feet to a point in the westerly line of said Block 3; thence North 10° 27' 45" West, 59.30 feet to the point of beginning.

(Juanita Avenue Distribution Station)

Parcel No. 12: That portion of the Northwest quarter of Section 19, Township 1 South, Range 13 West, S.B.M., in the City of Los Angeles, County of Los Angeles, State of California, described as follows:

Beginning at the intersection of the Easterly line of Juanita Avenue (formerly Park Drive), as shown on the map of Maltman’s First Street Addition, as per map recorded in Book 54, Page 74 of Miscellaneous Records in the office of the County Recorder of said County, with the Northerly line of Third Street, 80 feet wide, as condemned by the City of Los Angeles in Case No. 195573, Superior Court of said County; thence along said Northerly line South 86° 25' 05" East 205.73 feet to a point that is distant Westerly 180 feet, measured at right angles, from the West line of Westmoreland Avenue, 80 feet wide, as shown on the map of Tract No. 722, recorded in Book 16, Page 6 of Maps in the office of the County Recorder of said County; thence North 0° 18' 40" West 432.745 feet to a point in a straight line extending from the Northeast corner of Lot 9 of said Maltman’s First Addition to the Northwest corner of Lot 56 of said Tract No. 722; thence along said last mentioned line South 89° 52' 15" West 306.20 feet to said Easterly line of Juanita Avenue; thence along said Easterly line South 13° 50' East 431.725 feet to the point of beginning.

(Lakewood Village Office)

Parcel No. 13: Lot 11 in Block A of Tract No. 9832, in the County of Los Angeles, State of California, as per map recorded in Book 186, Pages 11 and 12 of Maps in the office of the County Recorder of said County.

(Macy Street Station: Additional Land)

Parcel No. 14: A parcel of land in the City of Los Angeles as shown on plat recorded in Book 2, Pages 504 and 505 of Miscellaneous Records in the office of the County Recorder of Los Angeles County, included within The Atchison, Topeka and Santa Fe Railway Company’s right of way, as said railway right of way is shown on map of Tract No. 10151, recorded in Book 157, Pages 45, 46 and 47 of Maps, bounded by the following described line:

Beginning at an angle point in the Easterly line of Lot 7 in said Tract No. 10151, distant South 81° 10' 10" West, 13.72 feet from the most Easterly corner thereof; thence along said lot line North 81° 10' 10" East, 11.21 feet; thence Southerly along the arc of a curve concave Westerly and having a radius of 381.722 feet through an angle of 21° 34' 49", a length of 143.77 feet, a radial line from the point of beginning of said curve bearing South 75° 43' 41" West; thence tangent to said curve South 7° 18' 30" West, 5.37 feet; thence Southerly along the arc of a tangent curve concave Westerly and having a radius of 932.291 feet through an angle of 5° 43' 30", a length of 93.15 feet; thence tangent to said curve South 13° 02' 00" West, 228.14 feet, the last four described courses being parallel or concentric with and 10 feet Westerly, measured normally or radially from the center line of said Railway Company’s spur tracks Nos. 1 and 597; thence North 76° 58' 00" West, 62.87 feet to a point in the Westerly line of said Railway

Company’s right of way, being the Easterly line of said Lot 7; thence along said right of way and lot line North 13° 51' 45" East, 459.38 feet to the point of beginning.

(Macy Street Station: Additional Land)

Parcel No. 15: That portion of the tract marked “Lot “E” Edward Strasburg”, as per map of partition of a portion of the Sepulveda Vineyard Tract, in the City of Los Angeles, County of Los Angeles, State of California, filed in the action entitled “American Oil and Asphalt Company vs. A. W. Sepulveda et al”, Case No. 33773, in the Superior Court of Los Angeles County and State (a copy of which is attached to decree recorded in Book 1422, page 182 of Deeds) described as follows:

Beginning at the southeasterly corner of Lot “D” as shown on said map; thence North 34° 52' West along the easterly line of said Lot “D” 130 feet to a point in the southerly line of Alhambra Avenue; thence North 83° 7' East along said southerly line 826.8 feet to the Northwesterly corner of the tract of land conveyed by the Los Angeles Pressed Brick and Terra Cotta Company to W. T. Barbee, by deed recorded in Book 1619, Page 102 of Deeds; said Northwesterly corner being in the Northwesterly line of Lot 10 of Tract No. 10151 as shown on the map recorded in Book 157, pages 45 to 47 of Maps, in the office of the County Recorder of said County; thence along said Northwesterly line South 35° 43' 10" West 605.00 feet and South 37° 45' 40" West 55.75 feet, more or less, to the most Easterly corner of the land described in the deed to said City recorded in Book 15800, page 166, Official Records of said County; thence along the Northeasterly line of Bauchet Street as described in said deed and in the deed to said City recorded in Book 15533, page 319 of said Official Records, North 47° 24' West 487.00 feet, more or less, to the point of beginning:

EXCEPTING therefrom that portion of said land described as follows: Beginning at a point in the Southerly line of Alhambra Avenue 100 feet wide, as now established, said point being Northwesterly corner of Lot 10 of Tract No. 10151 as per map recorded in Book 157, page 45 of Maps; thence South 83° 07' 30" West along the Southerly line of Alhambra Avenue a distance of 329.71 feet to an intersection of curve concave to South having a radius of 543.14 feet, radial line at intersection bearing North 0° 58' 43" West; thence Easterly along arc of curve a distance of 265.67 feet to an intersection of Northwesterly line of Lot 10 distant South 35° 44' 30" West 121.71 feet from aforesaid Northwesterly corner of said Lot 10; thence North 35° 44' 30" East along said Northwesterly line of said Lot 10 a distance of 121.71 feet to the point of beginning; as granted to Southern Pacific Company, et al, by deed recorded in Book 14730, page 385, Official Records;

EXCEPTING that portion of the tract marked “Lot E Edward Strasburg” as shown on map of partition of a portion of the Sepulveda Vineyard Tract, in the City of and County of Los Angeles, State of California, filed in the action entitled “American Oil and Asphalt Company vs. A. V. Sepulveda, et al,” Case No. 33773, in the Superior Court of Los Angeles County, (a copy of which is attached to the decree in said Case, a certified copy of said decree being recorded in Book 1422, Page 182 of Deeds, Records of said County), described as follows:

Beginning at the intersection of the Northwesterly line of Date Street with the Northeasterly line of Bauchet Street, as shown on the map of Tract No. 11667, recorded in Book 244, Pages 34 and 35 of Maps, said point being the most Easterly corner of Lot “D”, as

shown on said map of Partition; thence along said Northeasterly line South 47° 28' 12" East, 174.19 feet; thence North 6° 53' West, 247.23 feet, more or less, to a point in the Northerly line of said Lot “E”, that is distant thereon North 83° 07' East, 175.00 feet from the most Northerly corner of said Lot “D”; thence along said Northerly line, South 83° 07' West, 175.00 feet to said most Northerly corner of Lot “D”; thence along the Northeasterly line of said Lot “D”, South 35° 05' 50" East, 130.45 feet to the point of beginning.

(Macy Street Station: Additional Land)

Parcel No. 16: (a) A parcel of land in the City of Los Angeles, County of Los Angeles, State of California, being a portion of that certain portion of the Lucy Gillmore allotment in Superior Court Case numbered 667, conveyed to the Associated Oil Company by deed recorded in Book 3087, Page 279, Official Records of said Los Angeles County, lying within the following described boundary line:

Beginning at the most Northerly corner of Lot 8, Tract 10151, as shown on map recorded in Book 157, Pages 45, 46 and 47 of Maps; thence North 13° 02' 00" East along the Northwesterly line of The Atchison, Topeka and Santa Fe Railway Company’s right of way, 100 feet in width, as described in deed recorded in Book 1249, Page 131 of Deeds, 265.17 feet to a point in the Southerly line of that portion of The Atchison, Topeka and Santa Fe Railway Company’s property as described in deed recorded in Book 1179, Page 200 of Deeds; thence South 81° 10' 10" West along the Southerly line of the land described in last mentioned deed, .26 feet; thence North 15° 11' 40" East, along the Northwesterly line of land described in last mentioned deed, 272.54 feet to the most Southerly corner of land conveyed to the Santa Fe Land Improvement Company by deed recorded in Book 15415, Pages 371 and 372, Official Records, which is a point on a curve concave Southwesterly having a radius of 533.14 feet, and a radial line through said point bearing North 53° 52' 23" East; thence Northwesterly along said curve in the Southwesterly boundary of said land conveyed to the Santa Fe Land Improvement Company through a central angle of 20° 31' 36" 191.00 feet to a point in the Southeasterly line of Lot 10 of said Tract 10151; thence South 35° 43' 10" West along the Southeasterly line of said Lot 10, 435.58 feet to the most Northerly corner of the land described as Parcel 4 in the deed to Southern Pacific Company recorded in Book 15493, Page 122, Official Records, which is a point on a curve concave Southeasterly having a radius of 389.736 feet, and a radial line through said point bearing North 71° 49' 05" West; thence Southerly along said curve which lies in the Easterly boundary line of said Parcel 4, through a central angle of 8° 10' 15", 55.58 feet; thence South 10° 00' 40" West along the Easterly boundary line of said Parcel 4, 66.87 feet to a point on a curve concave Easterly having a radius of 400.51 feet and a radial line through said point bearing North 79° 59' 20" West; thence Southerly along said curve which lies in the Easterly boundary line of said Parcel 4, through a central angle of 8° 10' 15", 57.12 feet; thence South 1° 50' 25" West, along the Easterly boundary line of said Parcel 4, 17.29 feet to a point on a curve concave Easterly having a radius of 400.51 feet and a radial line through said point bearing North 88° 09' 35" West; thence Southerly along said curve which lies in the Easterly boundary line of said Parcel 4, through a central angle of 5° 15' 10", 36.72 feet to a point in the Northeasterly boundary line of Lot 7 of said Tract 10151; thence South 22° 45' 00" East along the boundary line of said Lot, 300.21 feet; thence North 40° 08' 20" East along the boundary line of said Lot 7, and its Northeasterly prolongation to and along the Northwesterly line of Lot 8 of said Tract 10151, 272.86 feet to the point of beginning.

(b) That certain easement for ingress and egress over a strip of land 30 feet wide, as reserved by Tidewater Associated Oil Company in deed to Southern Pacific Company recorded in Book 15493, Page 172, Official Records.

(Macy Street Station: Additional Land)

Parcel No. 17: All that certain piece or parcel of land situate in the City of Los Angeles, County of Los Angeles, State of California, being that portion of Lot 7 of Tract No. 10151, as per map recorded in Book 157, Pages 45 to 47 inclusive of Maps, Records of said County, described as follows:

Beginning at the point of intersection of a line that is parallel with and distant Easterly 39.00 feet, measured at right angles, from the course in the boundary line of said Lot 7 shown as having a length of 220.04 feet and bearing North 17° 29' East, with the Easterly prolongation of the course in the boundary line of said Lot 7 shown as having a length of 141.72 feet and bearing North 72° 31' West; thence Northerly along a curve, concave Westerly, having a radius of 367.34 feet (tangent at said point of intersection to said parallel line) a distance of 186.41 feet to a point; thence North 11° 35' 33" West along a line (tangent to said curve at last mentioned point) a distance of 132.83 feet to a point in the Northeasterly boundary line of said Lot 7, which point is the most Southerly corner of Parcel 4 described in the deed dated September 24, 1937, recorded December 16, 1937, in Book 15493, Page 122, Official Records, in the office of the County Recorder of said County; thence South 22° 44' 30" East, along the boundary line of said Lot 7, a distance of 299.60 feet; thence North 40° 08' 30" East along the boundary line of said Lot 7, 128.28 feet to a point on a curve, concave to the Southwest, having a radius of 374.565 feet (a radial line through said point bears North 59° 18' 27" East); thence Southeasterly along said curve, in the boundary line of said Lot 7, through a central angle of 16° 30' 04", a distance of 107.87 feet; thence South 81° 09' 30" West, along the boundary line of said Lot 7, 13.72 feet; thence South 13° 51' 48" West, along the boundary line of said Lot 7, 604.42 feet to a point in the Northerly line of the parcel of land described in the Indenture dated June 5, 1941, recorded August 1, 1941, in Book 18601, Page 302, Official Records, in the office of the County Recorder of said County; thence North 71° 47' 30" West, along the Northerly line of said parcel of land, 200.18 feet; thence South 73° 17' 06" West, along the Northerly line of said parcel of land, 198.15 feet to the most Westerly corner of said parcel of land; thence North 17° 36' 30" East, along the Easterly line of Lyon Street, as shown on said map, 24.27 feet; thence North 55° 41' 30" East, 122.98 feet to the beginning of a tangent curve, concave to the Northwest, having a radius of 285.02 feet; thence Northeasterly along said curve 190.07 feet to a point; thence North 17° 29' 00" East, tangent to the last described curve, 319.04 feet to the point of beginning.

Also, all of Lot 8 of said Tract No. 10151.

(Macy Street Station: Additional Land)

Parcel No. 18: That portion of Lot 7 of Tract No. 10151, in the City of Los Angeles, County of Los Angeles, State of California, as per map recorded in Book 157, Pages 45 to 47 inclusive of Maps in the office of the County Recorder of said County, described as follows:

Beginning at that corner of said Lot 7 that is in the Easterly line of Lyon Street and distant 83.44 feet South 17° 36' 30" West thereon from the Northerly end thereof; thence South

72° 34' 30" East along the Southerly line of said Lot, 144.97 feet to the Easterly line of said Lot; thence North 24° 53' 20" East along the Easterly line of said Lot, 82.01 feet to the Southerly line of said lot; thence South 71° 47' 30" East along the Southerly line of said lot, 210.43 feet to the Easterly line of said lot; thence North 13° 51' 48" East along the Easterly line of said lot, 30.08 feet, to a point in a line that is parallel with and distant Northerly 30 feet measured at right angles from the above described course bearing South 71° 47' 30" East; thence North 71° 47' 30" West along said parallel line, 200.18 feet; thence South 73° 17' 06" West 198.15 feet to the point of beginning.

(North Hollywood Distribution Depot Site: Cumpston Street)

Parcel No. 19: Those parcels of land in the City of Los Angeles, County of Los Angeles, State of California, described as:

(a) The North 262 feet of Lot 1, Block 2 of Lankershim, as per map recorded in Book 16, Pages 114 and 115 of Maps, in the office of the County Recorder of said County.

(b) The North 262 feet of the West half of Lot 2 in said Block 2 of Lankershim.

(Pasadena Office: Additional Land)

Parcel No. 20: The Easterly 35 feet of Lot 4 and the Westerly 12½ feet of Lot 5 of Ogden’s Subdivision of the Northerly portion of Lot 8, Block “C” of the San Pasqual Tract, in the City of Pasadena, County of Los Angeles, State of California, as per map recorded in Book 14, Page 39, Miscellaneous Records:

EXCEPT the Southerly 2 feet thereof conveyed to the City of Pasadena for street purposes.

(Pasadena Office: Additional Land)

Parcel No. 21: The East 25 feet of Lot 3 and the West 25 feet of Lot 4 of Ogden’s Subdivision of the North portion of Lot 8 in Block “C” of the San Pasqual Tract, in the City of Pasadena, as per map recorded in Book 14, Page 39, Miscellaneous Records in the office of the County Recorder of Los Angeles County:

EXCEPT the South 2 feet thereof conveyed to the City of Pasadena for street purposes, by deed recorded in Book 3260, Page 126 of Deeds.

(Pasadena Station: Additional Land)

Parcel No. 22: Lot 9 of the Mills Tract in the City of Pasadena, as per map recorded in Book 11, Page 33 of Miscellaneous Records, in the office of the County Recorder of Los Angeles County.

(Patrol Station No. 4 — Atmore)

Parcel No. 23: A parcel of land located in the Northwest quarter of Section 33, Township 6 North, Range 17 West, S.B.B. & M., in the County of Los Angeles, State of California, and lying within the following described lines:

Beginning at the Southeast corner of the Northwest quarter of Section 33, Township 6 North, Range 17 West, S.B.B.& M., thence North 88° 41' 30" West along the South line of the Northwest quarter of said Section 33, 366.95 feet; thence North 1° 18' 30" East, 295.00 feet; thence North 49° 48' 30" East 116.87 feet to a point in the Southwesterly line of State Highway VII-LA-4-G 100 feet in width; thence South 40° 11' 30" East along the Southwesterly line of said State Highway, 418.53 feet to a point in the East line of the Northwest quarter of said Section 33; thence South 0° 43' 10" East along the East line of the Northwest quarter of said Section 33, 59.01 feet more or less to the point of beginning.

(Playa Del Rey Site)

Parcel No. 24: All right, title, interest and estate of the Corporation, as reserved to it by deed dated September 18,1946, to Hughes Tool Company, a corporation, recorded in Book 23939, Page 338 of Official Records in the office of the County Recorder of said County, in and to the following described property:

Part of the Rancho La Ballona in the County of Los Angeles, State of California, described as follows, to-wit:

Beginning at the intersection of the center line of Playa Street with the Southerly prolongation of the Easterly line of Del Rey Beach, as shown on map of Del Rey Beach recorded in Book 6, Page 186 of Maps in the office of the County Recorder of said County; thence along said Easterly line and the prolongation thereof North 29° 07' 02" West 2843.71 feet to the most Northerly corner of Block 13 of said Del Rey Beach; thence along the line established by deed between G. W. Colton and A. R. Fraser, et al, recorded in Book 2108, Page 13 of Deeds, in the office of the County Recorder of said County, North 62° 46' 07" East 63.43 feet to the Southeast corner of the tract of land described in deed to A. R. Fraser et al, recorded in Book 2072, Page 134 of Deeds in the office of the County Recorder of said County; thence along the Southerly line of the Addison Sanford 132.51 acre allotment in said Rancho La Ballona, and along the Northwesterly line of the 42.24 acre tract of land allotted to Gregoria Talamantes by the final decree of partition of said Rancho La Ballona had in Case No. 965 of the District Court of the First Judicial District of the State of California, North 62° 08' 00" East 2238.24 feet to the Southwesterly line of the parcel of land described in the deed between La Ballona Land and Development Company and Joseph Pierson recorded in Book 19795, Page 20, Official Records in the office of the County Recorder of said County; thence along said last mentioned Southwesterly line South 27° 52' 00" East 700 feet; thence along the Southeasterly line of said last mentioned parcel of land along the following courses and distances North 62° 08' 00" East 581.37 feet, North 27° 52' 00" West 50 feet, North 62° 08' 00" East 150 feet, South 27° 52' 00" East 50 feet, North 62° 08' 00" East 275 feet to a point in the Southwesterly line of the parcel of land described in the deed between Del Rey Company and Joseph Pierson recorded in Book 17715, Page 91, Official Records in the office of the County Recorder of said County, distant South 27° 52' 00" East 700 feet from the Northwest corner of said last mentioned parcel of land; thence along said last mentioned Southwesterly line South 27° 52' 00" East 300 feet; thence along the Southeasterly line of said last mentioned parcel of land North 62° 08' 00" East 323.57 feet; thence parallel with said Easterly line of Del Rey Beach, South 29° 07' 02" East 874.91 feet to the center line of the 380 foot strip of land described in the deed between Del Rey Company and Los Angeles County Flood Control District recorded in Book 16355, Page 127, Official Records, in the office of the County Recorder of said County; thence along said center line North

55° 56' 35" East 885.31 feet; thence parallel with said Easterly line of Del Rey Beach, South 29° 07' 02" East 984.93 feet to the Northwesterly line of Jefferson Boulevard, formerly Playa Street; thence along the Northwesterly line of Jefferson Boulevard (and being the Southerly line of the 26.30833 acre tract of land allotted to Jose de la Luz Machado by said final decree of partition) South 61° 20' 38" West 518.93 feet to the intersection with the Northeasterly line of the land described in Parcel 5 of the decree entered in Case No. 2454-B Civil in the District Court of the United States in and for the Southern District of California Central Division, a certified copy of said decree being recorded in Book 19608, Page 346, Official Records, thence along said last mentioned Northeasterly line North 28° 39' 22" West 263.50 feet to the most Northerly corner thereof; thence along the Northwesterly line of said Parcel 5 South 61° 20' 38" West 2290 feet to the most Westerly corner of said Parcel 5; thence along the Southwesterly Line of said Parcel 5 South 28° 39' 22" East 280 feet to the center line of Playa Street (vacated by Order of the Board of Supervisors April 10, 1905) thence along the center line of said Playa Street South 61° 20' 38" West 1682.00 feet to the point of beginning.

(Southern Division Operating Headquarters: Additional Land)

Parcel No. 25: (a) That portion of Lot 79 of Tract No. 5831, in the City of Compton, County of Los Angeles, State of California, as shown on map recorded in Book 85, Pages 41 and 42 of Maps, in the office of the County Recorder of said County, described as follows:

Beginning at the Southwesterly corner of said lot; thence along the Westerly line of said lot, North 3° 11' West 135.00 feet; thence parallel with the Southerly line of said lot, North 89° 55' 29" East 14.30 feet to the Easterly line of said lot; thence South 3° 06' 15" East 135.00 feet to the Southeasterly corner of said lot; thence South 89° 55' 20" West 14.11 feet to the point of beginning. Said portion of Lot 79 is registered under the Land Title Law of the State of California. The registered owner thereof is Southern California Gas Company. The number of the last certificate is W-93.

(b) That portion of the West three-fourths of Lot 2, Range 4, of Temple and Gibson Tract, in the City of Compton, County of Los Angeles, State of California, as per map recorded in Book 2, Page 540 of Miscellaneous Records in the office of the County Recorder of said County, bounded Westerly by the Easterly line of Tract No. 5831, as per map recorded in Book 85, Pages 41 and 42 of Maps, in the office of the County Recorder of said County, and bounded Northerly by the prolonged South line of the North half of the South two-fifths of the South half of the East quarter of said Lot 2, Range 4.

(Spence Street Terminal)

Parcel No. 26: An undivided three-quarters of the North 53 feet of Lots 40 and 41 of Tract No. 5030, in the City of Los Angeles, as per map recorded in Book 53, Pages 31 and 32 of Maps, in the office of the County Recorder of Los Angeles County.

(Spence Street Terminal: Additional Land)

Parcel No. 27: Lots 14 and 15 of Tract No. 5030, in the City of Los Angeles, as per map recorded in Book 53, Pages 31 and 32 of Maps, in the office of the County Recorder of Los Angeles County.

(Sunset Boulevard Office Site)

Parcel No. 28: Lot 17 of the Lake Side Tract in the City of Los Angeles, County of Los Angeles, State of California, as per map recorded in Book 6, Page 42 of Maps, in the office of the County Recorder of said County.

(Van Nuys Office: Additional Land)

Parcel No. 29: Lots 15 and 16 in Block 30 of Tract No. 1200 in the City of Los Angeles, County of Los Angeles, State of California, as per map recorded in Book 19, Page 35 of Maps, in the office of the County Recorder of said County:

EXCEPT all minerals, coal, oils, petroleum and kindred substances and natural gas under and in said land.

II. COUNTY OF SAN BERNARDINO

That certain lot, piece and parcel of land, situate in the County of San Bernardino, State of California, described as follows (the captions not constituting a part of the property descriptions, but being used as a convenient identification of the parcel described):

(San Bernardino Office: Additional Land)

Parcel No. 30: All that portion of Lot 2, Block 28 of the City of San Bernardino, in the City of San Bernardino, County of San Bernardino, State of California, as per plat recorded in Book 7 of Maps, Page 1, Records of said County, described as follows:

Commencing at the Southwest corner of said Lot 2; thence East along the South line of said lot, 136 feet to the Southwest corner of the land conveyed to Southern California Gas Company, a corporation, by deed dated August 19, 1924, and filed for registration September 20, 1924, as Document No. 1675; thence North along the West line of the land so conveyed to Southern California Gas Company, 9 rods, more or less, to the North line of said Lot 2; thence West along the North line of said lot, 136 feet to the Northwest corner of said lot; thence South along the West line of said lot, 9 rods, more or less, to the point of beginning.

III. COUNTY OF RIVERSIDE

Those certain lots, pieces and parcels of land situate in the County of Riverside, State of California, described as follows (the captions not constituting a part of the property descriptions, but being used as a convenient identification of the several parcels described):

(Blythe Compressor Plant Site)

Parcel No. 31: An undivided three-fourths interest in the following described property:

Beginning at the Southeast corner of the Southeast Quarter of the Southeast Quarter of Section 35, Township 6 South, Range 22 East, San Bernardino Base and Meridian, thence westerly 1420 feet on the South line; thence Northeasterly 1387.40 feet to a point 992.73 feet West of the East line; thence East 992.73 feet to the East line; thence Southerly 1320 feet to point of beginning:

EXCEPTING therefrom the South 30 feet and the East 30 feet thereof as conveyed to the County of Riverside for road purposes.

(Beaumont Maintenance Station)

Parcel No. 32: An undivided ¾ interest in Lot 2 in Block 171 of the Town of Beaumont, in the County of Riverside, as said lot is shown by Amended Map of the Town of Beaumont, on file in Book 6, pages 16 and 17 of Maps, in the Office of the County Recorder of the County of San Bernardino, State of California.

(Shaver Summit Well Site)

Parcel No. 33: An undivided ¾ interest in the Southwest quarter of the Northwest quarter of Section 16, Township 6 South, Range 11 East, San Bernardino Base and Meridian.

IV. COUNTY OF TULARE

Those certain lots, pieces and parcels of land situate in the County of Tulare, State of California, described as follows (the captions not constituting a part of the property descriptions, but being used as a convenient identification of the several parcels described):

(Dinuba Station: Additional Land)

Parcel No. 34: That portion of the alley in Block 57 of the City of Dinuba in the County of Tulare, State of California, as per map recorded in Book 3, Page 15 of Maps, in the office of the County Recorder of said County, which lies Northwesterly of a line drawn Southwesterly across said alley from the Southwesterly corner of Lot 7 to the Southeasterly corner of Lot 26 in said Block 57.

(Visalia Office)

Parcel No. 35: The East 90 feet of Block 59 of Visalia, County of Tulare, State of California, as per map recorded in Vol. 3, Page 48 of Maps, in the office of the County Recorder of said Tulare County, and the East 90 feet of that certain alley running East and West through said Block 59, which was vacated by Resolution No. 687 of the City of Visalia, recorded in Vol. 882, Page 334 of Official Records of Tulare County.

(Visalia Station: Additional Land)

Parcel No. 36: That portion of the Northwest quarter of the Southeast quarter of Section Twenty-nine (29), Township Eighteen (18) South, Range Twenty-five (25) East, Mount Diablo Base and Meridian, in the City of Visalia, County of Tulare, State of California, described as follows:

Commencing at a point thirty-eight (38) rods South and thirty-six (36) rods East of the Northwest corner of the Southeast quarter of said Section 29; thence due South 50.08 feet to the actual point of beginning of the parcel of land to be described, said point being in the East line of Drouillard’s Addition to the City of Visalia, as per Map recorded in Book 5, Page 16 of Maps in the office of the County Recorder of said County; thence due South along the East line of said

Drouillard’s Addition 223.59 feet to a point 50.00 feet Northerly at right angles from the center line of Oak Street produced Easterly; thence Easterly parallel with said centerline of Oak Street produced Easterly, 50.00 feet; thence due North 223.59 feet; thence Westerly parallel with the centerline of Oak Street produced Easterly, 50.00 feet to the actual point of beginning.

V. COUNTY OF KERN

Those certain lots, pieces and parcels of land situate in the County of Kern, State of California, described as follows (the captions not constituting a part of the property descriptions, but being used as a convenient identification of the several parcels described):

(Bakersfield Station No. 2)

Parcel No. 37: That portion of the Northwest Quarter of Section 7, Township 29 South, Range 28 East, M.D.B.M., in the County of Kern, State of California, described as follows:

Beginning at the East Quarter corner of Section 12, Township 29 South, Range 27 East, M.D.B.M., as said Quarter corner is shown on Map of Tract 1045, recorded in Book 4, Pages 84 and 85 of Maps in the office of the County Recorder of Kern County; thence North 0° 27' 00" West along the line common to the Easterly line of said Section 12 and the Westerly line of Section 7, Township 29 South, Range 28 East, M.D.B.M., 114.49 feet; thence South 89° 50' 40" East 55.00 feet to the true point of beginning; thence continuing South 89° 50' 40" East, along the Northerly line of the Southern Pacific Land Company’s property 450.00 feet; thence North 0° 27' 00" West, 200.00 feet; thence North 89° 50' 40" West 325.00 feet; thence South 0° 27' 00" East 50.00 feet; thence North 89° 50' 40" West 125.00 feet; thence South 0° 27' 00" East, 150.00 feet to the true point of beginning:

EXCEPTING THEREFROM all oil, gas, asphaltum and other hydrocarbons and other minerals, whether similar to those herein specified or not, within or underlying or that may be produced from, said land, together with the exclusive right to mine and remove the same from said land, as reserved in the deed from Standard Oil Company of California, a corporation, recorded August 19, 1946.

(Mojave Station: Additional Land)

Parcel No. 38: All that portion of the South half (S½) of Section Eight (8), Township Eleven (11) North, Range Twelve (12) West, S.B.B.M.; in the County of Kern, State of California, described as follows:

Commencing at the Northeast corner of Block 134, as said Block is shown on that certain map entitled “Map of the Town of Mojave” recorded March 5, 1905 in Book 1, Pages 95 and 96 of Maps in the Office of the County Recorder of said County; thence running North-westerly and along the Northwesterly extension of the Easterly line of said Block 134, a distance of 455 feet for the true point of beginning; thence Southwesterly at right angles to said extension of said Easterly line of said Block 134 a distance of 150 feet; thence Southeasterly at right angles 100 feet; thence Northeasterly at right angles 150 feet to said extension of said Easterly line of said Block 134; thence Northwesterly at right angles along said extension to the true point of beginning.

(Mojave Station: Additional Land)

Parcel No. 39: All that portion of the South Half (S½) of Section Eight (8), Township Eleven (11) North, Range Twelve (12) West, S.B.B.M.; in the County of Kern, State of California, described as follows:

Commencing at the Northeast corner of Block 134, as said Block is shown on that certain map entitled “Map of the Town of Mojave” recorded March 5, 1905 in Book 1, Pages 95 and 96 of Maps in the Office of the County Recorder of said County; thence running Northwesterly and along the Northwesterly extension of the Easterly line of said Block 134, a distance of 520 feet for the true point of beginning; thence Southwesterly at right angles to said extension of said Easterly line of said Block 134, a distance of 150 feet; thence Southeasterly at right angles 40 feet, thence Northeasterly at right angles 150 feet to said extension of said Easterly line of Block 134; and thence Northwesterly at right angles along said extension to the true point of beginning.

VI. COUNTY OF KINGS

That certain lot, piece, or parcel of land situate in the County of Kings, State of California, described as follows (the captions not constituting a part of the property descriptions, but being used as a convenient identification of the parcel described):

(Grangeville Boulevard Site)

Parcel No. 40: A parcel of land in the County of Kings, State of California, being that portion of Section 21, Township 18 South, Range 20 East, Mount Diablo Base and Meridian, bounded by the following described line:

Beginning at a point in the Southerly line of said Section 21, distant thereon North 89° 59' 15" West, 795.00 feet from the Southeast corner of said Section 21; thence continuing North 89° 59' 15" West along the Southerly line of said Section 21, 110.00 feet; thence North 0° 00' 45" East, 135.00 feet; thence North 63° 26' 51" East, 122.99 feet; thence South 0° 00' 45" West, 190.00 feet to the point of beginning.

VII. COUNTY OF FRESNO

Those certain lots, pieces and parcels of land situate in the County of Fresno, State of California, described as follows (the captions not constituting a part of the property descriptions, but being used as a convenient identification of the several parcels described):

(Hub Meter Site)

Parcel No. 41: That portion of Lot 32 in Section 33, Township 17 South, Range 20 East, Mount Diablo Base and Meridian, in the County of Fresno, State of California, according to the map of LAGUNA DE TACHE GRANT recorded May 4, 1900, in Book 1, Page 83 of Record of Surveys, in the office of the County Recorder of said County, bounded and described as follows:

Beginning at the southwest corner of said Lot 32; thence north 0° 13' 28" west along the westerly line of said Lot 32, 130 feet; thence north 89° 58' 47" east parallel to the southerly line of said Lot 32, 100 feet; thence south 0° 13' 28" east parallel to the westerly line of said Lot 32,

130 feet to a point in the southerly line of said Lot 32; thence south 89° 58' 47" west along the southerly line of said Lot 32, 100 feet to the point of beginning.

(Reedley Holder Site)

Parcel No. 42: A parcel of land in the Northwest quarter of Section 35, Township 15 South, Range 23 East, M.D.B.&M., County of Fresno, State of California, lying within the following described lines:

Beginning at a point in the northeasterly line of the 100 foot right of way of the Atchison, Topeka and Santa Fe Railway Company in Lot 3 of the Curtis and Shoemake Tract, as shown on map recorded in Book 1, Page 6 of Miscellaneous Maps, Records of County of Fresno, which is distant 30.00 feet south, measured at right angles, from the north line of said Section 35; thence east parallel to and 30.00 feet south of the north line of said Section 35, 768.23 feet; thence northerly, at right angles, to the last described course, 30.00 feet to the true point of beginning which lies in the north line of said Section 35; thence south, at right angles, to the north line of said Section 35, 283.38 feet; thence westerly parallel to the north line of said Section 35, 142.36 feet to a point in the east line of land conveyed to Arthur L Krehbiel and Corienne Krehbiel, husband and wife, by deed recorded May 23, 1936 in Book 1500, Page 231 of Official Records of County of Fresno; thence southerly along the east line of said land conveyed to Arthur J. Krehbiel and Corienne Krehbiel, 250.00 feet to a point in the northeasterly line of said Atchison, Topeka and Santa Fe Railway Company’s right of way; thence southeasterly along the northeasterly line of said Atchison, Topeka and Santa Fe Railway Company’s right of way, 185.70 feet to a point in the east line of Lot 3 of said Curtis and Shoemake Tract; thence northerly along the east line of Lot 3 of said Curtis and Shoemake Tract, 623.51 feet to a point in the north line of said Section 35; thence westerly along the north line of said Section 35, 20 feet more or less to the true point of beginning:

EXCEPT any portion thereof lying in the road along the north line of said Section 35.

(Riverdale Meter Station)

Parcel No. 43: Real property situated in the County of Fresno, State of California, described as follows:

Beginning at a point on the South line of Section 24, Township 17 South, Range 19 East, Mount Diablo Base and Meridian, distant 730.69 feet West of Southeast corner of said Section; thence North along the Easterly line of the property of the Riverdale Joint Union High School District, a distance of 70 feet; thence East and parallel to the South line of said Section 24, a distance of 100 feet; thence South and parallel to the Easterly line of the property of the Riverdale Joint Union High School District 70 feet to the South line of said Section 24; thence West along said South line a distance of 100 feet to the point of beginning.

SECOND: All other property, real, personal and mixed, of every kind, nature and description, now or hereafter owned, held, possessed, acquired or enjoyed by or in any manner conferred upon or appertaining to the Corporation; together with all and singular the tenements, hereditaments, and appurtenances belonging or in any way appertaining to each and every part of any and all property subject or intended to be subject to the lien and operation of the Original

Indenture, and the reversion and reversions, remainder and remainders, tolls, incomes, revenues, earnings, rents, issues and profits thereof.

SAVING AND EXCEPTING, however, notwithstanding anything contained in the granting clauses of this Supplemental Indenture, from the property hereby mortgaged, conveyed in trust and/or pledged, all property, whether now owned by the Corporation or hereafter acquired by it, expressly saved and excepted from the lien of the Original Indenture and therein referred to as the “excepted property”, unless and until, upon the occurrence of an event of default under the Original Indenture, the Trustee, or any receiver appointed thereunder, shall take possession of any or all of such excepted property.

TO HAVE AND TO HOLD in trust with power of sale for the equal and proportionate benefit and security of all holders of bonds of the Corporation and the interest coupons appertaining thereto, now or hereafter outstanding under the Original Indenture as from time to time in effect, and for the enforcement and payment of said bonds and interest thereon when payable, and the performance of and compliance with the covenants and conditions of the Original Indenture as from time to time in effect, without any preference, distinction or priority as to lien or otherwise of any of said bonds over any others thereof by reason of the difference in the time of the actual issue, sale or negotiation thereof, or for any other reason whatsoever, except as otherwise expressly provided in the Original Indenture as from time to time in effect, so that each and every such bond shall have the same lien and so that the principal and interest of every such bond shall, subject to the terms thereof, be equally and proportionately secured by said lien, as if such bond had been made, executed, delivered, sold and negotiated simultaneously with the execution and delivery of the Original Indenture.

The term “Corporation” as used in Sections 5.14(a), 6.04(a)(3), 9.17 and 9.22 of the Original Indenture is hereby defined to mean and include not only the party of the first part hereto, Southern California Gas Company and (subject to the provisions of Article XV of the Original Indenture) its successors and assigns, but also any other obligor upon any of said First Mortgage Bonds of any series now or hereafter outstanding under the Original Indenture as from time to time in effect.

IT IS HEREBY COVENANTED, DECLARED, AND AGREED by and between the parties hereto that all such bonds and coupons are issued, authenticated and delivered, or are to be issued, authenticated and delivered, and that all property subject, or to become subject, to the Original Indenture, including any indenture supplemental thereto, is to be held, subject to the covenants, conditions, uses and trusts therein set forth; and the Corporation, for itself and its successors, does hereby covenant and agree to and with the Trustee and its successor or successors in said trust, for the benefit of those who shall hold said bonds and coupons, or any of them, as follows:

The recitals of fact contained herein shall be taken as the statements of the Corporation, and the Trustee assumes no responsibility for the correctness of the same. The Corporation hereby covenants and agrees that it will cause this Supplemental Indenture to be kept recorded and/or filed as may be required by law, in such manner and in such places as may be necessary fully to preserve and protect the security of the bondholders and all of the rights of the Trustee hereunder, and that it will with all reasonable dispatch deposit with the Trustee counterparts of this Supplemental Indenture bearing official notation or endorsement showing such recordation

and/or filing, or in case such counterparts are not returned to the Corporation, furnish to the Trustee the best official evidence of such recordation and/or filing reasonably obtainable by the Corporation, but the Trustee, subject to the provisions of Sections 14.02 and 14.03 of said Original Indenture, shall in no wise be liable for any failure or omission in this regard.

The date of this Supplemental Indenture, and the date of the bonds of the 2⅞% Series due 1977, are intended as and for dates for the convenient identification of this Supplemental Indenture and of the bonds of said series, respectively, and are not intended to indicate that this Supplemental Indenture was executed and delivered on its date or that said bonds were executed, delivered or issued on July 1, 1947; it being hereby agreed that this Supplemental Indenture may be executed and delivered, and that said bonds may be executed, delivered or issued, either on the respective dates thereof or before or after said respective dates, and that this Supplemental Indenture is in fact executed and delivered by each party hereto on the date of its certificate of acknowledgment hereto attached.

This Supplemental Indenture shall be deemed to be part of the Original Indenture, and the Corporation agrees to conform to and comply with all and singular the terms, provisions, conditions and covenants set forth therein and herein. This Supplemental Indenture shall be construed in connection with and as a part of the Original Indenture.

It is further agreed that the Trustee accepts the trust imposed upon it by this Supplemental Indenture, upon and subject to the same terms and conditions as are expressed in Article XIV of the Original Indenture.

In order to facilitate the recording of this Supplemental Indenture, the same may be executed in several counterparts, each of which so executed shall be deemed to be an original, and such counterparts shall collectively constitute one and the same instrument.

IN WITNESS WHEREOF, Southern California Gas Company has caused this Supplemental Indenture to be signed in its corporate name, by its President or one of its Vice Presidents, and its corporate seal to be hereunto affixed, duly attested by its Secretary or one of its Assistant Secretaries, and American Trust Company, in token of its acceptance of the trust hereby established, has caused this Supplemental Indenture to be signed in its corporate name by its President or one of its Vice Presidents, and its corporate seal to be hereunto affixed, duly attested by its Secretary or one of its Assistant Secretaries, or Cashier or one of its Assistant Cashiers, all as of the day and year first above written.


SOUTHERN CALIFORNIA GAS COMPANY,
(Corporate Seal)	By	F.S.WADE
		President.

ATTEST:		R.R. BLACKBURN
		Secretary.
AMERICAN TRUST COMPANY,
(Corporate Seal)	By	B.B. BROWN
		Vice President.

ATTEST:		C.E. FAGG
		Assistant Secretary.


STATE OF CALIFORNIA,	}	ss.
COUNTY OF LOS ANGELES

On this 4th day of June, before me, Lillian Abrams, a Notary Public in and for the County of Los Angeles, State of California, residing therein, duly commissioned and sworn, personally appeared F. S. Wade, known to me to be the President, and R. R. Blackburn, known to me to be the Secretary, of Southern California Gas Company, one of the corporations named in and which executed the foregoing instrument, known to me to be the persons who executed the within instrument on behalf of said Corporation, and acknowledged to me that such Corporation executed the same.

In Witness Whereof, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.


			Lillian Abrams
			Notary Public in and for the County of Los Angeles,
(Notarial Seal)			State of California.

My commission expires: April 8, 1949.


STATE OF CALIFORNIA,	}	ss.
CITY AND COUNTY OF SAN FRANCISCO

On this 6th day of June, before me, Frank L. Owen, a Notary Public in and for the City and County of San Francisco, State of California, residing therein, duly commissioned and sworn, personally appeared B. B. Brown, known to me to be the Vice President, and C. E. Fagg, known to me to be the Assistant Secretary, of American Trust Company, one of the corporations named in and which executed the foregoing instrument, known to me to be the persons who executed the within instrument on behalf of said Corporation, and acknowledged to me that such Corporation executed the same.

In Witness Whereof, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written.


			Frank L. Owen
			Notary Public in and for the City and County of San Francisco,
(Notarial Seal)			State of California.

My commission expires: Nov. 23, 1949.

RECORDATION MEMORANDA

The foregoing Supplemental Indenture from Southern California Gas Company to American Trust Company, Trustee, was filed for record with the Registrar of Titles in Los Angeles and San Bernardino Counties, respectively, State of California, and was recorded in the following Counties of California (and indexed in each of said Counties as a deed, mortgage, trust deed, chattel mortgage, assignment, and power of attorney) on the respective dates and at the respective places indicated in the following schedule:


County	Date	Reference
Los Angeles	Juno 24, 1947	Book 24,705, Page 262, Official Records
Kern	June 24, 1947	Book 1,431, Page 306, Official Records
Tulare	June 24, 1947	Vol. 1260, Page 52, Official Records
Kings	June 24. 1947	Vol. 384, Page 118, Official Records
Ventura	June 24, 1947	Book 791, Page 182, Official Records
Fresno	June 24, 1947	Vol. 2,526, Page 462, et seq., Official Records
Orange	June 24, 1947	Book 1,528, Page 368, Official Records
Riverside	June 24, 1947	Book 840, Page 338, et seq., Official Records
San Bernardino	June 24, 1947	Book 2,064, Page 301, Official Records
Los Angeles	June 24, 1947	Filed as Torrens Document No. 14531-P, and entered on Torrens Certificates Nos. JT- 87581, JT-87583, JV-88156, N-235, and W-93 in the office of the Registrar of Titles.
San Bernardino	June 24, 1947	Filed as Torrens Document No. 29810, and entered on Torrens Certificate No. 5879 in the office of the Registrar of Titles.

Document

Exhibit 10.1

Execution Copy

CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED BECAUSE (I) SEMPRA ENERGY CUSTOMARILY AND ACTUALLY TREATS THE INFORMATION AS PRIVATE OR CONFIDENTIAL AND (II) THE INFORMATION IS NOT MATERIAL. INFORMATION THAT HAS BEEN OMITTED ON THAT BASIS IS DENOTED IN THIS DOCUMENT AS “[***].”

CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED BECAUSE ITS DISCLOSURE WOULD CONSTITUTE AN UNWARRANTED INVASION OF PERSONAL PRIVACY. INFORMATION THAT HAS BEEN OMITTED ON THAT BASIS IS DENOTED IN THIS DOCUMENT AS “[###].”

SECOND AMENDED AND RESTATED

ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT

NUMBER CW13695

BETWEEN

PORT ARTHUR LNG, LLC,

PALNG COMMON FACILITIES COMPANY, LLC
(FOR THE PURPOSES DESCRIBED HEREIN)

AND

BECHTEL ENERGY INC.

(F/K/A BECHTEL OIL, GAS AND CHEMICALS, INC.)

RELATING TO THE

PORT ARTHUR LIQUEFACTION PROJECT

Dated as of

October 19, 2022


ARTICLE 1 INTRODUCTION, DEFINITIONS AND INTERPRETATION			3
	1.1	Agreement Structure	3
	1.2	Definitions	3
	1.3	Acronyms, Terms and Symbols	43
	1.4	Interpretation	43
ARTICLE 2 CONTRACTOR’S RESPONSIBILITIES			45
	2.1	Work	46
	2.2	Independent Contractor	47
	2.3	Performance Standards and Compliance with Applicable Laws	47
	2.4	Contractor’s Acknowledgments	47
	2.5	Appointment of Authorized Representatives; Periodic Meetings; Owner Access	51
	2.6	Employees and Key Personnel	53
	2.7	Supply Contracts and Suppliers	55
	2.8	Construction Equipment	62
	2.9	Liens	64
	2.10	Contractor Permits; Owner Permits	66
	2.11	Use of the Site	70
	2.12	Roads; Shipping and Storage; Laydown Areas; Importing Equipment	73
	2.13	Fuel, Utilities and Consumable Items	76
	2.14	Spare Parts; Special Tools	77
	2.15	Materials at the Site	79
	2.16	Personnel Training	80
	2.17	Environmental Compliance; Hazardous Materials and Explosives	80
	2.18	HSSE Plans and Policies; Site Rules; Security	82
	2.19	Emergencies	87
	2.20	Quality Assurance/Quality Control Plan	88
	2.21	Correction of Work in Progress	89
	2.22	Reports	90
	2.23	Books, Records and Audits	91
	2.24	Inspections and Testing	92
	2.25	Design and Engineering Work	95
	2.26	Survey Control Points	97
	2.27	Operation Prior to Substantial Completion	97
	2.28	Coordination with Others Performing Work	98
	2.29	Compliance with Lender Requirements	99
	2.30	COVID-19	100
ARTICLE 3 OWNER’S RESPONSIBILITIES			102
	3.1	Payment of the Contract Price	102
	3.2	Owner Supply of Electricity during Pre-Commissioning, Commissioning, Start-up and Testing	102
	3.3	Owner-Furnished Information	103
	3.4	Appointment of Authorized Representative	103
	3.5	Access to the Site	103
	3.6	Personnel Provided by Owner	104


	3.7	Owner Permits	104
	3.8	Feed Gas; Fuel Gas	105
	3.9	Owner Provision of LNG Tankers; LNG Tanker Loading; Cool-Down Cargos	105
	3.10	Disposition and Title to Products	105
	3.11	Pre-Existing Hazardous Materials and Archeological Finds	105
	3.12	LNG Storage	105
	3.13	Tipping Fees	105
	3.14	Rights-of-Way	106
	3.15	No Other Responsibilities	106
	3.16	Owner’s Failure to Perform	106
ARTICLE 4 COMMENCEMENT OF WORK; PROJECT SCHEDULE			106
	4.1	Commencement of Work	106
	4.2	Project Schedule	109
	4.3	Liquidated Damages	111
	4.4	Critical Path Method Schedule; Acceleration and Schedule Recovery	112
	4.5	Incentive Bonus Payment	115
ARTICLE 5 PROJECT PERFORMANCE			115
	5.1	Guaranteed Performance Levels	115
	5.2	Liquidated Damages	116
ARTICLE 6 COMPENSATION AND PAYMENT			117
	6.1	Contract Price	117
	6.2	Payments	117
	6.3	Invoices and Supporting Documentation	120
	6.4	Disputed Payments and No Waiver	123
	6.5	Owner Right to Withhold and Set Off Payment	123
	6.6	Final Payments	125
	6.7	Late Payments	126
	6.8	Overpayments	126
	6.9	Currency Conversions	126
	6.10	Effect of Payment	127
	6.11	Certain Conditions Precedent to Payment	127
	6.12	Fixed Price Nature of Contract	127
ARTICLE 7 TAXES			127
	7.1	Responsibility for Taxes	127
	7.2	Withholding of Taxes	128
	7.3	Foreign-Trade Zone	128
	7.4	Exemptions	129
	7.5	Texas Sales and Use Tax Matters	130
	7.6	Fixed Asset Price Allocation Schedule	131
ARTICLE 8 CHANGE ORDERS			131
	8.1	Changes to the Work	132
	8.2	Change Orders Requested by Owner	132
	8.3	Change Orders Requested by Contractor	134
	8.4	Change Order Remedies	137
	8.5	Change Request Logs; Contractor-Requested Change Order Procedures	141


	8.6	Unilateral Change Orders	143
	8.7	Subsequent Invoices	144
	8.8	NO OBLIGATION OR PAYMENT WITHOUT EXECUTED CHANGE ORDER	144
	8.9	Executed Change Order Form Final	144
	8.10	No Suspension	144
	8.11	Supplier Rates	145
	8.12	SOLE AND EXCLUSIVE REMEDY	145
ARTICLE 9 TESTING AND COMPLETION			145
	9.1	Pre-Commissioning Plan; Completion Database	145
	9.2	Mechanical Completion of Systems	146
	9.3	Commissioning Activities	146
	9.4	Ready for Feed Gas Introduction and Ready for Start-Up.	147
	9.5	Notices of Initial Production Dates and Feed Gas Requirements	149
	9.6	LNG Production From and After Start-Up	152
	9.7	Performance Testing	155
	9.8	Substantial Completion	156
	9.9	Punch List	158
	9.10	Achievement of Guaranteed Performance Levels	159
	9.11	Final Acceptance	163
	9.12	Final Completion	164
ARTICLE 10 WARRANTIES AND CORRECTION OF WORK			164
	10.1	Contractor’s Warranties	165
	10.2	Supplier Warranties	166
	10.3	Warranty Repair Procedures	167
	10.4	Structural Works Defects	169
	10.5	Root Cause	169
	10.6	EXCLUSIVE WARRANTY; EXCLUSIVE REMEDY	170
ARTICLE 11 TITLE TRANSFER; CUSTODY; RISK OF LOSS			170
	11.1	Transfer of Title	170
	11.2	Care, Custody and Control	171
	11.3	Risk of Loss	171
ARTICLE 12 OWNERSHIP OF DOCUMENTATION AND INTELLECTUAL PROPERTY			173
	12.1	Ownership of Work Product by Owner	173
	12.2	Delivery and Use of Work Product	174
	12.3	Contractor Intellectual Property	175
	12.4	Owner Intellectual Property	175
	12.5	Limited License to Contractor	176
	12.6	Technology	176
ARTICLE 13 REPRESENTATIONS AND WARRANTIES			177
	13.1	Representations and Warranties of Contractor	177
	13.2	Representations and Warranties of Owner and Common Facilities Owner	179
ARTICLE 14 CONFIDENTIALITY			180
	14.1	Contractor’s Obligations	180

iii


	14.2	Owner’s Obligations	181
	14.3	Exceptions	184
	14.4	Remedies	184
	14.5	Legal Demand for Information	184
	14.6	Term	185
ARTICLE 15 INDEMNIFICATION			185
	15.1	Contractor Indemnity and Release	185
	15.2	Owner Indemnity and Release	188
	15.3	Intellectual Property Infringement	190
	15.4	Notice of Claims	191
	15.5	Defense of Third Party Claims	192
	15.6	Enforceability	193
	15.7	Additional Indemnity	193
ARTICLE 16 INSURANCE			193
	16.1	Contractor Insurance Requirements	193
	16.2	Owner-Provided Insurance	198
	16.3	Territorial Limits	200
	16.4	Failure of Contractor to Maintain Policies	200
	16.5	Unavailability of Insurance	200
ARTICLE 17 FINANCIAL SECURITY			201
	17.1	Contractor Guarantee	201
	17.2	Contractor Letter of Credit	201
	17.3	Further Assurances	203
ARTICLE 18 FORCE MAJEURE; EXCUSABLE EVENTS; COVID-19 EVENTS; RUSSIAN AND UKRAINE CONFLICT EVENTS			204
	18.1	Effect of Force Majeure, Excusable Event or COVID-19 Event	204
	18.2	Notice of Occurrence and Contractor Notice Regarding Impact	207
	18.3	Suspension and Evacuation Due to Named Windstorms	209
	18.4	Labor Impacts	209
	18.5	Russian and Ukraine Conflict Events	210
ARTICLE 19 TERMINATION AND SUSPENSION			210
	19.1	Owner’s Termination for Convenience	210
	19.2	Owner Suspension for Convenience	212
	19.3	Default by Contractor	212
	19.4	Default by Owner	216
	19.5	Cure Rights of Lenders	218
	19.6	Contractor General Obligations Upon Suspension	218
	19.7	Contractor General Obligations Upon Termination	219
	19.8	Termination for Delay in FNTP Date	219
	19.9	WAIVER OF CERTAIN RIGHTS	219
ARTICLE 20 DISPUTE RESOLUTION			219
	20.1	Notice of Dispute	219
	20.2	Informal Dispute Resolution	220
	20.3	Mediation	220
	20.4	Arbitration and Arbitration Procedures	221


	20.5	Entry of Judgment	222
	20.6	Fees and Expenses	222
	20.7	Joinder; Consolidation	222
	20.8	Confidentiality	223
	20.9	Continuation of Work During Dispute	223
ARTICLE 21 LIMITATION ON LIABILITY			224
	21.1	CONTRACTOR OVERALL LIMIT OF LIABILITY	224
	21.2	LIMITATION ON CONSEQUENTIAL, PUNITIVE AND OTHER DAMAGES	224
	21.3	APPLICABILITY OF LIABILITY LIMITATIONS	225
	21.4	EXCLUSIVE REMEDIES	226
ARTICLE 22 NOTICES			226
	22.1	Address Information	226
	22.2	Deliveries of Notices; Revised Notice Information	228
	22.3	Routine/Technical Correspondence	228
ARTICLE 23 MISCELLANEOUS			228
	23.1	Entire Agreement	228
	23.2	Amendments	228
	23.3	Waiver	228
	23.4	Effect of Review, Acceptance and Inspection	229
	23.5	Governing Law	229
	23.6	Severability	229
	23.7	Assignment and Assumption of Obligations	229
	23.8	Further Assurances	229
	23.9	No Third Party Beneficiaries	230
	23.10	Excluded Interests	230
	23.11	No Advertising	230
	23.12	Survivability	230
	23.13	Ethical Business Considerations	231
	23.14	Counterpart Execution	233
	23.15	Expenses	233
	23.16	Relationship of Parties	233
	23.17	Drafting	233

APPENDICES

Appendix A Scope of Work

Attachment A-1 Contractor Design Deliverables

Attachment A-2 Port Arthur Liquefaction Project Environmental Plan

Attachment A-3 Master Document Index

Appendix B Basis of Design

Attachment B-1 List of Specifications

Appendix C Separated Contract Price

Attachment C-1 Form of Sales and Use Tax List

Attachment C-2 Foreign Currency Conversion

Attachment C-3 Provisional Sums

Attachment C-4 Commodity Indexing Price Adjustments

Attachment C-5 High Value Orders

Appendix D Payment Schedule

Attachment D-1 Milestone Payment Schedule

Attachment D-2 Estimated Progress Payment Schedule

Appendix E-1 Key Date Schedule

Appendix E-2 CPM Schedule and Detailed Resource Plan

Appendix F-1 Form of Mutual Change Order

Appendix F-2 Form of Unilateral Change Order

Appendix F-3 Form of Interim Change Order

Appendix G Emissions and Noise Testing, Functional Testing, Performance Testing, Performance Guarantees and Performance Liquidated Damages

Appendix H Contractor’s Key Personnel

Appendix I Acceptable Suppliers

Attachment I-1 Acceptable Sub-Suppliers for Certain Equipment

Attachment I-2 Application of Appendix I to Lower-Tier Suppliers

Appendix J-1 Owner-Acquired Permits

Appendix J-2 Contractor-Acquired Permits

Appendix J-3 Owner-Acquired Permit Clarifications

Appendix K Glossary of Acronyms, Terms and Symbols

Appendix L Liquefaction Project Site

Attachment L-1 Site Description

Attachment L-2 ALTA/NSPS Land Title Survey

Attachment L-3 Survey Control

Attachment L-4 Pipeline Crossing Locations

Appendix M Procedures for Planned and Unplanned Post-Substantial Completion Activities

Appendix N Non-Verified Information

Appendix O Applicable Tax Abatement Terms

vii

Appendix P Training Program

Appendix Q Contractor HSSE Program

Attachment Q-1 Form of Contractor Permit to Work

Appendix R Quality Assurance Plan

Appendix S Project Controls Requirements

Attachment S-1 Work Breakdown Structure

Attachment S-2 Weekly Status Report and Monthly Status Report Requirements

Attachment S-3 Rules of Credit

Attachment S-4 Form of Storage Report

Appendix T-1 Required Equipment Shop Testing Notices; Owner Hold Points

Appendix T-2 Required Notices of On-Site Activities and Testing; Owner Hold Points

Appendix U Contractor Deliverables Requirements

Attachment U-1 IT/IS and Document Control Requirements

Attachment U-2 Contractor Document Management Plan

Appendix V-1 Form of Invoice

Appendix V-2 Form of Final Payment Invoice

Appendix W Project Execution Plan

Attachment W-1 Other Execution Plans

Appendix X Form of Contractor Letter of Credit

Appendix Y Form of Contractor Guarantee

Appendix Z Incentive Bonuses

Appendix AA Form of Ready for Start-Up Certificate

Appendix BB Form of Substantial Completion Certificate

Appendix CC Form of Final Acceptance Certificate

Appendix DD Form of Final Completion Certificate

Appendix EE-1 Form of Contractor Interim Lien and Claim Waiver

Appendix EE-2 Form of Supplier Interim Lien and Claim Waiver

Appendix FF-1 Form of Contractor Unconditional Interim Lien and Claim Waiver

Appendix FF-2 Form of Supplier Unconditional Interim Lien and Claim Waiver

Appendix GG-1 Form of Contractor Final Lien and Claim Waiver

Appendix GG-2 Form of Supplier Final Lien and Claim Waiver

Appendix HH-1 Form of Contractor Unconditional Final Lien and Claim Waiver

Appendix HH-2 Form of Supplier Unconditional Final Lien and Claim Waiver

Appendix II Information Management Plan

Appendix JJ Form of Full Notice to Proceed

Appendix KK Unit Rates, Unit Pricing and Time and Materials Rates

Appendix LL Owner’s Real Property Leases, Easements and Other Rights

viii

Appendix MM-1 Contractor-Provided Insurance

Appendix MM-2 Owner-Provided Insurance

Appendix NN-1 Form of Ramp-Up LNTP

Appendix NN-2 Form of February 2023 LNTP

Appendix OO-1 Form of Consent and Agreement – Owner

Appendix OO-2 Form of Consent and Agreement – Common Facilities Owner

Appendix PP Form of Fixed Asset Price Allocation Schedule

Appendix QQ Owner HSSE Plans and Procedures

Appendix RR Contractor Bank and Account Information

Appendix SS Common Facilities Assets

Appendix TT Capital Spare Parts

Appendix UU Contractor Notice

Appendix VV Contractor Mitigation Plan

Appendix WW Local Engagement Performance Requirements and Key Performance Indicators

Appendix XX Designated Claim Procedure

Appendix YY COVID-19 Means, Methods and Assumptions

Attachment YY-1 COVID-19 Guidelines

Appendix ZZ Contractor Laydown Areas

Appendix AAA RFFGI Certificate

SECOND AMENDED AND RESTATED ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT

This SECOND AMENDED AND RESTATED ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT is entered into as of October 19, 2022 (the “Effective Date”), between PORT ARTHUR LNG, LLC, a Delaware limited liability company (“Owner”), PALNG COMMON FACILITIES COMPANY, LLC, a Delaware limited liability company (“Common Facilities Owner”), but only for the limited purposes set forth herein, and BECHTEL ENERGY INC. F/K/A BECHTEL OIL, GAS AND CHEMICALS, INC., a Delaware corporation (“Contractor”). Contractor, Owner and Common Facilities Owner are each referred to herein from time to time as a “Party” and together as the “Parties”.

RECITALS

WHEREAS, Owner and the Common Facilities Owner desire to develop and construct a large-scale natural gas treatment, gas processing and liquefaction facility, including two (2) LNG Trains, two (2) LNG Tanks, with an option for a third LNG Tank, two (2) marine Berths and associated loading facilities, NGL extraction, storage and delivery facilities, cryogenic pipelines and infrastructure, utilities and facilities necessary to provide liquefaction services (the “LNG Facility”).

WHEREAS, Owner, Common Facilities Owner and Contractor have previously entered into the Engineering and Design Services Agreement dated as of August 6, 2018 (together with any Work Authorizations issued thereunder, the “EDSA”), whereby Contractor has provided and will provide the engineering and other services described therein, and pursuant to which Contractor has, among other things, developed the Contract Price and the Baseline CPM Schedule.

WHEREAS, Owner, Common Facilities Owner and Contractor have previously entered into the Site Works Services Agreement dated as of December 20, 2019 (together with any Work Authorizations issued thereunder, the “SWSA”), whereby Contractor has provided and will provide certain Site preparation and other on-Site services described therein, and pursuant to which Contractor has, among other things, developed the Contract Price and the Baseline CPM Schedule.

WHEREAS, Owner, Common Facilities Owner and Contractor have previously entered into the Engineering, Procurement and Construction Contract dated as of February 28, 2020 (the “February 2020 Agreement”), whereby Contractor, itself and through its Suppliers, was engaged to provide the engineering, procurement, construction, pre-commissioning, commissioning, start-up, testing and operating services for the LNG Facility, on a fixed, separated price basis.

WHEREAS, Owner, Common Facilities Owner and Contractor entered into an Amended and Restated Engineering, Procurement and Construction Contract dated as of December 11, 2020 (the “First Amended and Restated Agreement”), whereby Contractor, itself and through its Suppliers, was engaged to provide the engineering, procurement, construction, pre-

commissioning, commissioning, start-up, testing and operating services for the LNG Facility, on a fixed, separated price basis.

WHEREAS, Contractor has agreed to perform certain engineering, procurement, permitting and other services and activities to progress the development of the LNG Facility, including that certain letter agreement dated as of September 15, 2022 (the “September 2022 Letter Agreement”) with respect to the performance of a scope of activities and services to be continued under the Ramp-Up LNTP.

WHEREAS, the Parties desire to amend and restate the First Amended and Restated Agreement on the terms and conditions set forth herein, to, among other things, reflect certain updates to the Contract Price and the Project Schedule.

NOW, THEREFORE, in consideration of the premises and the agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Owner, Common Facilities Owner and Contractor hereby agree as follows:

ARTICLE 1

INTRODUCTION, DEFINITIONS AND INTERPRETATION

1.1 Agreement Structure. This Agreement consists of the Terms and Conditions (Articles 1 through 23) and the Appendices attached hereto (Appendix A through Appendix TT) and the Attachments thereto, each of which is incorporated herein by this reference.

1.2 Definitions. The following capitalized terms have the respective meanings set forth below, unless the context requires otherwise:

“2022 Plan Updates” has the meaning set forth in Section 2.4.6.

“313 Agreement” means any successor agreement to the Agreement for Limitation on Appraised Value of Property for School District Maintenance and Operations Taxes, dated as of October 24, 2016 (as modified, supplemented, or amended from time to time), by and among Sabine Pass Independent School District, Owner and the Common Facilities Owner (as successor in interest to Port Arthur LNG Holdings, LLC), together with the related approval of the 313 Agreement by the Texas Comptroller of Public Accounts, dated October 13, 2016, and the related Certificate for a Limitation on Appraised Value issued by the Texas Comptroller of Public Accounts to Owner and the Common Facilities Owner (as successor in interest to Port Arthur LNG Holdings, LLC) on May 16, 2016 under the provisions of Texas Tax Code Chapter 313, the terms of which successor agreement does not expand any of the requirements as set forth on Appendix O.

“AAA” means the American Arbitration Association.

“AAA Rules” means the Construction Industry Arbitration Rules and Mediation Procedures (Including Procedures for Large, Complex Construction Disputes) of the AAA.

“Abandonment” means prior to Substantial Completion, Contractor has at any time stopped, suspended, or refused to perform all or substantially all of the remaining Work under this Agreement (including a significant reduction in Contractor Personnel performing Work to such a degree that objectively evidences the intent not to complete the Work) if such stoppage, suspension or refusal continues for five (5) consecutive Days or longer and, after notice from Owner, Contractor fails to confirm, within five (5) Days of such notice, its intent to resume performance of the Work within a period of time reasonably acceptable to Owner, and Contractor fails to resume such performance within such agreed time; provided that Abandonment shall not include stoppage, suspension or refusal to perform the Work for which Contractor has the express right to do so under the Agreement.

“Acceleration Plan” has the meaning set forth in Section 4.4.4.

“Additional COVID-19 Counter-Measures” means COVID-19 Type A Counter-Measures, COVID-19 Type B Counter-Measures, [***] and any extensions thereto pursuant to a COVID-19 Type A Counter-Measure Extension, COVID-19 Type B Counter-Measure Extension and/or [***], as applicable.

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or otherwise. Without limiting the foregoing, ownership of fifty percent (50%) or more of the equity interests of each class holding voting rights shall be deemed to be control of a Person. Notwithstanding the foregoing, Parent, the members of Parent and their respective Affiliates shall be considered Affiliates of Owner and Common Facilities Owner for purposes of this Agreement.

“Agreement” means this Engineering, Procurement and Construction Contract, and all Appendices and Attachments hereto and thereto, as amended from time to time in accordance with the terms of this Agreement.

“Applicable Codes and Standards” means those codes and standards that are applicable to the Liquefaction Project, the LNG Facility or the Work, under Applicable Laws and as set forth in Appendix A, Appendix B or the Deliverables.

“Applicable Laws” means (a) all laws, statutes, rules, regulations, ordinances, codes, Applicable Codes and Standards required under Applicable Laws, and executive orders or proclamations by the U.S. President that are enforceable by Governmental Authorities against the Parties; (b) rules of common law, and judgments, decisions, interpretations, orders, directives; (c) all Permits and requirements or conditions contained in any Permit, including any condition on or with respect to the issuance, maintenance, renewal or transfer of any Permit; (d) all Import Laws; and (e) any injunctions, writs, decrees, stipulations, or awards of any applicable Governmental Authority or duly authorized official, court or arbitrator thereof, in each case, now existing or, without limiting what may constitute a Change In Law, which may be enacted or issued after the Effective Date, and that are applicable to the Parties, the Liquefaction Project, the LNG Facility, the Site, any other location where the Work is performed, or this Agreement or the performance or enforcement hereof.

“Archeological Finds” means discoveries of subsurface fossils, antiquities, biofacts, cultural artifacts, cultural landscapes, or other archaeological materials or similar items, required to be reported to any Governmental Authority or protected under Applicable Laws, and which are not disclosed by Owner (including the location thereof) or otherwise known to Contractor prior to [***].

“As-Built Drawings” means redlined Drawings as prepared in the field that show all current “as-built” conditions, as required under Attachment A-1 to Appendix A and Appendix U.

“Audit Period” has the meaning set forth in Section 2.23.2(a).

[***].

“BAR” has the meaning set forth in Section 16.2.1.

“Baseline CPM Schedule” means the Level III detailed resource work-hour loaded critical path method schedule that incorporates all of the Key Date Items and reflects the Milestones, as attached hereto as Appendix E-2, as updated in accordance with Section

4.2.2.

“Basis of Design” means the basis of design and parameters of the Liquefaction Project and the Work as set forth in Appendix B.

“Books and Records” has the meaning set forth in Section 2.23.1.

“Berth” means each berth at the LNG Facility for the berthing and Loading of LNG Tankers.

“British Thermal Unit” and “Btu” means a unit of thermal energy equal to the amount of heat required to raise one (1) pound of pure water one (1) degree Fahrenheit at Standard Conditions for LNG, or Standard Conditions for Natural Gas, as the case may be.

“Business Day” means each calendar day, Monday through Friday, excluding U.S. federal banking holidays.

“CAD” has the meaning set forth in Section 2.25.7.

“Capital Spare Parts” has the meaning set forth in Section 2.14.3.

“Cargo” means a quantity of LNG expressed in MMBtu to be Loaded onto an LNG Tanker at the LNG Facility.

“Central Time” means U.S. Central Standard Time, as may be adjusted for daylight savings.

[***].

“Change in Law” means the enactment, adoption, promulgation or imposition of any new Applicable Laws with different terms, or the repeal, amendment, or change to, including the binding interpretation, enforcement or application by any Governmental Authority of, any Applicable Laws that occurs after the date that is [***] Days prior to [***], which, for purposes of this Agreement with respect to Taxes, shall include only newly enacted or increases or decreases in Taxes for which Contractor is responsible for under this Agreement and that are not otherwise excluded below. Notwithstanding the foregoing, a Change in Law shall not include any such enactment, adoption, promulgation, imposition or repeal, amendment, or change in binding interpretation, enforcement or application: (a) in accordance with a proposed regulatory change that was published prior to the date that is [***] Days prior to [***] but not yet made effective; (b) that (i) increases or decreases any Taxes, or establishes, imposes or assesses any new Taxes, on corporate income or profits/losses, or on Construction Equipment; (ii) [***]; (iii) [***]; (iv) any increase or decrease in, or the establishment, imposition or assessment of new, Texas Sales and Use Taxes, Customs Duties or property Taxes for which Contractor is not

entitled to reimbursement, in each case either because (A) with respect to property Taxes only, title has not passed to Owner pursuant to Section 11.1.1; or (B) as described in Sections 2.12.4, 7.1, 7.3.2, 7.4 or 7.5.2, including Taxes on (1) the real property of Owner; and (2) Equipment and materials to be incorporated into, affixed to, or installed into the LNG Facility; (c) with respect to any purported change in enforcement or application by a Governmental Authority which is within the discretionary authority of such Governmental Authority where such change in enforcement or application is triggered by or is in reaction to the fault, act or omission of a member of the Contractor Group; (d) to the extent such enactment, adoption, promulgation, imposition or repeal, amendment, or change in binding interpretation, enforcement or application results wholly or partially from the act or omission of the Party or Affiliates of the Party claiming the Change in Law, or the affected Party’s or its Affiliates’ noncompliance with any Applicable Laws (other than such non-compliance resulting from a separate Excusable Event or event of Force Majeure); or (e) any event which would otherwise constitute a COVID-19 Event.

“Change Order” means a written order authorizing a change in the Work, or an adjustment to the Contract Price, the Milestones, the Payment Schedule, the Key Date Schedule, including the Guaranteed Substantial Completion Dates, or the Guaranteed Performance Levels, as applicable, as a result of the occurrence of one of the events described in Section 8.2.1 or 8.3.1, as agreed in a document substantially in the form of either Appendix F-1, if required to be signed by both of the Parties, or Appendix F-2, if signed solely by Owner in accordance with Section 8.6.

“CIMTAS” means Cimtas Boru Imalatlari ve Ticaret Limited Sirke.

“Claim” or “Claims” means any and all claims or actions, threatened or filed, that directly or indirectly relate to the matters in question, including all Losses, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the expiration or earlier termination of this Agreement, subject to any applicable statutes of limitation.

“Claim Submission Deadline” means with respect to the occurrence of any Claim Submission Event [***], the date that is [***] Days after Contractor first became aware, or should have become aware, of the occurrence of the applicable Claim Submission Event; provided, that in the case of the occurrence of any such event, if Contractor submits a preliminary Claim to Owner within such [***] Day period, together with an explanation for why Contractor requires additional time to prepare a final Claim submission, the Claim Submission Deadline shall be extended for the period of time that Contractor reasonably demonstrates is necessary to prepare the final Claim submission, but in any event to no more than [***] Days after Contractor first became aware, or should have become aware, of the occurrence of the Claim Submission Event; provided, however, that notwithstanding anything to the contrary in the foregoing:

(a) [***].

(b) [***].

“Claim Submission Event” has the meaning set forth in Section 8.3.1.

“CO Cost Threshold” means [***].

“Commission” and “FERC” means the U.S. Federal Energy Regulatory Commission, or any successor agency having jurisdiction over the LNG Facility and the provision of services by Owner from such LNG Facility.

“Common Facilities” means those portions of the Work that are used or are constructed to be used by more than one (1) LNG Train, including the Equipment and facilities described in Appendix SS.

“Common Facilities Owner” has the meaning set forth in the Preamble.

“Comparable Facilities” means domestic or international LNG facilities of a size, type and design comparable to the LNG Facility.

“Competitors” means any of the following, including their Affiliates, [***]; provided, however, that notwithstanding that a Person is included in the foregoing list, Competitors shall not include (a) any such Person or its Affiliates that the Parties have agreed will act as Owner’s Engineer, subject to such Persons entering into a confidentiality agreement with Owner with substantially similar terms to those stated in Section 14.2; (b) any Person who has an equity interest in the Liquefaction Project; and (c) any individual who serves on the governing body of Owner or any of its Affiliates.

“Completions Database” has the meaning set forth in Section 9.1.3.

“Confidential Information” means either or both of Contractor Confidential Information and Owner Confidential Information, as the context requires.

“Construction Equipment” means the equipment, machinery, structures, scaffolding, materials, tools, supplies, consumables, systems and temporary buildings, in each case owned, rented or leased by Contractor or its Subcontractors for use in accomplishing the Work, but not intended for incorporation into the LNG Facility.

“Contract Price” means the fixed, separated price for all Stages of the Work as indicated in Appendix C, including the Work performed under the EDSA, the SWSA, the September 2022 Letter Agreement, the Ramp-Up LNTP and, if issued, the February 2023 LNTP, as more particularly described in Section 6.1, in each case as adjusted from time to time under the provisions of this Agreement.

“Contractor” has the meaning set forth in the Preamble.

“Contractor Confidential Information” means: (a) data and information disclosed by Contractor or another member of the Contractor Group in the course of performing the Work and that has clearly been identified in writing by the Disclosing Party as being confidential; provided, however, that in no event shall Contractor Confidential Information include any of the Work Product (other than Non-Technical Documents) even if marked as confidential; (b) the Non-

Technical Documents; or (c) financial information of Contractor or any other member of the Contractor Group, whether or not marked and identified in writing as confidential.

“Contractor Event of Default” has the meaning set forth in Section 19.3.1.

“Contractor Group” means Contractor, its Affiliates, its Suppliers, and its and their respective directors, officers, employees (including agency personnel), consultants, agents and Invitees, but does not include any Owner Group member.

“Contractor Guarantee” means a guarantee executed by the Contractor Guarantor in favor of Owner and the Common Facilities Owner in the form attached hereto as Appendix Y.

“Contractor Guarantor” means Bechtel Global Energy, Inc., a Delaware corporation.

“Contractor Guarantor Letter of Credit” has the meaning set forth in Section 17.3.

“Contractor Guarantor Minimum Net Worth” has the meaning set forth in Section 17.3.

“Contractor HSSE Program” has the meaning set forth in Section 2.18.2.

“Contractor Indemnified Parties” means Contractor and its Affiliates and each of their respective officers, directors, shareholders, employees, agents and advisers.

“Contractor Intellectual Property” has the meaning set forth in Section 12.3.

“Contractor Key Dates” means the Key Date Items that are obligations of Contractor hereunder and are identified as “Contractor Key Dates” on Appendix E-1.

“Contractor Lien” means any Lien on the Work, the Site, the LNG Facility, the Liquefaction Project or other property of Owner or the Common Facilities Owner or any part thereof or interest therein, created by any member of Contractor Group or otherwise arising as a consequence of Contractor’s performance of the Work.

“Contractor-Furnished Items” means all the Equipment, including spare parts, furnished by or on behalf of Contractor and its Suppliers to perform the Work and intended to be incorporated into the LNG Facility.

“Contractor Mitigation Plan” means the mitigation plan implemented by Contractor as described in Appendix VV.

“Contractor Permits” means each and every Permit other than the Owner Permits that is required by any Applicable Laws or that is otherwise necessary for the performance of the Work, including all Permits listed as Contractor Permits on Appendix J-2 and all:

(a) Permits required to be maintained in Contractor’s or a Supplier’s name;

(b) building Permits required for the construction of the LNG Facility;

(d) business Permits reasonably related to the conduct of the operations of Contractor and all Subcontractors in the State of Texas and any other location where such Permits may be required;

(e) Permits, approvals, consents or agreements from or with any Person necessary (including all contractors’ licenses, engineering licenses and related documents) (i) for the performance by Contractor of the Work or its warranty obligations hereunder; (ii) for the transportation or importation of Equipment; or (iii) for the transportation or importation of Construction Equipment;

(f) Permits for the temporary Work, disposal Permits necessary to perform Contractor’s Scope of Work, road use Permits necessary to perform Contractor’s Scope of Work, Permits related to the use, storage and disposal of Hazardous Materials brought onto the Site by or on behalf of any member of Contractor Group, and Permits issued pursuant to any building, mechanical, electrical, plumbing or similar Applicable Codes and Standards; and

(g) Permits, visas, approvals and certifications necessary for Contractor’s employees to legally perform the Work in the State of Texas (including documentation of citizenship or legal residency in the U.S.).

“Contractor Representative” means that Person or Persons designated by Contractor as the Senior Project Manager on Appendix H or in accordance with Section 2.6.1.

“Corrective Work” has the meaning set forth in Section 10.3.1.

“COVID-19” means the SARS-CoV-2 virus and any infectious respiratory disease or diseases that it causes, as identified by the World Health Organization and further abbreviated by such organization as “COVID-19,” including any additional Outbreaks of COVID-19 or any other worsening of the COVID-19 pandemic, or any related strains and mutations of COVID-19, wherever the same may occur.

“COVID-19 Applicable Law Event” means the occurrence of any of the following:

(a) a COVID-19 Applicable Law Issuance; or

(b) a COVID-19 Type A Counter-Measure Extension.

“COVID-19 Applicable Law Issuance” means the enactment, adoption, promulgation, imposition, repeal, amendment, or change in binding interpretation, enforcement or application of an Applicable Law by a Governmental Authority that:

(a)is issued in response to the COVID-19 pandemic, or to protect those performing the Work from the spread of COVID-19, or to otherwise fight against the spread of COVID-19;

(b)is issued after [***] days prior to [***]; and

(c)with respect to Contractor, results in Contractor being required to employ additional or different counter-measures or other means and methods in performing the Work at the Site [***] from those counter-measures or means and methods set forth in Appendix YY so as to protect those performing the Work from the spread of COVID-19, or to otherwise fight against the spread of COVID-19, and perform the Work in accordance with all Applicable Laws related to COVID-19 (such additional or different counter-measures, means or methods required pursuant to the above, collectively, “COVID-19 Type A Counter-Measures”).

“COVID-19 Event” means the occurrence of any of the following:

(a)a COVID-19 Applicable Law Event;

(b)a COVID-19 PCSC Event;

(c)with respect to any Supplier, the enactment, adoption, promulgation, imposition, repeal, amendment, or change in binding interpretation, enforcement or application of an Applicable Law by a Governmental Authority that:

(i)is issued in response to the COVID-19 pandemic, or to protect those performing the Work from the spread of COVID-19, or to otherwise fight against the spread of COVID-19;

(ii)is issued after [***] days prior to [***]; and

(iii)results in such Supplier being required to employ additional or different counter-measures or other means and methods in performing the Work at any location (other than the Site) where the Work is being performed by such Supplier from those counter-measures or means and methods set forth in such Supplier’s COVID-19 response plan so as to protect those performing the Work from the spread of COVID-19, or to otherwise fight against the spread of COVID-19, and perform the Work in accordance with all Applicable Laws related to COVID-19; or

(d) [***].

“COVID-19 Guidelines” means:

(a)the publication of a guideline, recommendation or suggested practice (or revisions, amendments or supplements thereto);

(b)issued [***] days prior to [***];

(c)issued by (i) a Governmental Authority, or (ii) [***] (including the Centers for Disease Control and Prevention (CDC) or the Occupational Safety & Health Administration (OSHA)); and

(d)such guideline, recommendation or suggested practice (or revisions, amendments or supplements thereto) is applicable to the performance of the Work; and (i) is issued to protect those performing the Work from the spread of COVID-19; or (ii) issued to otherwise fight against the spread of COVID-19.

“COVID-19 Guidelines Issuance” means: (a) COVID-19 Guidelines have been issued after [***] days prior to [***] which recommend the adoption of additional or different counter-measures or other means and methods in performing the Work from those counter-measures or means and methods set forth in Appendix YY as of [***] which are in addition to those set forth in Appendix YY; and (b) the adoption or extension, as the case may be, of such COVID-19 Guideline is reasonably necessary to protect those performing the Work from the spread of COVID-19, or to otherwise fight against the spread of COVID-19 (such means and methods and counter-measures, collectively, “COVID-19 Type B Counter-Measures”).

[***].

“COVID-19 PCSC Event” means the occurrence of any of the following:

(a)a COVID-19 Guideline Issuance;

(b)[***];

(c)a COVID-19 Type B Counter-Measure Extension; or

(d)[***].

[***].

“COVID-19 Recommended Additional Counter-Measures” has the meaning set forth in Section 2.30(c).

[***].

“COVID-19 Type A Counter-Measures” has the meaning set forth in the definition of “COVID-19 Applicable Law Issuance”.

“COVID-19 Type A Counter-Measure Extension” means a circumstance following [***] days prior to [***] where the time period for the implementation of any of the means, methods and counter-measures included as part of Part III of Appendix YY has expired and Contractor is required under Applicable Law to continue implementing such means, methods and counter-measures in order to perform the Work in compliance with Applicable Laws, but only for the duration of the extension required by Applicable Laws.

“COVID-19 Type B Counter-Measures” has the meaning set forth in the definition of “COVID-19 Guidelines Issuance”.

“COVID-19 Type B Counter-Measure Extension” means a circumstance following [***] days prior to [***] where the time period for the implementation of any of the means, methods and counter-measures included as part of Part III of Appendix YY has expired and either: (a) COVID-19 Guidelines recommend the continuance of the means, methods and counter-measures identified in Part III of Appendix YY for time-periods extending beyond the period then currently indicated in Part III of Appendix YY (but only for the duration of such required extension); or (b) the COVID-19 Guidelines that originally precipitated the previous adoption of COVID-19 Type B Counter-Measures are still in effect, and, in each case ((a) and (b)), keeping such means, methods and counter-measures in effect, as applicable, is reasonably necessary to protect those performing the Work from the spread of COVID-19, or to otherwise fight against the spread of COVID-19;

[***].

“CPM Schedule” means the most recent Level III critical path method schedule provided by Contractor that meets the requirements of Section 4.4.1 and Appendix S.

“Credit Rating” means for any Person the senior unsecured long term Dollar debt rating of such Person (without any form of credit enhancement), as determined by Moody’s or Standard & Poor’s.

“Creditworthy Bank” means a commercial bank having at the applicable time: (a) combined total assets of at least [***]; and (b) a Credit Rating of: (i) A- or better from Standard & Poor’s; or (ii) A3 or better from Moody’s; or (iii) if such bank has a Credit Rating at such time from both Standard & Poor’s and Moody’s, A- or better from Standard & Poor’s and A3 or better from Moody’s.

“Critical Path Item(s)” means the items identified as critical path items on the CPM Schedule.

“Customs Duties” means U.S. import Taxes, customs duties, antidumping duties, countervailing duties, quotas, tariff-rate quotas, quantitative restrictions and other tariffs, duties, or restrictions imposed under any statutory authority, including Section 232 of the Trade Expansion Act of 1962 (as amended), Section 301 of the Trade Act of 1974 (as amended), Section 201 of the Trade Act of 1974 (as amended), and any additional or different tariffs or quotas on certain imported products and materials imposed by executive orders or proclamations by the U.S. President that constitute Applicable Laws.

“Daily Quantity” has the meaning set forth in Section 9.5.3(d).

“Day” means a period of twenty-four (24) consecutive hours commencing at midnight Central Time on any calendar day.

“Defect” means any failure of the Work to comply with the standards set out in Section 10.1.1.

“Defective” means that the applicable Work contains a Defect.

“Delay LD Cap” means an amount equal to [***] for Stage I, and an amount equal to [***] for Stage II.

“Delay Liquidated Damages” means any or all of the: (a) Stage I Delay Liquidated Damages; or (b) Stage II Delay Liquidated Damages.

“Deliverable” means any documentation or written information required to be delivered to Owner pursuant to this Agreement, including the Drawings and Specifications and design Deliverables as described in Attachment A-1 to Appendix A, the Plans, and the reports, manuals, schedules and related information, logs, data books, calculations, models, simulations, manufacturers’ drawings and data as described herein.

“Direct Agreement” has the meaning set forth in Section 2.29.1.

“Disclosing Party” means the Party that has disclosed Confidential Information hereunder in accordance with Article 14, or on whose behalf Confidential Information has been disclosed, and to whom confidentiality obligations are owed with respect to such Confidential Information pursuant to Article 14.

[***].

“Dispute” has the meaning set forth in Article 20.

“Dispute Notice” has the meaning set forth in Section 20.1.

“Disputing Parties” has the meaning set forth in Article 20.

“DOE” means the U.S. Department of Energy (or a successor regulatory agency).

“Dollars” and “$” means the lawful currency of the U.S.

“Dredge Disposal Areas” means as of the FNTP Date, dredge disposal placement area 9 as identified in the applicable Owner Permit, and dredge disposal placement area 8 as identified in the applicable Owner Permit, but with respect to placement area 8, only as of the date set forth in the Key Date Schedule that Owner is required to obtain access to such placement area.

“Dredge Disposal Placement Areas” means dredge disposal placement areas PA-09A, PA-09B, PA-08, and the J.D. Murphree beneficial use area.

“Drawings” means the graphic and pictorial documents (in written or electronic format) showing the design, location and dimensions of the Work, generally including plans, elevations,

sections, details, lists, data sheets and diagrams, which are prepared as a part of and during the performance of the Work.

“EDSA” has the meaning set forth in the Recitals.

“Effective Date” means the date identified in the opening Preamble of this Agreement and upon which this Agreement shall become effective and the Parties shall be bound.

“Emissions Guarantee” means the guarantee with respect to emissions as described in Section 3.1 of Appendix G.

“Entergy” means Entergy Texas, Inc. and its successors or assigns.

“Environmental Plan” shall mean the Port Arthur Liquefaction Project Environmental Plan as set forth in Attachment A-2 to Appendix A, to the extent applicable to the Work, and the policies and procedures described therein with respect to discoveries of Archeological Finds or Pre-Existing Hazardous Materials.

“Equipment” means any and all materials, supplies, equipment and facilities, of whatever nature, including each LNG Tank, intended to become a permanent part of the LNG Facility.

“Event of Default” means either a Contractor Event of Default or an Owner Event of Default.

“Excepted Risk” means (a) war (whether declared or undeclared), civil war, act of terrorism, blockade, insurrection (except for a Russian and Ukraine Conflict Event); or (b) ionizing radiation, or contamination by radioactivity from nuclear fuel, or from any nuclear waste from the combustion of nuclear fuel properties of any explosive nuclear assembly or nuclear component thereof; or (c) Named Windstorms.

“Exchange Rate” means the last published rate expressed in terms of foreign currency units per one (1) Dollar as quoted by Bloomberg FX Fixings, as applicable, for the last Business Day immediately preceding the Day on which the conversion is deemed to be made.

“Excusable Event” means the occurrence of: (a) an Owner-Caused Delay; (b) a Change In Law; (c) an Unforeseen Excused Site Condition; or (d) [***]. For purposes of clarity, Excusable Events shall not include any event of Force Majeure, Russian and Ukraine Conflict Event or COVID-19 Event.

“Extended Warranty Items” has the meaning set forth in Section 10.2.2.

“February 2020 Agreement” has the meaning set forth in the Recitals.

“February 2023 LNTP” means a limited notice to proceed issued by Owner and signed by Contractor to commence performing the Work as described in the notice, in the form as set forth in Appendix NN-2.

“Feed Gas” means Natural Gas that is provided to be used for processing to produce LNG, not including Fuel Gas.

“Feed Gas Specifications” means the pressure, temperature and quality specifications for Feed Gas set forth in Table 6 of Appendix B, and the Process Basis of Design (PAL-PJT-PRO-BOD-00-GEN-0002) as referenced in Appendix B.

“FEIS” means the final environmental impact statement for the Liquefaction Project.

“FERC Order” means Order No. 167 FERC ¶ 61,052 issued by the FERC on April 18, 2019 with respect to the FERC Construction and Operating Authorization issued under Section 3 of the Natural Gas Act, as set forth in Appendix J-1.

“Final Acceptance” means, with respect to a Stage, that the following conditions have been satisfied for the applicable Stage:

(a) Substantial Completion of such Stage shall have occurred;

(b) such Stage shall have satisfied the Noise Guarantee, or if the Performance Tests for such Stage failed to demonstrate that such Stage satisfied the Noise Guarantee, FERC shall have agreed that Contractor has demonstrated to FERC’s satisfaction through the Noise Model or other information that such Stage satisfies the Noise Guarantee;

(c) Contractor shall have completed all Punch List Items with respect to such Stage in accordance with this Agreement, unless Owner has notified Contractor in accordance with Section 9.9.4 that Owner has elected to complete the Punch List Items with respect to such Stage;

(d) Contractor shall have satisfied each of the Guaranteed Performance Levels, except to the extent that a Guaranteed Performance Levels Correction Period and a GPL Correction Plan is in effect in accordance with Section 9.10.2; provided that with respect to any Guaranteed Performance Levels for which a Guaranteed Performance Levels Correction Period and GPL Correction Plan is in effect, such Stage shall meet the Emissions Guarantees and the Minimum Performance Standards for such Guaranteed Performance Levels based on the last Performance Test conducted with respect to such Guaranteed Performance Levels;

(e) Contractor shall have fully complied with its obligations under Section 2.11.9 following Substantial Completion of a Stage, including the removal of all of Contractor’s and Suppliers’ personnel, supplies, equipment, Hazardous Materials for which Contractor is responsible under Section 2.17.2 or 2.17.3, waste materials, rubbish and temporary facilities from the areas of the Site related to that Stage, except for such personnel and Construction Equipment needed to fulfill Contractor’s obligations during the Warranty Period, as agreed to by Owner;

(f) all warranty Work identified prior to the date of Final Acceptance shall have been completed, or the Parties shall have agreed on a plan for completion of such warranty Work in accordance with Article 10;

(g) to the extent that the Warranty Period, as extended, has expired, Contractor shall have assigned to Owner all Supplier warranties required to be assigned to Owner as of such date pursuant to Section 10.2.1;

(h) all Record As-Built Drawings for such Stage shall have been completed and issued by Contractor, and delivered to Owner;

(i) with respect to such Stage, Owner shall have received: (i) all Deliverables required by Appendix A; and (ii) all test data and other technical information and Deliverables required under this Agreement;

(j) with respect to such Stage, Owner shall have received final O&M Manuals and instruction books as are necessary to operate the LNG Facility with respect to such Stage in a safe, efficient and effective manner, including as specified in Appendix U;

(k) Owner shall have received from Contractor each Contractor Permit, if any, that is required for continuous use and operation of such Stage (all such Permits to be in Owner’s name or to have been assigned to Owner, in accordance with Applicable Laws) and, to the extent any Contractor Permit is required to be “closed out” or a similar process is required by the applicable Governmental Authority, Contractor shall have complied with all such requirements for such Contractor Permits;

(l) no Contractor Event of Default shall exist; and

(m) all of Contractor’s representations and warranties contained in Sections 13.1.6, 13.1.7, 13.1.10 and 23.13 shall be true and correct, or shall be cured to be true and correct, and Contractor shall have performed its obligations under its covenants and agreements in Section 23.13.

“Final Acceptance Certificate” means a certificate substantially in the form of Appendix CC.

“Final Acceptance Date” means, with respect to a Stage, the date on which Final Acceptance of such Stage occurs: (a) as set forth on a Final Acceptance Certificate that has been countersigned by Owner; (b) as determined in accordance with Article 20; or (c) as otherwise agreed by the Parties.

“Final Completion” means that the following conditions have been satisfied:

(a) Final Acceptance of each of Stage I and Stage II shall have occurred;

(b) if a Guaranteed Performance Levels Correction Period was in effect for a Stage, such Guaranteed Performance Levels Correction Period shall have expired as to such Stage, and, based on the results of the last Performance Tests conducted with respect to such Stage, such Stage shall have either (i)(A) met the Emissions Guarantees and all of the Guaranteed Performance Levels applicable to such Stage pursuant to Appendix G; or (B) met the Emissions Guarantees and satisfied at least the Minimum Performance Standard with respect to all Guaranteed Performance Levels for which Contractor has not achieved the Guaranteed Performance Levels; and (ii) Contractor shall have paid all applicable Performance Liquidated Damages in accordance with Section 9.10.6;

(c) all warranty Work identified prior to the date of Final Completion shall have been completed, or the Parties shall have agreed on a plan for completion of such warranty Work in accordance with Article 10;

(d) to the extent that the Warranty Period, as extended, has expired, Contractor shall have delivered to Owner for its acceptance a copy of the assignment of all Supplier warranties required to be assigned to Owner, assigned by Contractor, as of such date pursuant to Section 10.2.1;

(e) Owner shall have received from Contractor the final statement with respect to Texas Sales and Use Taxes in accordance with Section 7.5.3;

(f) Owner shall have received a statement from Contractor summarizing and reconciling all invoices submitted prior to the date of this Final Completion Certificate, payments and Change Orders;

(g) Contractor shall have fully complied with its obligations under Section 2.11.9, including the removal of all of Contractor’s and Suppliers’ personnel, supplies, equipment, Hazardous Materials for which Contractor is responsible under Section 2.17.2 or 2.17.3, waste materials, rubbish and temporary facilities from the Site, except for such personnel and Construction Equipment needed to fulfill Contractor’s obligations during the Warranty Period, as agreed to by Owner;

(h) Owner shall have received from Contractor and each Major Supplier a Final Lien and Claim Waiver, or a Final Unconditional Lien and Claim Waiver, as applicable, covering all of the Work in accordance with Section 6.3.5 or 6.6;

(i) an affidavit of completion of the Work that complies with the requirements of Texas Prop. Code Section 53.106 and is otherwise in form and substance acceptable to Owner shall have been filed in the records of Jefferson County of the State of Texas no later than ten (10) Days after the Final Acceptance Date of the last Stage to achieve Final Acceptance, and Contractor shall have provided Owner with a copy of such recorded affidavit;

(j) no Contractor Event of Default shall exist; and

(k) all of Contractor’s representations and warranties contained in Sections 13.1.6, 13.1.7, 13.1.10 and 23.13 shall be true and correct, or shall have been cured to be true and correct, and Contractor shall have performed its obligations under its covenants and agreements in Section 23.13.

“Final Completion Certificate” means a certificate substantially in the form of Appendix DD.

“Final Completion Date” means the date on which Final Completion occurs: (a) as set forth on a Final Completion Certificate that has been countersigned by Owner; (b) as determined in accordance with Article 20; or (c) as otherwise agreed by the Parties.

“Final Invoice” has the meaning set forth in Section 6.6.

“Final Lien and Claim Waiver” means the waiver and release provided to Owner by Contractor or a Major Supplier in accordance with the requirements of Section 6.6, which shall be in the form of Appendix GG-1 for Contractor and in the form of Appendix GG-2 for such Major Supplier, or, if another form is required under Applicable Law for a final lien and claim waiver to accomplish the waivers and releases contemplated by Appendix GG-1 or Appendix GG-2, as applicable, in the form required under Applicable Law.

“Final Loading Window” has the meaning set forth in Section 9.6.3.

“Final Unconditional Lien and Claim Waiver” means the unconditional waiver and release provided to Owner by Contractor or a Major Supplier in accordance with the requirements of Section 6.6, which shall be in the form of Appendix HH-1 for Contractor and in the form of Appendix HH-2 for such Major Supplier, or, if another form is required under Applicable Law for a final unconditional lien and claim waiver to accomplish the waivers and releases contemplated by Appendix HH-1 or Appendix HH-2, as applicable, in the form required under Applicable Law.

“First Amended and Restated Agreement” has the meaning set forth in the Recitals.

“First Source Referral Agreement” means the First Source Referral Agreement dated June 12, 2019 between Owner and the City of Port Arthur.

“First-Tier Supply Contract” has the meaning set forth in Section 2.7.3(b).

“Fixed Asset Schedule” has the meaning set forth in Section 7.6.

“FNTP Date” means the date, subject to Section 6.2.6, on which the Full Notice to Proceed as issued by Owner becomes effective in accordance with its terms, which effective date shall be set forth in the Full Notice to Proceed when issued by Owner and which date shall in any event shall not be any sooner than five (5) Business Days after the date on which Owner issues the Full Notice to Proceed.

“Force Majeure” means any event after [***] (or with respect to the HVO Supply Contracts, the date of the applicable Supplier’s Updated Combined HVO Quote as defined in Attachment C-5 to Appendix C) that meets all of the following criteria: (a) the event and its effects are not within the reasonable control, directly or indirectly, of the Party affected, and, in the case of Contractor, is beyond the reasonable control of the Contractor Group (it being understood that if an event is within the reasonable control of an affected Person, the direct consequences thereof shall also deemed to be within such Person’s reasonable control); (b) the event and its effects are unavoidable or could not be prevented, overcome or removed by the commercially reasonable efforts and due diligence of the Party claiming the Force Majeure event (and, in the case of Contractor, the Suppliers), including the expenditure of reasonable sums of money or the pursuit of alternative means of performance; and (c) the event and its effects do not result from such Party’s negligence or fault (or, in the case of Contractor, the negligence or fault of the Suppliers);

provided that and subject to the event meeting all of the criteria described above, Force Majeure events include:

(i) Unusually Severe Weather, earthquake, landslide, or other acts of God;

(ii) fire, explosion, accident, destruction of facilities, plant or Equipment, structural collapse or chemical contamination, in each case in the case of Contractor or any Supplier not being due to:

(A) Defects in the LNG Facility or any Equipment;

(B) the failure to construct the LNG Facility in accordance with this Agreement; or

(iii) subject to clause 14 in the proviso immediately below, act of war (whether declared or undeclared), invasion, armed conflict, revolution, sabotage, terrorism or threat thereof, piracy on the high seas, perils of the sea which could not be reasonably foreseen and guarded against, in each case, as probable incidents of the intended voyage, riot, civil war, blockade, embargo, expropriation or confiscation by a Governmental Authority (other than as a result of any violation of Applicable Law), insurrection, acts of public enemies, civil disturbances, or, subject to clause 13 in the proviso immediately below, epidemics or pandemics;

(iv) national or regional strikes, lockouts or other industrial disturbances that are not solely directed at Contractor or a Supplier(s), or both; and

(v) delays by a Governmental Authority in issuing a Permit, but only to the extent such delay was not due to the acts or omissions of Contractor or its Suppliers;

provided, however, that the Parties expressly agree that the following shall not constitute Force Majeure:

(1) the non-availability or lack of funds or failure to pay money when due;

(2) economic hardship, including Contractor’s ability to sell its services at a higher or more advantageous price than the Contract Price;

(3) the cost, shortage or unavailability of labor;

(4) the mere shortage of Equipment (including delays of Vendors in supplying same) and commodities or materials or normal wear and tear or flaws in materials or breakdowns in equipment, unless caused by circumstances that are themselves Force Majeure events;

(5) strikes, lockouts or other industrial disturbances other than those described in subclause (iv) above;

(6) all weather conditions and events caused by or resulting from any weather conditions, including due to acts of God, other than Unusually Severe Weather;

(7) the condition of the Site or any Site Conditions encountered by Contractor or a Supplier, but without limiting the rights of Contractor hereunder with respect to Unforeseen Excused Site Conditions and excluding physical conditions of the Site created as a result of a Force Majeure Event;

(8) general economic or industry conditions that increase the cost of the Work or otherwise impact the performance of the Work;

(9) the mere declaration of an emergency or disaster by any Governmental Authority; provided that the underlying circumstance or event that led to such declaration may itself constitute a Force Majeure event if the event satisfies the definition of a Force Majeure event;

(10) late delivery of Equipment, unless caused by circumstances that are themselves Force Majeure events;

(11) failure of any of Contractor’s Suppliers to perform, unless caused by circumstances that are themselves Force Majeure events;

(12) any matter reviewed and deemed accepted by Contractor pursuant to Section 2.4, but without limiting the rights of Contractor hereunder with respect to Unforeseen Excused Site Conditions;

(13) without limiting what may constitute a COVID-19 Event, any and all impacts to the Work resulting from the COVID-19 pandemic, including any additional outbreaks of COVID-19 or any other worsening of the COVID-19 pandemic, wherever the same may occur; and

(14) any and all impacts to the Work resulting from the Russia and Ukraine war wherever occurring, including a Russian and Ukraine Conflict Event.

“Foreign Currency Amount” has the meaning set forth in Section 6.9.

“Foreign-Trade Zone” or “FTZ” means a foreign-trade zone under the Foreign-Trade Zones Act of 1934 (19 U.S.C. 81a-81u), as amended to date.

“Fuel Gas” means Natural Gas to be used in connection with the performance of the Work that is intended to be consumed by Equipment.

“Full Cargo” has the meaning set forth in Section 9.6.1.

“Full Notice to Proceed” means a notice to be delivered by Owner to Contractor that Contractor may commence the performance of all of the Work, in the form provided in Appendix JJ.

“Fully Functional” means native electronic files prepared using the software as described in Appendix U that has not been corrupted, is virus-free and malware-free, and is not password protected.

“GAAP” means generally accepted accounting principles, consistently applied.

“General Services Subcontracts” means (a) Subcontracts under which the relevant Subcontractor: (i) does not supply Equipment or other Contractor-Furnished Items; (ii) does not provide services or perform any part of the Work that is a necessary precursor (including Subcontracts for grading or welding services) to successfully install the Equipment or other Contractor-Furnished Items; and (iii) is not an Affiliate of Contractor; and (b) such Subcontract: (i) is fully assignable to Owner without the consent of the Subcontractor that is a party to such Subcontract in the event Contractor is terminated pursuant to this Agreement for any reason; and (ii) the value of such Subcontract, in the aggregate based on all Supply Contracts with each such Subcontractor and its Affiliates, is less than [***].

“Geotechnical Reports” means the geotechnical data described in Table 3 of Appendix B.

“Good Engineering and Construction Practices” or “GECP” means the generally accepted practices, methods, skills, care, techniques and standards employed in the LNG industry, that are commonly used by a skilled and experienced Person exercising that degree of professional skill, diligence and judgment that would ordinarily be expected to be used in prudent engineering, procurement and construction to safely design, construct, pre-commission, commission, start-up and test Comparable Facilities, in accordance with Applicable Laws and Applicable Codes and Standards, as such practices and methods are appropriate in the circumstances for the LNG Facility and the Liquefaction Project.

“Governmental Authority” means: (a) any governmental body, or any subdivision, agency, court, commission (including the Commission) or authority thereof, of any nation or

state, region or local jurisdiction, or any quasi-governmental body exercising any regulatory or taxing authority thereunder, including with respect to the United States, the United States Coast Guard, U.S. Citizenship and Immigration Services, U.S. Immigration and Customs Enforcement, Transportation Safety Administration, including PHMSA, U.S. Customs and Border Protection and the U.S. Department of Homeland Security; and (b) the Sabine Neches Navigation District.

“Government Official” means an official of a Governmental Authority, a candidate for political office, an official of a political party, a political party and an employee of a public international organization.

“GPL Correction Plan” has the meaning set forth in Section 9.10.2.

“Guaranteed Performance Levels” means for each Stage the guaranteed performance levels for the LNG Production Rate, the Fuel Consumption Rate, Specific Power Consumption, Electric Power Consumption Rate and the Ship Loading Rate, each as described in Appendix G.

“Guaranteed Performance Levels Correction Period” has the meaning set forth in Section 9.10.2.

“Guaranteed Stage I Substantial Completion Date” has the meaning set forth in Section 4.2.1.

“Guaranteed Stage II Substantial Completion Date” has the meaning set forth in Section 4.2.1.

“Guaranteed Substantial Completion Date” means, as the context provides, either the Guaranteed Stage I Substantial Completion Date, or the Guaranteed Stage II Substantial Completion Date, and “Guaranteed Substantial Completion Dates” means the Guaranteed Stage I Substantial Completion Date and the Guaranteed Stage II Substantial Completion Date, collectively.

“Hazardous Materials” means any substance that under Applicable Laws is considered to be hazardous or toxic or is or may be required to be remediated, including: (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls and processes and certain cooling systems that use chlorofluorocarbons; (b) any chemicals, materials or substances which are now or hereafter become defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” or any words of similar import pursuant to Applicable Laws; or (c) any other chemical, material, substance or waste, exposure to which is now or hereafter prohibited, limited or regulated by any Governmental Authority, or which may be the subject of liability for damages, costs or remediation.

“HAZOP” means hazardous operations.

“High Value Orders” means the Purchase Orders or Supply Contracts for the Equipment as set forth in Attachment C-5 to Appendix C.

“HUB/DBE Suppliers” has the meaning set forth in Section 2.7.10.

“Impact Notice” has the meaning set forth in Section 18.2.2.

“Import Law” means all U.S. import laws, regulations, tariffs, duties and restrictions, that impose additional or different Customs Duties from those Customs Duties in effect [***] Days prior to [***], and all other such measures adopted by Governmental Authorities with jurisdiction over such matters.

[***].

“Indemnitee” means an Owner Indemnified Party or a Contractor Indemnified Party, as the case may be.

“Indemnitor” means a Party required to provide indemnification to an Indemnitee under this Agreement.

“Independent Engineer” means any technical consultant, environmental consultant or engineering firm appointed to represent the Lenders.

“Initial Production Date” means, for each LNG Train, the first Day that LNG is produced by such LNG Train and delivered to an LNG storage tank during the commissioning and start-up of such LNG Train under this Agreement.

“Initial Tanker” has the meaning set forth in Section 9.6.5.

“Integrated Commissioning Team” has the meaning set forth in Section 9.3.4.

“Integrated Digital Asset Management System” means the digital asset management system that Owner will implement and Contractor will support as part of the Work in accordance with the requirements of Appendix II.

“Intellectual Property” means patents, trademarks, service marks, copyrights, applications for any of the preceding, any foreign counterparts to and divisionals, provisionals, reversions, continuations, continuations-in-part, reissues, reexaminations, renewals and extensions of any of the foregoing, trade secrets and other forms of comparable property rights protected by any Applicable Laws.

[***].

“Interim Lien and Claim Waiver” means the waiver and release provided to Owner by Contractor or a Major Supplier in accordance with the requirements of Section 6.3.5, which shall be in the form of Appendix EE-1 for Contractor and in the form of Appendix EE-2 for such Major Supplier, or, if another form is required under Applicable Law for an interim lien and

claim waiver to accomplish the waivers and releases contemplated by Appendix EE-1 or Appendix EE-2, as applicable, in the form required under Applicable Law.

“Interim Unconditional Lien and Claim Waiver” means the unconditional waiver and release provided to Owner by Contractor or a Major Supplier in accordance with the requirements of Section 6.3.5, which shall be in the form of Appendix FF-1 for Contractor and in the form of Appendix FF-2 for such Major Supplier, or, if another form is required under Applicable Law for an interim unconditional lien and claim waiver to accomplish the waivers and releases contemplated by Appendix FF-1 or Appendix FF-2, as applicable, in the form required under Applicable Law.

“Invitee” means a third party invited to the Site by a Party in connection with the Work. Owner’s Invitees shall not include any Contractor Group members and the Other Contractors. Contractor’s Invitees shall not include any Owner Group members.

“Invoice” means Contractor’s request for a payment pursuant to Section 6.3.1 and pursuant to Section 6.6 for final payment, which invoice shall be in the form of Appendix V-1 for Milestone Payments and Progress Payments, and Appendix V-2 for final payment.

“ISO” means the International Organization for Standardization and the standards developed by such organization, as applicable.

“Key Date Item(s)” means a discrete portion of the Work to be completed by the applicable date set forth in the Key Date Schedule.

“Key Date Schedule” means the listing of dates attached as Appendix E-1, including the Guaranteed Substantial Completion Dates, describing the dates of completion of each Key Date Item and for completion of the Work by Contractor, as amended from time to time in accordance with this Agreement.

“Key Personnel” has the meaning set forth in Section 2.6.1.

“KPIs” means the key performance indicators associated with compliance with Contractor’s obligations under the Local Engagement Program and Section 2.7.10, as developed by the Parties in accordance with Appendix WW.

“Late Payment Rate” means, with respect to any payment due hereunder, the lesser of: (a) the sum of (i) the rate of interest published as the “prime rate” for Dollars in The Wall Street Journal, on the payment due date, and then on the first Business Day of each Month thereafter in which such Late Payment Rate applies until the applicable payment is made, plus (ii) two hundred (200) basis points; and (b) the maximum rate of interest allowed by Applicable Laws.

“Lenders” means the lenders, export credit agencies, multilateral institutions, bond investors, noteholders, underwriters, hedge providers and other entities or institutions who provide or commit to provide any portion of any financing to develop and construct the LNG Facility or any portion or Stage thereof, and any Lenders’ Agent acting on behalf of such lenders,

export credit agencies, multilateral institutions, bond investors, noteholders, underwriters, hedge providers and other entities or institutions.

“Lenders’ Agent” means any representative, collateral agent, trustee, agent or other designee acting on behalf of any Lender in connection with any financing of the LNG Facility or any portion or Stage thereof.

“Letter of Credit” has the meaning set forth in Section 17.2.

“License” means the Liquefaction Technology License and a sublicense of BASF SE technology.

“Licensor” means each of the Liquefaction Technology Licensor and BASF SE.

“Lien” means any mortgage, pledge, lien, charge, adverse claim, proprietary right, collateral assignment, security interest, title retention, preferential right or trust arrangement or any other security agreement or arrangement having the effect of security, including worker’s, mechanic’s, vendor’s, materialmen’s, laborers’, subcontractors’ and vendors’ liens.

“Liquefaction Project” means the development, construction and completion of the LNG Facility.

“Liquefaction Technology License” means the license agreement contained within the purchase agreement between Contractor and the Liquefaction Technology Licensor with respect to the process technology utilized in the LNG Trains.

“Liquefaction Technology Licensor” means Air Products and Chemicals, Inc.

“Liquefied Natural Gas” and “LNG” means Natural Gas in a liquid state at a temperature that is at or below its point of boiling and at or near atmospheric pressure.

“LNG Facility” has the meaning set forth in the Recitals.

[***].

“LNG Production Schedule” has the meaning set forth in Section 9.6.1.

“LNG Specifications” means those Specifications for LNG set forth in Appendix B.

“LNG Tank” means each of the LNG storage tanks that will be procured and installed as part of the Work.

“LNG Tanker” means any ocean-going vessel used by Owner, a customer of the LNG Facility or their respective designees for the transportation of LNG.

“LNG Train” means a Natural Gas pre-treatment and LNG liquefaction unit.

“LNTP Date” means the date on which Owner issues the Ramp-Up LNTP or, if issued the February 2023 LNTP, as the context requires.

“Load” or other derivatives means the receipt, loading or transport of a quantity of LNG from the LNG Facility, utilizing LNG Tankers.

“Loading Window” has the meaning set forth in Section 9.6.1.

“Local Engagement Program” has the meaning set forth in Section 2.7.10.

“Local Labor” has the meaning set forth in Section 2.7.10.

“Local Suppliers” has the meaning set forth in Section 2.7.10.

“Losses” means, without limiting the application of Article 21, any and all liabilities (including liabilities arising out of the application of the doctrine of strict liability), obligations, losses, damages, penalties, claims, actions, suits, judgments, costs, expenses and disbursements, whether any of the foregoing be founded or unfounded (including legal fees and expenses, costs of investigation, and experts’ fees and court costs), and whether arising in equity, at common law, or by statute, or under the law of contracts, torts or property, of whatsoever kind and nature, including claims for property damage, personal injury (including emotional distress) and economic loss, and whether or not involving damage to the Equipment, the LNG Facility or the Site.

“Major Purchase Order” means any Purchase Order entered into with any Person that is either: (a) a Purchase Order having an aggregate value in excess of [***]; or (b) one (1) of multiple Purchase Orders with one (1) Vendor that have an aggregate value in excess of [***].

“Major Subcontract” means any Subcontract with any Person that is either: (a) a Subcontract having an aggregate value in excess of [***]; or (b) one (1) of multiple Subcontracts with one (1) Subcontractor that have an aggregate value in excess of [***].

“Major Subcontractor” means any Subcontractor with whom Contractor or another Subcontractor enters, or intends to enter, into a Major Subcontract.

“Major Supplier” means any Major Subcontractor or Major Vendor.

“Major Supply Contract” means any Major Subcontract or Major Purchase Order.

“Major Vendor” means any Vendor with whom Contractor enters, or intends to enter, into a Major Purchase Order.

“Material Adverse Change” has the meaning set forth in Section 17.3.

“Maximum Liability Cap” means an amount equal to [***], which amount shall be increased or decreased by [***] of the amount of the related adjustment to the Contract Price in connection with the exercise of any Scope Options.

“Maximum LNTP Payment Amount” means the maximum amount that Owner may be obligated to pay to Contractor for the performance of Work pursuant to the Ramp-Up LNTP or the February 2023 LNTP, if issued, which, if this Agreement is terminated prior to the FNTP Date, shall include the cancellation costs, all as set forth in the Ramp-Up LNTP or the February 2023 LNTP, as applicable.

“Milestone” means a discrete portion of the Work identified as a Milestone on the Payment Schedule.

“Milestone Payment” means the portion of the Contract Price allocated to achievement of each Milestone on the Payment Schedule.

“Minimum Performance Standards” means for each Stage the performance levels for the LNG Production Rate, Fuel Consumption Rate, Specific Power Consumption, Electric Power Consumption Rate and the Ship Loading Rate set out in Appendix G.

“MMBtu” means one million (1,000,000) Btu.

“Month” means the period beginning on the first calendar day of a calendar month and ending immediately prior to the beginning of the first calendar day of the next succeeding calendar month.

“Month Look-Ahead Schedule” has the meaning set forth in Appendix S.

“Monthly Status Reports” has the meaning set forth in Section 2.22.1(d).

“Moody’s” means Moody’s Investor Services, Inc. or any successor rating agency thereof.

“Named Windstorms” means an atmospheric disturbance marked by high winds, with or without precipitation, including such events as hurricanes, typhoons, monsoons, cyclones, rainstorms, tempests, hailstorms, tornados, or any combination of the foregoing events, which in each case is identified by name by any meteorological Governmental Authority, such as the U.S. National Weather Service, National Hurricane Center or the National Oceanic and Atmospheric Administration, including any resulting flood, tidal, wave action or water damage.

“Natural Gas” means any hydrocarbon or mixture of hydrocarbons consisting primarily of methane and other paraffinic hydrocarbons and non-combustible gases in a gaseous state.

“Natural Gas Transfer Point” means any point of interconnection between any Natural Gas pipeline and the LNG Facility.

“NGL” means liquid and liquefied heavy hydrocarbons, consisting primarily of pentane and heavier hydrocarbons, separated from the Feed Gas and delivered as a separate product from the LNG produced by the LNG Trains.

“Noise Guarantee” means the guarantee with respect to noise levels as described in Section 3.2 of Appendix G.

“Noise Model” means the model and methodology developed by Contractor, to demonstrate that the noise contributed from Stage I or the LNG Facility, as applicable, does not exceed the Noise Guarantee, as part of Contractor’s noise test procedures in accordance with Appendix G.

“Non-Technical Documents” means (a) the Project Execution Plan; (b) the Information Management Plan as set forth in Appendix II (including the Attachments thereto); (c) any estimating or pricing methodologies or estimating or pricing information of Contractor or its Subcontractors relating to the Work, including the Contract Price; (d) inspection and test plans (ITPs); and (e) native files of the Baseline CPM Schedule and CPM Schedule; provided that native files shall not mean PDF format copies of the Baseline CPM Schedule or CPM Schedule.

“Non-Verified Information” means the information as described in Appendix N.

“O&M Manuals” means the operation and maintenance and procedures manuals to be developed by Contractor or an Affiliate thereof in respect of each Stage as set forth in Appendix U.

“Operating Personnel” has the meaning set forth in Section 2.16.1.

[***].

“Other Contractors” means all other Persons (including contractors and subcontractors) with whom Owner or any Owner Group member, or any of Owner Group’s Other Contractors, enters into a contract or agreement for the acquisition of goods, services, utilities or technology, (but not including Contractor Group members or Owner) that perform any physical work or activities at the Site.

“Outbreak” [***].

“Owner” has the meaning set forth in the Preamble.

“Owner Change Order Review Period” has the meaning set forth in Section 8.5.4(b).

“Owner Confidential Information” has the meaning set forth in Section 14.1.

“Owner Event of Default” has the meaning set forth in Section 19.4.1.

“Owner Group” means Owner, the Common Facilities Owner, Parent and the immediate shareholders or members of Parent, the Affiliates of each of the preceding Persons, the Owner’s Engineer, the Lenders, the Independent Engineer, and the Other Contractors and its and their respective directors, officers, managers, employees (including any individuals other than Competitors engaged by Owner as part of its staff augmentation plans, subject to such Persons

entering into a confidentiality agreement with Owner), consultants, agents and Invitees, but in no event shall Owner Group include any Contractor Group member.

“Owner HSSE Program” means those health, safety, security and environmental plans and procedures of Owner as described in Appendix QQ, as those plans and procedures may be updated from time to time in accordance with this Agreement.

“Owner Indemnified Parties” means Owner, the Common Facilities Owner, Parent and the immediate shareholders or members of Parent, the Affiliates of each of the preceding Persons, Owner’s Engineer, the Lenders and the Independent Engineer, and such Persons’ respective directors, officers, managers, employees (including agency personnel), consultants, agents and Invitees.

“Owner Intellectual Property” has the meaning set forth in Section 12.4.

“Owner Permits” means each and every Permit listed a on Appendix J-1, together with such other Permits as Owner shall obtain in accordance with Section 2.10.2.

“Owner Representative” means the individual appointed by Owner under Section 3.4 or any substitute appointed in accordance with Section 3.4.

“Owner-Caused Delay” means the occurrence of any of the following, other than as a result of or due to the acts or omissions of Contractor or any other member of the Contractor Group: (a) Owner’s failure to perform any of the obligations of Owner set forth in the Key Date Schedule by the date specified therein; provided, however, that if Contractor’s notice delivered to Owner pursuant to Section 9.5.3 does not require delivery of Feed Gas (including for use as Fuel Gas) until after the date by which Owner is scheduled to deliver the first Feed Gas under the Key Date Schedule, the date set forth in the Key Date Schedule shall automatically be adjusted to the latest date on which Contractor requests the first delivery of such Feed Gas; (b) Owner’s request under Section 2.24.5(b) for Contractor to uncover Work that has been properly covered, if the covered Work is found to be in accordance with the terms of this Agreement upon inspection; (c) Owner’s failure to witness inspections and tests that have been expressly designated as hold points where Contractor may not proceed with the inspection or test unless Owner is present; provided that Contractor has provided notice to Owner of such inspections and tests in accordance with Section 2.24; (d) Owner’s refusal to submit an application with respect to an Owner Permit pursuant to Section 2.10.2(c) within thirty (30) Days after Contractor’s submission to Owner of the requisite documentation or information, or Owner’s unreasonable rejection of, a submission for a modification or amendment to an Owner Permit prepared by Contractor in accordance with Section 2.10.2; provided that such application or submission for modification or amendment: (i) is complete, includes all supporting documentation required by the applicable Governmental Authority and otherwise complies with the requirements of Applicable Laws; and, as applicable; and (ii) amends or modifies only those aspects of the Owner Permit as Owner had previously agreed; (e) Owner’s failure to allow Contractor to perform Work on a Stage which has achieved Substantial Completion in accordance with a schedule and plan for performance of such Work that has been accepted by Owner pursuant to Section 2.11.2; (f) Owner’s failure to respond to a Ready for Feed Gas Introduction Certificate for a Stage, Ready for Start-Up Certificate for a Stage, or a Substantial Completion Certificate for a Stage, within the period

provided in Section 9.4.1, 9.4.2 or 9.8, respectively; (g) Owner’s suspension of the Work under Section 19.2; (h) any change to or errors or inaccuracies in any Non-Verified Information; (i) the FTZ, once activated, does not include the laydown yard(s) in Jefferson County, Texas as identified in Appendix ZZ; (j) subject to Contractor’s compliance with the requirements of Section 2.28, delays to the performance of the Work caused by Other Contractors performing work on the Site; provided that Contractor has promptly notified Owner of such delay in accordance with Section 2.28, Owner has had a reasonable opportunity to attempt to resolve the situation with the Other Contractor, and the Other Contractor continues to interfere with Contractor’s performance of the Work; (k) the circumstances set forth in Sections 2.8.5, 2.17.5, 2.18.4 and 2.18.7; (l) Contractor’s correction of Work in connection with Section 2.21.1 at Owner’s request that is subsequently determined not to have been Defective; (m) a suspension of the performance of the Work under the circumstances set forth in Section 16.4.2; (n) if Owner submits an update to Attachment L-2 to Contractor and the location of any of the boundaries of the Owner Property available to Contractor for the performance of the Work as described in Appendix L change and such change adversely impacts Contractor’s performance of the Work; and (o) [***].

“Owner-Furnished Information” has the meaning set forth in Section 3.3.1.

“Owner’s Engineer” means Wood Group, Moffatt and Nichols, Burns & McDonnell, WorleyParsons Limited (or its Affiliate), Faithful and Gould, Black & Veatch, Audubon Engineering and KBR, Inc. (or its Affiliate); provided that KBR, Inc. (or its Affiliate) shall only be an Owner’s Engineer with respect to information management matters (including with respect to the matters discussed in Appendices U and II (including any Attachments thereto)), and other technical consultation, but not including construction support, and shall not have access to the Non-Technical Documents other than Contractor’s information management plan.

“Parent” means Port Arthur Liquefaction Holdings, LLC, a Delaware limited liability company, the direct owner of 100% of the equity interests in Owner.

“Party” and “Parties” has the meaning set forth in the Preamble.

“Payment Schedule” means the schedule that sets out the payments to be made to Contractor upon the completion of various Milestones and progress of the Work, as set forth in Appendix D.

“PCSC” means the pandemic advisory committee as described in Contractor’s COVID-19 Pandemic Response & Control Plan referenced in Appendix Q and as further described in Section 2.30(b).

“Performance Conditions” means the “average gas” and “average ambient temperature” conditions as set forth in Appendix B.

“Performance Liquidated Damages” has the meaning set forth in Appendix G.

“Performance LD Cap” means for Stage I, an amount equal to [***], and for Stage II, an amount equal to [***], in each case as adjusted in connection with any Change Orders that adjust the Guaranteed Performance Levels, as applicable.

“Performance Test” means each test (including any repetition thereof) to be performed by Contractor to demonstrate the ability of a Stage to satisfy the Emissions Guarantee, the Noise Guarantee and the Guaranteed Performance Levels as set forth in Sections 3 and 5 of Appendix G.

“Performance Test Procedures” has the meaning set forth in Section 9.7.1.

“Permits” means all permits, authorizations, variances, approvals, registrations, certificates of legal status, certificates of occupancy, orders or other approvals or licenses granted or issued by any Governmental Authority having jurisdiction over the LNG Facility or matters covered by this Agreement, including the Contractor Permits and the Owner Permits and any conditions thereof or thereto. “Permits” shall also include (a) the Permit application; (b) supporting and technical information replied upon by the relevant Governmental Authority to issue a Permit; (c) the environmental impact statement regarding the LNG Facility and the Liquefaction Project; and (d) other records and reports reviewed by the relevant Governmental Authority, in each case to the extent that a Permit or order granting or issuing such Permit includes a condition requiring compliance with such application, information, statement or records or reports.

“Person” means any individual, firm, corporation, trust, partnership, limited liability company, association, joint venture, other business enterprise or any Governmental Authority.

“PHMSA” means the Pipeline and Hazardous Materials Safety Administration.

“Pipeline” means any Natural Gas pipeline that interconnects with any Natural Gas Transfer Point.

“Piping Special Supports” has the meaning set forth in Section 12.2.3.

“Plans” means the Project Execution Plan, the Contractor HSSE Program, the Quality Assurance Plan, the plans for performance of the Work as described in Attachment W-1 to Appendix W, and any other plan required pursuant to this Agreement with respect to the execution of the Work and Contractor’s performance of its obligations hereunder.

“Pre-Existing Hazardous Materials” means any Hazardous Materials present on the Site, including those portions of the Sabine Neches Waterway where Work is performed, prior to Contractor’s entry thereupon.

[***].

“Pre-FNTP Site Work” means the Work to be performed on the Site prior to the FNTP Date, in accordance with and as set forth in the Ramp-Up LNTP or the February 2023 LNTP, as applicable.

“Pre-FNTP Site Work Notice” means the written notice that Owner issues to Contractor notifying Contractor of the date on which Owner anticipates authorizing Contractor to perform the Pre-FNTP Site Work.

“Project Execution Plan” means the plan and each component plan thereof prepared by Contractor and set forth in Appendix W for the execution of the Work and Contractor’s performance of its obligations under this Agreement throughout the performance of the Work, as amended from time to time in accordance with Section 2.4.6.

“Project Schedule” means the Key Date Schedule and the CPM Schedule.

“Project Sponsors” means, for the Owner, [###], and for the Contractor, [###]. Each of Owner and Contractor may change their respective Project Sponsor upon written notice to the other Party in its sole discretion.

[***].

“Proposed Permit Modification” has the meaning set forth in Section 2.10.2(c).

“Provisional Sums” means the provisional sums as set forth in Attachment C-3 to Appendix C with each provisional sum being a “Provisional Sum.”

“psia” means a unit of pressure equal to pounds per square inch absolute.

“Punch List” means a list of all Punch List Items.

“Punch List A Items” has the meaning set forth in Section 9.9.1(a).

“Punch List B Items” has the meaning set forth in Section 9.9.1(b).

“Punch List C Items” has the meaning set forth in Section 9.9.1(c).

“Punch List Items” means those items or components of the Work identified in accordance with Section 9.9, which are Punch List A Items, Punch List B Items and Punch List C Items, as applicable.

“Purchase Order” means any contract entered into by Contractor or a Supplier with a Vendor for the supply of Contractor-Furnished Items.

“Qualifying Job” means a permanent full-time job maintained by Contractor or a Major Subcontractor that: (a) requires at least 1,600 hours of work a year; (b) is not transferred from one area in Texas to another area in Texas; (c) is not created to replace a previous employee; (d) is covered by a group health benefit plan for which the Contractor or Major Subcontractor offers to pay at least eighty percent (80%) of the premiums or other charges assessed for employee-only coverage under the plan, regardless of whether an employee may voluntarily waive the coverage; and (e) pays at least one hundred ten percent (110%) of the average weekly wage for manufacturing jobs in Jefferson County, Texas.

“Quality Assurance Plan” has the meaning set forth in Section 2.20.1.

“Ramp-Up LNTP” means a limited notice to proceed issued by Owner and signed by Contractor to commence performing the Work as described in the notice, in the form as set forth in Appendix NN-1.

“Ramp-Up LNTP Adjustment” means a day-for-day adjustment calculated as follows: (i) the number of Days equal to [***] Days less the number of Days prior to the FNTP Date that Owner issued the Ramp Up LNTP; plus (ii) the number of Days equal to [***] Days less the number of Days that Owner provides to Contractor the Pre-FNTP Site Work Notice in advance of authorizing Contractor to commence the Pre-FNTP Site Work under the Ramp-Up LNTP or the February 2023 LNTP; plus (iii) the number of Days equal to [***] Days less the number of Days prior to the FNTP Date that Owner authorized Contractor to commence the Pre-FNTP Site Work under the Ramp Up LNTP or the February 2023 LNTP, as applicable, but in each case not less than zero (0).

“Ready for Feed Gas Introduction” or “RFFGI” means, with respect to each Stage, that all of the following have occurred:

(a) Contractor has completed all of the Punch List A Items, completed the RFFGI requirements prepared in accordance with Section 9.4.1(a) for such Stage (as agreed by the Parties in accordance with Section 9.1.2), and otherwise completed the activities necessary to support the introduction of hydrocarbons, including the utility and process systems, safeguarding and shutdown systems have been pre-commissioned, commissioned and integrity verified;

(b) such Stage is ready for acceptance of Feed Gas; and

(c) Contractor has provided the required documents for FERC approval for the introduction of hydrocarbons into such Stage.

“RFFGI Certificate” means a certificate in the form of Appendix AAA.

“Ready for Start-Up of a Stage” or “RFSU of a Stage” means, with respect to all of the Systems of an applicable Stage, that the following conditions have been satisfied for such Stage:

(a) Contractor has achieved and maintained Ready for Feed Gas Introduction for such Stage;

(b) Contractor has completed all of the Punch List A Items, and has provided the updated Punch List to Owner in accordance with Section 9.9.1;

(c) Contractor has completed the RFSU requirements prepared in accordance with Section 9.4.2(a) for such Stage (by System as agreed by the Parties in accordance with Section 9.1.2);

(d) all pre-commissioning and commissioning activities for the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage, as set forth in the commissioning and start-up plan as finalized pursuant to Section 9.3.3, shall have been

successfully completed, and the control system for such Stage shall have been tested and shall be operational in accordance with the commissioning and start-up plan as finalized pursuant to Section 9.3.3;

(e) all applicable safety and fire protection requirements shall have been met, and all applicable safety and fire protection systems with respect to such Stage shall have been installed and shall be operable pursuant to all Applicable Laws and in accordance with GECP;

(f) all field test and inspection records applicable to the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage, including electrical and instrumentation test and inspection records, and those relating to relay settings and instrument calibration, shall have been made available to Owner as and when prepared;

(g) all mechanical and electrical safety devices with respect to the Stage shall have been field tested, adjusted and sealed where necessary;

(h) all Equipment that is part of the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage shall have been cleaned, leak checked, lubricated and functional tests for all instrumentation and controls, including hazard controls, security components, and cause and effects tests, shall have been completed, to verify that they have been correctly installed;

(i) all Systems (as agreed by the Parties in accordance with Section 9.1.2)

for RFSU for such Stage into which hydrocarbons are to be introduced shall have been purged;

(j) painting shall have been sufficiently completed with respect to such Stage to support LNG production without interference;

(k) insulation of the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage shall have been sufficiently completed so that (i) start-up operations will not be adversely affected; and (ii) the Stage is in compliance with all insurance requirements, Applicable Laws and GECP;

(l) no temporary lighting shall remain standing in areas where operators must work to start-up and operate the Stage, except as agreed to by Contractor’s and Owner’s operations teams, taking into consideration safe operation of the plant, GECP and compliance with Applicable Laws;

(m) a pre start-up and safety review with respect to the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage shall have been performed in accordance with the requirements set forth in Appendix Q;

(n) Performance Test protocols, including with respect to commissioning demonstration tests, emissions tests and other Performance Tests shall have been prepared by Contractor and accepted by Owner in accordance with Section 9.7.1;

(o) the Operating Personnel shall have completed the training program as required to be completed prior to Ready for Start-Up pursuant to Appendix P, and records verifying the completion of the training program and related testing of such Operating Personnel in accordance with Section 2.16.2 shall have been delivered to Owner;

(p) Owner shall have received the O&M Manuals for the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage required to be delivered at or prior to Ready for Start-Up pursuant to Appendix U;

(q) all procedures, plans and reviews that are required pursuant to this Agreement for the introduction of hydrocarbons and start-up of the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage shall have been finalized or conducted, as applicable, in accordance with this Agreement, and Contractor has provided the documents and other information to Owner required under the Permits for approval of the introduction of hydrocarbons and start-up of the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage;

(r) all turnover packages and all Vendors’ and other manufacturers’ instructions and drawings relating to Equipment that is included in the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage, including Equipment preservation and records, shall be available for review by the Integrated Commissioning Team; and

(s) all requirements of Applicable Laws that must be completed or satisfied prior to the introduction of hydrocarbons and the start-up of the Systems (as agreed by the Parties in accordance with Section 9.1.2) for RFSU for such Stage shall have been fulfilled, including the installation of security fencing in accordance with Appendix QQ.

“Ready for Start-Up Certificate” means a certificate in the form of Appendix AA.

“Ready for Start-Up Date” means, with respect to a Stage, the date on which Ready for Start-Up of such Stage occurs: (a) as set forth on a Ready for Start-Up Certificate that has been countersigned by Owner; (b) as determined in accordance with Article 20; or (c) as otherwise agreed by the Parties.

“Receiving Party” means any Party that receives Confidential Information hereunder in accordance with Article 14 and is subject to an obligation to hold such Confidential Information confidential pursuant to Article 14.

“Record As-Built Drawings” means, with respect to a Stage, final, record As-Built Drawings the Stage, as required under Attachment A-1 to Appendix A and Appendix U.

“Recovery Plan” has the meaning set forth in Section 4.4.2.

“Region” has the meaning set forth in Section 2.7.10.

“Rehabilitation Costs” means:

(a) the aggregate actual costs incurred by Contractor to perform Rehabilitation Work, and a mark-up as follows:

[***]; plus

(b) [***]; and

[***].

“Rehabilitation Work” has the meaning set forth in Section 11.3.1(b).

“Release” means the release, “threatened release” (as contemplated by the Comprehensive Environmental Response, Compensation, and Liabilities Act - CERCLA) discharge, deposit, injection, dumping, spilling, leaking or placing of any solid or Hazardous Material into the environment so that such solid or Hazardous Material or any constituent thereof may enter the environment, or be emitted into the air or discharged into any waters, including ground waters under Applicable Laws.

“Request for Arbitration” has the meaning set forth in Section 20.4.1.

“Required Plan Provisions” means the provisions in each Plan that have been identified therein as those provisions that Contractor shall not change, adjust, alter, modify or amend without Owner’s prior written approval.

“Russian and Ukraine Conflict Event” [***].

“Sabine Neches Waterway” means that deep water navigable waterway, located in southeast Texas and Calcasieu Parish, Louisiana and including parts of the Neches River, Sabine River, Sabine Lake, and Taylor Bayou, administered by the Sabine Neches Navigation District.

“Scope of Work” means the description of the Work to be performed as set forth in Appendix A, and as modified from time to time by Change Orders or executed amendments to this Agreement.

“Scope Option” shall mean each option for additional Work as described in Appendix C, and as more particularly described in the related attachments to Appendix C as specified therein.

“September 2022 Letter Agreement” has the meaning set forth in the Recitals.

“Site” means those areas where the LNG Facility will be located and where Contractor may perform Work, including for use as laydown areas, as shown in greater detail in Appendix L.

“Site Conditions” means the physical and other conditions at the Site and the surrounding area as a whole, including the Sabine Neches Waterway, and including conditions relating to the environment, transportation, access, waste disposal, handling and storage of

materials, the availability and quality of electric power, the availability and quality of water, the availability and quality of roads, the availability and quality of labor personnel and local work and labor rules, climatic conditions and seasons, topography, air and water quality conditions, raw water conditions, ground surface conditions, surface soil conditions, sound attenuation, subsurface geology, nature and quantity of surface and subsurface materials that are encountered (including, without limiting Contractor’s rights with respect to Unforeseen Excused Site Conditions, Hazardous Materials, and the subsurface conditions of the Sabine Neches Waterway and the nature and quantity of subsurface materials that may be encountered during the performance of the Work, including during dredging and construction of the marine berths and material offloading facility that are part of the Work or in connection with any temporary docks that Contractor otherwise utilizes during performance of the Work), the geological and subsurface conditions of the Site, all other local and other conditions which may be material to Contractor’s performance of its obligations under this Agreement, and the location of underground utilities, equipment and facilities.

“Specifications” means those documents consisting of the written requirements and philosophies for Equipment, standards and workmanship for the Work and performance of related services as referenced in Attachment B-1 to Appendix B, or to be developed by Contractor as part of the Work in accordance with Attachment A-1 to Appendix A, and included in Attachment B-1 to Appendix B, as may be updated from time to time by agreement of the Parties.

“Stage” means any or both of Stage I or Stage II, as the context requires.

“Stage I” means the first phase of the Work to be designed, procured and constructed and to achieve Substantial Completion under this Agreement (or, before it achieves Substantial Completion, the first such phase of the Work scheduled to achieve Substantial Completion according to the Project Schedule), and includes a Natural Gas liquefaction unit, a comparably-sized Natural Gas pretreatment unit and the Common Facilities, all as further set forth in this Agreement.

“Stage I Delay Liquidated Damages” has the meaning set forth in Section 4.3.1(a).

“Stage II” means the second phase of the Work to be designed, procured and constructed and to achieve Substantial Completion under this Agreement (or, before it achieves Substantial Completion, the second such phase of Work scheduled to achieve Substantial Completion according to the Project Schedule), and includes a Natural Gas liquefaction unit and a comparably-sized Natural Gas pretreatment unit, all as further set forth in this Agreement.

“Stage II Delay Liquidated Damages” has the meaning set forth in Section 4.3.1(b).

“Standard & Poor’s” means Standard & Poor’s Corporation or any successor rating agency thereof.

“Standard Conditions for LNG” means a pressure base of fourteen point six nine six (14.696) psia at a base temperature of sixty degrees Fahrenheit (60ºF) under ideal gas conditions.

“Standard Conditions for Natural Gas” means a pressure base of fourteen point seven three (14.73) psia at a base temperature of sixty degrees Fahrenheit (60ºF) under real gas conditions.

“Structural Works Defect” means, for the purpose of the extended Warranty Period as described in Section 10.4, any Defect in the engineering, procurement or construction of the LNG Facility, or components thereof, relating to the structural capacity, integrity or suitability of any load-bearing Equipment, buildings, structures, roads, jetties, Berths, or other foundations or underlying civil work for any portion of the LNG Facility that are part of the Work which: (a) materially and adversely affects the structural integrity of all or a part of any load bearing structures; or (b) results in the partial or total collapse of any portion of the LNG Facility.

“Subcontract” means any subcontract (including any Purchase Order) of any tier entered into between Contractor and a Subcontractor, or a Subcontractor and a Subcontractor.

“Subcontractor” means any Person (including any Licensor) engaged by Contractor, or any of Contractor’s Suppliers of any tier, to perform any of the Work or to whom Contractor otherwise delegates performance of any of the Work, but excluding Vendors.

“Substantial Completion” means, with respect to a Stage, that the following conditions have been satisfied with respect to the applicable Stage:

(a) Ready for Feed Gas Introduction of such Stage and Ready for Start-Up of such Stage shall have occurred and the requirements of Sections 9.9.2(a), 9.9.2(b) and 9.9.2(c) shall have been satisfied;

(b) all of the Work for such Stage, including in the case of Stage I, all of the Work with respect to the Common Facilities, shall have been completed without Defects, except for Punch List C Items included on the Punch List as accepted by Owner in accordance with Section 9.9.1, and with respect to the Noise Guarantee, Contractor’s obligations under Section 9.10.3;

(c) each Performance Test of such Stage shall have been Successfully Run during the last attempt of that Performance Test commenced by Contractor, including any Performance Tests required under Section 9.7.4(b), and all temporary filters, fine mesh strainers, piping systems, blinds and screens and other items temporarily installed to facilitate commissioning or start-up of such Stage shall have been removed and such Stage shall have been returned to full operation;

(d) Contractor shall have Successfully Run the Performance Test to demonstrate that such Stage satisfies the Noise Guarantee, and such Stage shall satisfy the Noise Guarantee or, if the Performance Test fails to demonstrate that such Stage satisfies the Noise Guarantee, Contractor, using Contractor’s Noise Model, shall demonstrate to Owner that such Stage satisfies the Noise Guarantee;

(e) such Stage shall satisfy the Emissions Guarantees and either: (i) such Stage shall satisfy all of the Guaranteed Performance Levels applicable to such Stage in accordance with Appendix G; or (ii) (A) such Stage shall satisfy at least the Minimum

Performance Standard with respect to all Guaranteed Performance Levels for which such Stage has not achieved the Guaranteed Performance Levels; and (B) Contractor shall have posted a Letter of Credit in an amount, or increased the existing Letter of Credit by an amount, covering all applicable Performance Liquidated Damages in accordance with Section 9.10.1;

(f) with respect to Stage II only, Contractor shall have demonstrated by appropriate surveys or other means reasonably acceptable to Owner, that the berm height, and the depth of the underwater material offloading facilities and Berth and jetty, as applicable, meets the requirements of the Basis of Design;

(g) Contractor shall have paid all Delay Liquidated Damages that have accrued in accordance with this Agreement;

(h) special tools and other items to be provided by Contractor under this Agreement that are necessary for the operation of such Stage shall have been turned over to Owner;

(i) a complete set of As-Built Drawings for such Stage in the form and format and as otherwise required pursuant to Attachment A-1 to Appendix A and Appendix U shall have been turned-over to Owner, except for modifications to those As-Built Drawings required to reflect Punch List C Items to be completed after Substantial Completion;

(j) the final Fixed Asset Schedule completed with respect to such Stage shall have been delivered to Owner in accordance with Section 7.6;

(k) the Operating Personnel have completed all aspects of the training program as described in Appendix P, and records verifying the completion of the training program and testing of such Operating Personnel in accordance with Section 2.16.2 shall have been delivered to Owner;

(l) a first fill of all applicable consumables for the Equipment that is part of such Stage shall have been provided, together with refills of applicable consumables for such Equipment as necessary to meet requirements of the applicable Suppliers of the Equipment;

(m) Contractor shall have obtained the release of all Liens relating to the LNG Facility that have been recorded as of such date in accordance with Section 2.9, and Interim Lien and Claim Waivers, Interim Unconditional Lien and Claim Waivers, Final Lien and Claim Waivers and Final Unconditional Lien and Claim Waivers, as applicable, shall have been delivered by Contractor and all Major Suppliers in accordance with Section 6.3.5;

(n) Owner shall have received the operating spare parts as required under Section 2.14.2 and the Capital Spare Parts as required under Section 2.14.3;

(o) Owner shall have received the O&M Manuals, as redlined, prepared by Contractor or a Vendor, as applicable, as required to be delivered to Owner on or before Substantial Completion of such Stage pursuant to Appendix U;

(p) all turnover packages and all Vendors’ and other manufacturers’ instructions and drawings relating to Equipment that is included in the Stage, including Equipment preservation and records, shall have been transmitted to Owner as per the agreed format and numbers in accordance with Appendix U;

(q) Owner shall have received from Contractor each Contractor Permit, if any, that is required to be obtained by Contractor that is necessary for Owner to operate the LNG Facility with respect to such Stage in accordance with all Applicable Laws, and such Permits shall be in Owner’s name or shall have been assigned to Owner, in accordance with Applicable Laws; and

(r) Contractor shall have delivered a copy of the assignment of the Liquefaction Technology License and the License with BASF, SE with respect to such Stage, signed by the respective Licensor and Contractor, to Owner (and Owner’s designees), Owner (and its designees) shall hold such Licenses in their respective names, and the Licenses shall be in full force and effect.

“Substantial Completion Certificate” means a certificate substantially in the form of Appendix BB.

“Substantial Completion Date” means, with respect to a Stage, the date on which Substantial Completion of such Stage occurs: (a) as set forth on a Substantial Completion Certificate that has been countersigned by Owner; (b) as determined in accordance with Article 20; (c) the date on which Owner declares Substantial Completion has occurred in accordance with Section 11.2.3; or (d) as otherwise agreed by the Parties; provided, however, that, subject to Contractor’s rights under Article 20, for purposes of Sections 10.1.3 and 11.3, the Substantial Completion Date of a Stage shall be deemed to have occurred on the date on which Owner countersigns the Substantial Completion Certificate for such Stage, notwithstanding the date of Substantial Completion set forth in such certificate.

“Successfully Run” means:

(a) that the Performance Test was completed in accordance with the conditions and requirements for the proper performance of such Performance Test set forth in Appendix G, the Performance Test Procedures, and the other provisions of this Agreement applicable to such Performance Test; and

(b) the requirements of Section 9.9.2(d) have been satisfied.

“Supplier” means any Subcontractor or Vendor.

“Supply Contract” means any Subcontract or Purchase Order.

“Suspension Notice” has the meaning set forth in Section 19.4.2(a).

“SWSA” has the meaning set forth in the Recitals.

“System” means a part of the LNG Facility that is encompassed in specific boundaries as defined on P&IDs or other Drawings to distinguish it from the LNG Facility as a whole, as determined in accordance with Section 9.1.2.

“Target Substantial Completion Date” means with respect to each Stage, the date on which Contractor is scheduled to achieve Substantial Completion of such Stage, as shown on the CPM Schedule as the “Target Substantial Completion Date”. [***].

“Taxes” means:

(a) income tax, gross receipts tax, profits tax, employment tax, unemployment tax, withholding tax, social security tax, contractor tax, sales tax, property tax, consumption tax, value added tax, use tax, excise tax, turnover tax, capital tax, occupational tax, works tax, import tax, export tax, license tax, personnel tax, services tax and any and all other taxes (including taxes measured by wages earned by employees of Contractor or any Supplier); and

(b) import and export taxes other than Customs Duties, Customs Duties, port charges or taxes on barge deliveries (or similar maritime transport deliveries via water vessel), fees and contributions payable to any Governmental Authority on any item or service that is part of the Work or the LNG Facility,

in each of case (a) or (b) whether such tax, duty, fee or contribution is normally included in the price of such item or service or is normally stated separately, together with any and all penalties, interest and additions thereto.

“Tax Abatements” mean, collectively, the following (as each may be extended or amended from time to time): (a) that certain Abatement Agreement for Property Located in the Reinvestment Zone entered into among Jefferson County, Owner and the Common Facilities Owner pursuant to Section 312.401 of the Texas Tax Code, dated March 25, 2019, as amended as of January 14, 2020, as further amended as of September 13, 2022; (b) that certain Abatement Agreement for Property Located in the Reinvestment Zone entered into among Sabine Pass Port Authority, Owner and the Common Facilities Owner pursuant to Section 312.401 of the Texas Tax Code, dated April 3, 2019, as amended on March 9, 2020; (c) that certain Abatement Agreement for Property Located in the Reinvestment Zone entered into among Sabine Neches Navigation District, Owner and the Common Facilities Owner pursuant to Section 312.401 of the Texas Tax Code, dated August 13, 2019, as amended as of March 11, 2020, as further amended as of September 13, 2022; (d) that certain Industrial District Agreement entered among the City of Port Arthur, Owner and the Common Facilities Owner dated June 4, 2019, as amended on or about October 11, 2022; (e) the First Source Referral Agreement; and (f) the 313 Agreement.

“TCEQ” means the Texas Commission on Environmental Quality Air Quality Division.

“Technical Licensor Information” means the data and information provided by a Licensor with respect to the Technology provided by such Licensee.

“Technology” means the technology covered by each License, respectively.

“Termination Notice” has the meaning set forth in Section 19.4.2(b).

“Texas Sales and Use Taxes” means all sales and use taxes imposed by the State of Texas, its counties or political subdivisions.

“Third Party Claim” has the meaning set forth in Section 15.5.1.

“Third Party Proprietary Work Product” has the meaning set forth in Section 12.3.

“Three Week Look-Ahead Schedule” has the meaning set forth in Appendix S.

[***].

“Train 1 First Production Window” has the meaning set forth in Section 9.5.1(a).

“Train 1 Second Production Window” has the meaning set forth in Section 9.5.1(b).

“Train 1 Third Production Window” has the meaning set forth in Section 9.5.1(c).

“Tribunal” has the meaning set forth in Section 20.4.2.

“TWIC Card” has the meaning set forth in Section 2.18.6(c).

“Unforeseen Excused Site Condition” means an Archaeological Find or Pre-Existing Hazardous Materials discovered on the Site after the Effective Date, or subsurface man-made objects not identified in the Owner-Furnished Information or the Geotechnical Reports.

“Unusually Severe Weather” means: (a) tornadoes (as identified in the Storm Events Database maintained by the National Oceanic and Atmospheric Administration’s National Centers for Environmental Information); (b) Named Windstorms or catastrophic flooding that shut down access to the Site or directly impact the Site or other locations, if any, where fabrication Work is being performed; or (c) any other weather event for which local officials call for mandatory public evacuations at the Site.

“U.S.” means the United States of America.

“Vendors” means the suppliers of any tier of Contractor-Furnished Items, as applicable, pursuant to a Purchase Order, that do not perform a significant component of any of the Work that they are performing at the Site.

“Warranty Manager” means the Person who has been designated by Contractor in a written notice to Owner to serve as Contractor’s Warranty Manager for the purposes of Section 10.3.3.

“Warranty Period” has the meaning set forth in Section 10.1.3.

“Warranty Work” means the Work performed during any Warranty Period pursuant to Article 10.

“Week” means a seven (7) Day period beginning on a Sunday and ending at the end of the immediately following Saturday.

“Weekly Status Reports” has the meaning set forth in Section 2.22.1(c).

“Work” has the meaning set forth in Section 2.1.1.

“Work Product” has the meaning set forth in Section 12.1.1.

1.3 Acronyms, Terms and Symbols. Certain acronyms, terms and symbols used in this Agreement are defined in Appendix K.

1.4 Interpretation.

1.4.1 Precedence. The provisions of this Agreement, including the Appendices, shall be construed as consistent rather than conflicting to the extent possible. In the event of an irresolvable conflict between the main body of this Agreement or any Appendix and a provision contained within the main body of this Agreement or another Appendix, the following order of precedence shall govern (multiple items in a priority shall have equal order of precedence):

(a) the main body of this Agreement;

(b) Appendices C (and all Attachments thereto), D (and all Attachments thereto), E-1, KK, NN-1, NN-2 and YY (and all Attachments thereto);

(d) Appendix G;

(e) Appendix B;

(f) Appendix A (and all Attachments thereto);

(g) Appendices J-1, J-2, J-3, MM and TT;

(h) Appendices I (and all Attachments thereto), O, S (and all Attachments thereto), U (and all Attachments thereto), VV and WW;

(i) Appendices F-1, F-2, F-3, L (and all Attachments thereto), M, N, T-1, T-2, V-1, V-2, W, X, Y, Z, AA, BB, CC, DD, EE-1, EE-2, FF-1, FF-2, GG-1, GG-2, HH-1, HH-2, OO-1, OO-2, PP, SS, UU, ZZ and AAA;

(j) Appendices H, II, JJ, LL and QQ;

(k) Appendices P, Q, R, RR; and

(l) Appendix K.

1.4.2 Precedence of Technical Documents. The order of precedence governing the Deliverables and other technical documentation shall be:

(a) Permits

(b) Project Specifications

(d) Purchase Orders

In the event of a conflict between any part of the Agreement and any Technical Document, or among any of the Technical Documents, Contractor shall notify Owner of such conflict using a written request for information and the Parties shall meet to resolve the conflict. If any ambiguities, discrepancies or inconsistencies are identified among any of the Appendices, the Technical Documents or any of the attachments thereto, that cannot be resolved pursuant to the order of precedence set forth in this Section 1.4, then the more specific obligation that is consistent with the order of precedence set forth in this Section 1.4 shall control.

1.4.3 Headings and Subheadings. All headings and subheadings are for reference only and shall not be used to construe any provision of this Agreement.

1.4.4 Undefined Terms. If a term is used in this Agreement but it is not defined herein, such term should be ascribed: (a) its meaning as used in the international LNG industry, if there is a generally accepted usage in that industry; and (b) otherwise, it’s generally accepted English language meaning.

1.4.5 References to Lenders, Lenders’ Agent and Independent Engineer. This Agreement shall be construed so as to allow the Lenders, the Lenders’ Agent and any Independent Engineer access to all aspects of the Work and Confidential Information (not including Contractor’s financial information, pricing information or proprietary cost data; provided that the foregoing shall not limit the rights of such Persons to access the Contract Price or any pricing information contained in any Change Order Request or Change Order) that Owner has the right to witness, inspect, observe, access or review hereunder. Subject to Section 23.9 and the rights of the Lenders, the Lenders’ Agent and the Independent Engineer pursuant to the Direct Agreements and any similar agreement to be entered into by Contractor directly with Lenders or Lenders’ Agent, and Owner in accordance with Section 2.29, the provisions in this Agreement that permit the Lenders, the Lenders’ Agent and the Independent Engineer access to the Site and any other location where the Work is performed, and, among other things, to witness tests, attend meetings, receive reports and be present during testing and inspections of the Work wherever such inspections or tests take place, shall not be deemed or construed to impose an obligation on Contractor to delay any Work, including any inspections or tests, or to grant any of the Lenders, the Lenders’ Agent or the Independent Engineer the right to make any decision with respect to the Work on behalf of Owner. Contractor acknowledges that the Lenders may appoint more than one Independent Engineer and that references to “Independent Engineer” throughout this Agreement are understood to mean more than one.

1.4.6 Other Principles of Interpretation. Unless the context requires otherwise: (a) the gender (or lack of gender) of all words used in this Agreement includes the masculine, feminine, and neuter; (b) words used or defined in the singular include the plural and vice versa; (c) references to the Preamble, any Recitals, Articles and Sections refer to the Preamble, Recitals, Articles and Sections of this Agreement, as same may be amended from time to time pursuant to an amendment entered into in accordance with the terms hereof; (d) references to Applicable Laws or any Applicable Codes and Standards refer to such Applicable Laws or Applicable Codes and Standards as may be amended from time to time and, with respect to Applicable Laws, all rules and regulations promulgated thereunder, and references to particular provisions of Applicable Laws or Applicable Codes and Standards include any corresponding provisions of any succeeding Applicable Laws or Applicable Codes and Standards; (e) references to any other agreement are to that agreement as amended or supplemented from time to time; (f) references to “include”, “includes” and “including” means include, includes or including without limitation to the matters described; (g) terms defined in this Agreement are used throughout this Agreement and in any Appendices hereto as so defined; (h) “shall” and “will” have equal force and effect; (i) the reservation of a right by a Party herein in any correspondence or other communication between the Parties shall not constitute a denial of any Claim made or position taken by the other Party; (j) unless expressly provided to the contrary, references in this Agreement containing terms such as “hereof”, “herein”, “hereto”, “hereby”, “hereinafter”, and other terms of like import are not limited in applicability to the specific provision within which such references are set forth but instead refer to this Agreement taken as a whole; and (k) except to the extent expressly stated otherwise in this Agreement, Owner’s right to review, inspect and comment on the Work shall not require Contractor to delay the Work beyond the period allowed for review, inspection and comment.

ARTICLE 2

CONTRACTOR’S RESPONSIBILITIES

2.1 Work.

2.1.1 General. Contractor shall, in consideration of the Contract Price payable in accordance with this Agreement, provide or perform the Work, or cause the Work to be provided or performed, in accordance with the terms of this Agreement. The “Work” means all of the work, duties, responsibilities, jobs, services, engineering, design, procurement services and other activities previously performed or provided by or on behalf of Contractor under the EDSA or the SWSA, and all obligations, work, duties, responsibilities, jobs, services, goods, Equipment, Deliverables, engineering, and activities to be performed or provided by, or on behalf of, Contractor under this Agreement, without regard to whether the Work is performed under the Ramp-Up LNTP, the February 2023 LNTP, or after issuance of the Full Notice to Proceed, as follows:

(a) the further development and completion of the engineering and design of the LNG Facility, including the preparation of all Drawings and Specifications in accordance with the engineering and design as reflected in the Scope of Work and Basis of Design, as approved by Owner pursuant to the EDSA;

(b) the complete fabrication and construction of the LNG Facility, all erection and installation of Equipment, and all commissioning, start-up (including calibration, inspection, and start-up operation) and testing included in or required for the LNG Facility;

(c) the interconnection of the LNG Facility with applicable Pipelines and permanent utilities, including interconnections with any new or upgraded facilities to be constructed by Entergy;

(d) all construction activities and services necessary to fully construct the LNG Facility, including construction utilities and necessary preparation of the Site (and any other location where any part of the Work is performed), including soil stabilization of the Site, Site preparation, including design and construction of suitable drainage systems during construction, construction of a pioneer construction dock and a permanent materials offloading facilities dock (which Contractor may use during construction), construction of a heavy haul road, excavation and grading and proper disposal of all excavated materials and furnishing of fill materials if and as required in connection with performance of the Work;

(e) procurement and supply of all supplies, materials, goods, consumables, tools, temporary facilities, including offices and warehouses, vehicles, equipment and machinery, for incorporation into the LNG Facility, or necessary to conduct the Work but which do not form a permanent part of the LNG Facility;

(f) supply of all work forces, including all skilled and unskilled labor, supervisory, quality assurance and support service personnel required to perform the Work, other than the Operating Personnel to be furnished pursuant to Section 3.6 for use in Contractor’s pre-commissioning, commissioning, testing and start-up efforts, and the training of Operating Personnel;

(g) all activities and services necessary to permit the receipt at the tie-in points as described in the EPC Interface Management Plan as set forth in Appendix W, including the Drawings referenced therein, with respect to Fuel Gas, Feed Gas and utilities for the Work;

(h) procurement, rental or lease of any lay-down areas, easements, access rights or other real estate necessary or desirable for Contractor to perform its obligations hereunder that Contractor determines it requires in addition to the Site; and

(i) all activities, services and items specifically described in, or reasonably inferable from, Appendix A, Appendix B or elsewhere in this Agreement;

in each case in accordance with the requirements of this Agreement, including the Project Schedule and the Project Execution Plan, and whether or not such activities, services or items are specifically identified in Appendix A or the other portions of this Agreement, such that the LNG Facility is fully functional and capable of being operated in accordance with Applicable Laws, GECP and the terms of this Agreement, but in any case excluding the items and activities that

Owner is expressly required to provide under Article 3. The definition of “Work” shall not include [***].

2.1.2 Simultaneous Operation Requirement. Without limiting the foregoing, Contractor shall perform the Work such that the LNG Facility and the Equipment satisfy the applicable provisions of the Scope of Work and Basis of Design, including designing, procuring and constructing the Common Facilities such that all LNG Trains installed in the LNG Facility may be operated simultaneously and independently at the design conditions set forth in this Agreement.

2.2 Independent Contractor. In the performance of this Agreement, Contractor is an independent contractor and none of Contractor, Suppliers or their employees or Invitees are agents, employees or Invitees of Owner. The entire performance, operation, management and direction of the Work and, except to the extent this Agreement expressly provides otherwise (including pursuant to Sections 2.6 and 2.7), all staffing, Supplier selection, means, methods, techniques, sequencing and procedures for coordinating all portions of the Work shall be under the exclusive control, command and direction of Contractor; nonetheless, Contractor shall comply with all provisions, terms and conditions of this Agreement, including the Specifications and Plans, and the fact that Contractor is an independent contractor shall not relieve it from its responsibility to fully, completely and safely perform and deliver the Work and cause the Suppliers and its and their respective personnel to safely perform and deliver the Work in compliance with this Agreement. Contractor shall be solely responsible for the payment of labor employed or hired by Contractor, whether on contract or other status, including all social benefits, compensation, termination payments, and all benefits of whatever description required by Contractor’s employment policies or practices.

2.3 Performance Standards and Compliance with Applicable Laws. Contractor shall perform the Work in accordance with: (a) all Applicable Laws; (b) the terms of this Agreement; (c) the plans and policies established pursuant to Sections 2.18 and 2.20; and (d) GECP (except to the extent such Good Engineering and Construction Practices are in conflict with any of clauses (a), (b) or (c), in which case such clause (a), (b) or (c) shall prevail).

2.4 Contractor’s Acknowledgements.

2.4.1 Site. Prior to the Effective Date, Contractor has inspected the Site and reviewed the Geotechnical Reports, and acknowledges and agrees that it:

(a) has assessed all Site Conditions at and around the Site that will affect Contractor’s conduct of the Work thereupon, including natural and man-made conditions;

(b) has satisfied itself that the Site is sufficient for Contractor to engineer, procure, construct, pre-commission, commission, start-up, test and operate the LNG Facility for the Contract Price, in accordance with GECP and the requirements of this Agreement, including Applicable Laws, the Emissions Guarantee, the Noise Guarantee and the Guaranteed Performance Levels (subject to Section 9.10), and so as to achieve Substantial

Completion of each Stage by the applicable Guaranteed Substantial Completion Date, including, without limiting the generality of the foregoing, that:

(i) the size, shape, location and condition of the Site are adequate for Contractor’s performance of the Work;

(ii) the Site includes additional space that is adequate for Contractor’s temporary office, including temporary offices of Owner (in accordance with Section 2.5.3(c)), warehouse, craft change rooms and shop buildings, storage of Equipment, employee parking and other Work lay-down and staging purposes;

(iii) there is sufficient access to the Site to transport personnel and all necessary Equipment and Construction Equipment; and

(iv) sufficient labor force (both in quantity and quality) and professional services will be available for Contractor’s performance of the Work in accordance with the requirements of this Agreement;

(c) is solely responsible for design and construction of suitable drainage systems during performance of the Work on the Site to avoid flooding at the Site which could interrupt the construction activities and cause damage to the Equipment, including piping and other material, stored or installed at the Site, and including proper Site preparation construction planning to minimize water entrapment, ponding, and flooding in some areas which could interrupt the construction activities, or damage stored Equipment;

(d) subject to Contractor’s rights and obligations pursuant to Section 8.3.1(q) and Section 8.3.1(r), as applicable, and Article 18 should a COVID-19 Event occur, [***], including any additional outbreaks of COVID-19 or any other worsening of the COVID-19 pandemic, wherever the same may occur; and

(e) Accordingly, with the exception of Unforeseen Excused Site Conditions or events of Force Majeure that impact the Site (or the area around the Site), and subject to Contractor’s rights and obligations pursuant to Section 8.3.1(e) and Article 18 for Owner's failure to satisfy the requirements of Section 3.5 regarding the condition of the Site as of the FNTP Date, Contractor hereby agrees that it shall have no right to claim or seek an increase in the Contract Price or an adjustment to the Key Date Schedule with respect to physical conditions at or around the Site, including the Site Conditions, and hereby waives and releases Owner from and against such claims. Contractor affirms that it has the skills and experience necessary to review and assess the Site, the Site Conditions and the Site in light of the different aspects of the Work. OWNER MAKES NO GUARANTY OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE SITE. CONTRACTOR EXPRESSLY ACKNOWLEDGES AND AGREES THAT THE INFORMATION SET FORTH IN THE BASIS OF DESIGN WITH RESPECT TO THE SITE IS PROVIDED FOR PURPOSES OF THE DESIGN AND ENGINEERING OF THE LIQUEFACTION PROJECT, AND IN NO WAY CONSTITUTES A REPRESENTATION, WARRANTY OR GUARANTY AS TO CONDITIONS THAT CONTRACTOR MAY ENCOUNTER DURING THE PERFORMANCE OF THE WORK.

THIS SECTION 2.4 SHALL NOT LIMIT CONTRACTOR’S RIGHTS TO MAKE CLAIMS FOR RELIEF UNDER SECTION 8.3 AND ARTICLE 18 IN CONNECTION WITH UNFORESEEN EXCUSED SITE CONDITIONS, OR OTHER EXCUSABLE EVENTS OR EVENTS OF FORCE MAJEURE THAT OCCUR DURING THE PERFORMANCE OF THE WORK.

2.4.2 Owner-Furnished Information. CONTRACTOR ACKNOWLEDGES, AND SHALL CAUSE ITS SUPPLIERS TO AGREE, THAT: (a) WITHOUT LIMITING WHAT CONSTITUTES AN OWNER-CAUSED DELAY, OWNER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, TO CONTRACTOR OR SUCH SUPPLIER OR ANY OTHER PERSON, AS TO THE ACCURACY, SUFFICIENCY OR CONTENT OF THE OWNER-FURNISHED INFORMATION OR THE OPINIONS THEREIN CONTAINED OR EXPRESSED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; AND (b) NEITHER CONTRACTOR, THE SUPPLIERS NOR ANY OTHER PERSON MAY RELY ON THE OWNER-FURNISHED INFORMATION, AND THAT NONE OF SUCH PERSONS SHALL HAVE A CLAIM AGAINST OWNER WITH RESPECT TO THE OWNER-FURNISHED INFORMATION, EXCEPT FOR SUCH INFORMATION THAT HAS BEEN SPECIFICALLY DESIGNATED AS NON-VERIFIED INFORMATION IN APPENDIX N. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, CONTRACTOR SHALL NOT BE REQUIRED TO VERIFY OR BE DEEMED TO HAVE VERIFIED ANY OF THE NON-VERIFIED INFORMATION.

2.4.3 Scope of Work and Basis of Design. Contractor has drafted and prepared the Scope of Work and Basis of Design with care and hereby acknowledges and agrees that, the attached Scope of Work and the Basis of Design in Appendix A and Appendix B and all documents referenced therein and attachments thereto, are accurate, adequate and complete for Contractor to conduct the Work for the Contract Price, by the Guaranteed Substantial Completion Date for each Stage set forth in the Baseline CPM Schedule, and in accordance with GECP and all requirements of this Agreement, including Applicable Laws, and subject to Section 9.10, the Emission Guarantee, the Noise Guarantee, and the Guaranteed Performance Levels. Notwithstanding anything to the contrary herein, Contractor has not verified and shall not verify the Non-Verified Information.

2.4.4 Incorporation of the EDSA and SWSA Work and Work Performed under the September 2022 Letter Agreement. Contractor acknowledges and agrees that upon Owner’s issuance of the Full Notice to Proceed hereunder, or if issued the issuance of the Ramp‑Up LNTP, all of the work, duties, responsibilities, jobs, services, engineering, design, procurement services and other activities previously performed or provided by or on behalf of Contractor under the EDSA or the SWSA or under the September 2022 Letter Agreement, shall be part of the Work for all purposes of this Agreement, and that therefore Contractor is fully responsible under this Agreement for all such work, duties, responsibilities, jobs, services and other activities performed under the EDSA, the SWSA or the September 2022 Letter Agreement as if it had been performed under this Agreement. Notwithstanding the foregoing, until the earlier of the LNTP Date or the FNTP Date, any work, duties, responsibilities, jobs, services, engineering, design, procurement services and other activities performed or provided by or on behalf of Contractor

under the EDSA or the SWSA or the September 2022 Letter Agreement shall be governed by the terms of the EDSA or the SWSA or such letter agreement, as applicable.

2.4.5 Applicable Laws and GECP. Contractor acknowledges and agrees that, subject to Contractor’s rights in connection with a Change in Law, it can conduct the Work for the Contract Price, in accordance with the Project Execution Plan and by the Guaranteed Substantial Completion Date for each Stage, and in accordance with GECP and all requirements of this Agreement, including Applicable Laws, the Emissions Guarantee, the Noise Guarantee and the Guaranteed Performance Levels (subject to Section 9.10). Without limiting Contractor’s rights under Section 8.3, Contractor shall perform the Work using GECP and in accordance with Applicable Laws, whether or not such Applicable Laws or GECP came into effect before or after the Effective Date or during the performance of the Work.

2.4.6 Plans; Required Plan Provisions. Contractor shall perform the Work in accordance with the Project Execution Plan and the other Plans as described herein. Contractor may update the Project Execution Plan and the other Plans from time to time to reflect updates or modifications or amendments or other changes that Contractor determines are desirable or necessary in connection with the Work; provided, however, that (a) Contractor shall furnish such updates, modifications, amendments or other changes to Owner clearly showing the revisions made to such Plan; (b) Contractor shall not implement any update, modification, amendment or other change to the Required Plan Provisions of any Plan without Owner’s prior written approval, not to be unreasonably withheld or delayed; and (c) any revisions to the Plans made to conform the Plans to changes made to this Agreement from the First Amended and Restated Agreement (the “2022 Plan Updates”), shall be subject to Owner’s review and approval, including with respect to any updates to the Required Plan Provisions desired by Owner. Within fifteen (15) Business Days after Owner receives any proposed 2022 Plan Update, Owner shall accept or reject and provide Contractor with any comments, including with respect to any additional Required Plan Provisions requested by Owner. Within fifteen (15) Business Days after Owner receives any proposed updates, modifications, amendments or other changes to any Required Plan Provisions, Owner shall accept or reject and provide any comments to such updates, modifications, amendments or other changes to the Required Plan Provisions. Contractor shall promptly respond to Owner’s comments to any proposed 2022 Plan Update or any proposed updated, modified, amended or otherwise changed Required Plan Provisions, and resubmit such 2022 Plan Update or such other updates, modifications, amendments or other changes to Owner for acceptance. Except in connection with any 2022 Plan Updates (which shall be resolved with Owner in accordance with the foregoing), if Owner provides comments to any other provisions of the updated, modified, amended or changed Plan that are not Required Plan Provisions, Contractor shall consider such comments in good faith. Owner’s review of and any comments provided to the Plans and the Required Plan Provisions pursuant to this Section 2.4.6 shall not in any way relieve Contractor of its responsibility regarding the execution of the Work and the performance of Contractor’s obligations hereunder. For purpose of clarity, if a Plan is also an Appendix (other than with respect to Appendices Q, R and W), then Contractor may not modify the terms and conditions of such Appendix without Owner’s consent.

2.5 Appointment of Authorized Representatives; Periodic Meetings; Owner Access.

2.5.1 Contractor Representative. Contractor hereby appoints [###] to be the Contractor Representative. At all times hereunder, the Contractor Representative shall simultaneously serve as Contractor’s Senior Project Manager. The Contractor Representative shall have full authority to act on Contractor’s behalf under this Agreement; provided, that Contractor Representative shall not be entitled to amend this Agreement without further written authorization from Contractor. Contractor may from time to time by notice to Owner remove any person from his appointment as Contractor Representative and appoint another person in his or her place with effect from a date to be specified in the notice in accordance with Section 2.6.1. Contractor shall ensure that there is an individual appointed to act as Contractor Representative in accordance with Section 2.5.1 at all times until it has fully performed its warranty obligations as described in Article 10.

2.5.2 Periodic Meetings. Contractor shall hold periodic progress and schedule monitoring meetings as described in Appendix S and as Owner may reasonably request, including meetings in connection with Disputes, Change Order requests or claims made by Suppliers. The Contractor Representative or the individual designated by the Contractor Representative to attend the meeting, the Contractor planning and scheduling representative, and as appropriate or necessary, other Contractor employees and Suppliers, shall attend such meetings. At Owner’s election, the meetings may be attended by the Owner Representative or the individual designated by the Owner Representative to attend the meeting, the Owner planning and scheduling representative, representatives of Owner’s Engineer, and any equity participant in Owner or Common Facilities Owner. The meetings may also be attended by any authorized representative or agent of the Lenders, the Independent Engineer and, subject to Contractor’s consent, not to be unreasonably withheld or delayed, any other Invitees of Owner (including, where invited by Owner, its customers).

2.5.3 Owner Access. The respective employees, consultants and representatives of Owner, including Owner’s Engineer, equity investors in Owner or the Common Facilities Owner, the Other Contractors (subject to Section 2.28), the Independent Engineer and any Lender shall (a) at all times have a right of access to the Site; and (b) have a right of access during normal business hours and upon reasonable advance notice to Contractor, to any Supplier location off of the Site where Work is being conducted, including locations where Equipment is being manufactured or such materials are being prepared for incorporation into the LNG Facility, so that representatives of such Persons, as applicable, may inspect production and observe tests, subject to such Persons complying with the applicable policies and procedures of Contractor (or the applicable Supplier) with respect to safety and security while at such location. Other Persons, including Competitors, invited by Owner shall be provided the access as described in this Section 2.5.3, subject to compliance with such policies and procedures, and upon reasonable advance notice to Contractor.

(a) Contractor shall provide the accommodations in accordance with Section 2.5.3(b). Contractor shall also cause its Major Suppliers to provide reasonable accommodations as are necessary for Owner’s representatives to exercise Owner’s rights and responsibilities under this Agreement, and to the Independent Engineer and any Lenders, including reasonable temporary work spaces. With respect to Suppliers that are not Major

Suppliers, Contractor shall use commercially reasonable efforts to cause such Suppliers to make work space available for one (1) to two (2) individuals upon Owner’s reasonable request. If a Supplier requests payment of additional costs to provide such temporary accommodations, Contractor shall notify Owner. If Owner nevertheless requires Contractor to obtain such temporary accommodations for Owner, the additional costs, if any, charged by the Suppliers with respect to such accommodations shall be an Owner cost.

(b) From and after the issuance of the Ramp-Up LNTP until the issuance of the Full Notice to Proceed, Contractor shall provide in Contractor’s office at 3000 Post Oak Blvd., Houston, Texas (or such other location in the Houston, Texas area where Contractor maintains its office), up to thirteen (13) furnished offices and thirty (30) furnished cubicles. From and after the issuance of the Full Notice to Proceed until the first anniversary of the FNTP Date, Contractor shall provide at such office up to thirteen (13) furnished offices and forty five (45) furnished cubicles. From and after the first anniversary of the FNTP Date until the last ISO engineering drawing Rev. 0 is finalized for Stage II, Contractor shall provide at such office, up to thirteen (13) furnished offices and thirty (30) furnished cubicles. Contractor shall also provide up to nine (9) furnished offices and one (1) furnished cubicle at such office until twelve (12) Months after the last ISO engineering drawing Rev. 0 is finalized for Stage II. In addition to the above, from and after the issuance of the Ramp-Up LNTP, or the Full Notice to Proceed, as applicable, until twelve (12) Months after the last ISO engineering drawing Rev. 0 is finalized for Stage II, Contractor shall provide at such office parking spaces, access to kitchen/break area and rest rooms, one (1) dedicated conference room with projection capabilities to accommodate up to twenty (20) people, access to at least one (1) other conference room that will accommodate up to eight (8) people, telephones for each office, cubicle and conference room and secure paper disposal. Upon Owner’s request, Contractor shall provide additional furnished offices and furnished cubicles at a rate of [***] per Month and [***] per Month, respectively. The office space and facilities shall be available for use by Owner’s and personnel of Owner’s Engineer’s and Lender’s representatives, as designated by Owner. Contractor shall provide equivalent office space and support for up to five (5) of Owner’s and Owner’s Engineer’s personnel at such other offices or locations of Contractor and its Affiliates described in the Project Execution Plan where the Work will be performed when such personnel are present at those locations. All costs for furnishing such office space and supplies and otherwise complying with the requirements of this Section 2.5.3(b) are included in the Contract Price.

(c) From and after the FNTP Date, Contractor shall provide temporary furnished office facilities at the Site to accommodate up to ninety five (95) of Owner’s personnel. Such temporary facilities will include a main temporary office facility sized to accommodate up to sixty (60) individuals, including offices for twenty five (25) individuals, four (4) bull pen offices (each sized to accommodate six (6) individuals), two (2) cubicles for Owner’s document management and control and storage, access to kitchen/break area (with dining space for twenty (20) individuals) and rest rooms, and two (2) conference rooms to accommodate up to forty (40) people. The temporary furnished office facilities shall also include three (3) standard double-wide trailers, consisting of two (2) offices, one conference room on each end of the trailer and open cubicle space in between the conference rooms. Contractor shall install electrical distribution lines and T-1 internet line to each temporary office. These temporary facilities shall be available for use by Owner’s and personnel of Owner’s Engineer’s and Lender’s representatives, as designated by Owner. Once Owner’s administration building is

completed and Owner’s personnel have moved out of the temporary office facilities, Contractor shall no longer have any obligation to maintain such temporary office facilities but shall provide Owner with sufficient space at the Site so that Owner may install its own temporary office facilities at that location. Contractor will provide all necessary utilities for such temporary office facilities, regardless of whether Contractor or Owner is furnishing the temporary office facilities. Contractor shall also provide two (2) twenty foot (20”) Conex storage units for Owner’s use near the main Owner’s temporary offices, and shall provide parking spaces for Owner vehicles, including twenty five (25) parking spaces located at the main Owner temporary office building that are signed as being reserved for Owner, and additional parking in the parking lot for such temporary office facilities area. The obligation to maintain such temporary office facilities or the space for Owner to locate its own temporary office facilities at the Site, as applicable, as contemplated in this Section 2.5.3 shall continue until Substantial Completion of Stage II.

(d) Contractor shall maintain at the Site and at Contractor’s office at 3000 Post Oak Blvd., Houston, Texas 77056 (or such other location in the Houston, Texas area where Contractor maintains its office), a complete and current collection of all issued for construction (IFC) drawings and related technical documentation prepared in connection with the Work, which shall be available for inspection by Owner, the Independent Engineer and the Lenders.

(e) Owner’s inspection or failure to inspect any aspect of the performance of the Work shall not be deemed to constitute acceptance or approval of the Work or excuse or limit any of Contractor’s obligations under this Agreement, including those under Article 10.

2.6 Employees and Key Personnel.

2.6.1 Key Personnel. Appendix H identifies the key personnel from Contractor’s organization who will be assigned to the Work (“Key Personnel”). Key Personnel shall be devoted to the Liquefaction Project for all of the time which is necessary to perform the Work and in any event during the periods of time specified in Appendix H, with the performance of the Work being a first priority of such Key Personnel. Contractor shall not remove any of the Key Personnel and if Contractor does so without obtaining Owner’s prior written approval and none of the circumstances for resignations, death, illness or disability set forth in the penultimate sentence of this Section 2.6.1 apply, and provided that the FNTP Date has occurred, Contractor shall: (a) pay Owner an amount equal to [***]; and (b) [***]. Except with respect to replacement of the Senior Project Manager, Owner shall have the right to consent to the individual that will replace the removed Key Personnel, which acceptance shall not be unreasonably withheld. All requests for the substitution of Key Personnel shall include an explanation and reason for the request and the resumes of professional education and experience, which shall include a minimum of two (2) candidates of suitable qualifications and experience for any Key Personnel position other than the Senior Project Manager. Should Owner accept the replacement Key Personnel, Contractor shall, to the extent reasonably possible, allow for an overlap of at least two (2) Weeks during which both the Key Personnel to be replaced and the new Key Personnel shall work together. If any Key Personnel resigns or is no longer available to perform the Work due to illness, death or disability, or is terminated and no longer employed or engaged in any capacity by Contractor or its Affiliates, Contractor shall nominate replacements

for such Key Personnel within five (5) Business Days. For the avoidance of doubt, acceptance of new Key Personnel shall not constitute approval for removal of such Key Personnel, and the requirements of this Section 2.6.1 shall apply with respect to individuals identified as Key Personnel under all circumstances, including removal or reassignment of individuals under the circumstances as described in Section 2.6.2. WITHOUT OTHERWISE LIMITING OWNER’S RIGHTS UNDER THIS AGREEMENT WITH RESPECT TO CONTRACTOR’S PERFORMANCE OF THE WORK, PAYMENTS MADE BY CONTRACTOR PURSUANT TO THIS SECTION 2.6.1 SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF OWNER AND COMMON FACILITIES OWNER FOR CONTRACTOR’S REMOVAL OF KEY PERSONNEL IN VIOLATION OF THIS SECTION 2.6.1.

2.6.2 All Personnel. Contractor’s personnel assigned to perform any of the Work shall be skilled and qualified to perform the work assigned to such Person, and Contractor shall require that its Suppliers assign the Work to personnel that are skilled and qualified to perform the work assigned to such Person. Contractor agrees to promptly remove or reassign (or to require any Subcontractor to remove or reassign) from its services in connection with the Work any Person performing Work who does not meet the foregoing requirements. In addition, Owner may request that Contractor remove from the Work or the Site any personnel of Contractor or any of its Suppliers (including Key Personnel) who, in the reasonable opinion of Owner are unsafe or incompetent in the performance of his or her duties. In such event, Contractor shall, and shall cause its Suppliers to, immediately upon receipt of such a request, remove such personnel from Owner’s property and from performance of the Work or the Site. Such personnel shall not thereafter be allowed on Owner’s property, the Site or to perform any of the Work, without the prior written acceptance of Owner. CONTRACTOR HEREBY RELEASES THE OWNER INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL CLAIMS, CAUSES OF ACTION, DAMAGES, LOSSES, COST AND EXPENSES (INCLUDING ALL ATTORNEYS’ FEES AND LITIGATION EXPENSES) AND LIABILITIES, OF WHATSOEVER KIND OR NATURE, WHICH MAY DIRECTLY OR INDIRECTLY ARISE OR RESULT FROM CONTRACTOR OR ANY SUPPLIER TERMINATING THE EMPLOYMENT OF OR REMOVING FROM THE WORK ANY SUCH PERSON FOLLOWING A REQUEST BY OWNER TO HAVE SUCH PERSON REMOVED FROM THE WORK. Contractor shall promptly replace such discharged Person with a suitably qualified and experienced Person, at Contractor’s expense.

2.6.3 Mandatory Briefings. In addition to such meetings as Contractor determines are necessary, Contractor shall, in formal briefings designed by Contractor for such purpose, instruct Contractor personnel, all Subcontractors and their respective personnel that are performing Work at the Site, on the terms and requirements of the Environmental Plan (including the role and authority of environmental inspectors as may be appointed by Owner pursuant to the Environmental Plan), safety and environmental protection policies and procedures for Work at the Site, and the terms and requirements of the Permits and Applicable Laws, and all Contractor personnel shall comply with such policies and procedures, Permits and Applicable Laws.

2.6.4 Videos and Photographs. Contractor and Owner will regularly utilize drones or other means to take aerial photographs or videos of the Site during the performance of the Work. The Parties may also from time to time take other photographs or videos of the Work,

the Site using other means. All use of drones and photography shall be in compliance with Applicable Law. To the maximum extent possible under Applicable Law, Contractor shall require each of its employees, and shall require its Subcontractors to require each of their respective employees, to acknowledge and agree that to the extent such employee is present at the Site and is included in any video or photograph taken by Owner or Contractor or their representatives or Invitees of the activities at the Site, such employee grants and releases to Contractor and Owner the right to record or photograph such employee while at the Site and to use and reproduce such recordings or photographs as Owner and Contractor (to the extent permitted under this Agreement) may determine is appropriate in connection with the Work and the Liquefaction Project, including posting such videos and photographs on the internet or other electronic media. Notwithstanding anything to the contrary in the foregoing, any photographs posted by Contractor on the internet or other electronic media shall not be identifiable as related to the Liquefaction Project unless permitted to do so in writing by Owner.

2.7 Supply Contracts and Suppliers.

2.7.1 Suppliers. Owner acknowledges and agrees that Contractor intends to have portions of the Work accomplished by Suppliers pursuant to written Supply Contracts between Contractor and such Suppliers, and that such Suppliers may have certain portions of the Work performed by other Suppliers. The provisions of any Supply Contract shall not relieve Contractor of any obligations to perform the Work or of its responsibility for each Supplier. Contractor shall be fully responsible to Owner for the acts and omissions of all Suppliers and of Persons directly or indirectly used by any of them in the performance of the Work to the same extent that Contractor is responsible to Owner under this Agreement for its own acts or omissions. NO SUPPLIER IS INTENDED TO BE OR SHALL BE DEEMED TO BE A THIRD-PARTY BENEFICIARY OF THIS AGREEMENT.

(a) All Suppliers shall be reputable, qualified firms with an established safety record and a record of successful performance in their respective trades performing identical or substantially similar work. To the extent necessary to perform the Work, Owner agrees that Contractor may allow the Suppliers to access the Site pursuant to the access rights granted to Contractor under this Agreement.

(b) Contractor shall and shall cause all of its Suppliers to comply with the International Labour Organization’s conventions regarding forced labor and child labor, including the International Labour Organization Minimum Age Convention and Forced Labour Convention (and any Applicable Laws promulgated under either of these conventions). Forced, bonded (including debt bondage) or indentured labor, involuntary prison labor, slavery or trafficking of individuals shall not be used by Contractor or any of its Suppliers that perform any part of the Work. Child labor as defined by the International Labour Organization shall not be used by Contractor or any Supplier. Compensation paid to Contractor’s and its Supplier’s personnel shall comply with all Applicable Laws regarding employment and labor, including those relating to minimum wages, overtime hours and legally mandated benefits. Contractor and each of the Suppliers shall maintain a safe and healthy work environment at any location where the Work is performed, in accordance with the International Labour Organization Guidelines on

Occupational Safety and Health and all Applicable Laws regarding the safety of the work environment, and shall operate their facilities where the Work is performed in compliance with all local Applicable Laws regarding the environment, health and safety. Without limiting the foregoing, Contractor shall, and shall cause all of its Suppliers that perform any part of the Work in the United States to, comply with all Applicable Laws of the United States with regards to labor and employment when employing labor in connection with the Work. If there is a conflict between any Applicable Laws or any of the other standards or guidelines described in this Section 2.7.1(b), Contractor and the Suppliers shall be required to meet the highest of the performance standards that are in conflict.

(c) Contractor shall, and shall use commercially reasonable efforts to require each Supplier (including CIMTAS, but excluding other Affiliates of Contractor and Suppliers that are only party to General Services Subcontracts with respect to the Work), to permit Contractor to monitor compliance by such Suppliers with the requirements of Section 2.7.1(b), and to allow Contractor to conduct unannounced audits to verify compliance with the requirements of Section 2.7.1(b) of each such Supplier that performs any part of the Work. Contractor shall perform audits to verify compliance with the requirements of Section 2.7.1(b) of such Suppliers at Owner’s reasonable request. With respect to Suppliers performing any part of the Work on the Site, Owner shall also have the right to request Contractor to conduct unannounced audits of such Suppliers to verify compliance with the requirements of Section 2.7.1(b), and Owner and the Lenders’ representatives (including the Independent Engineer) may participate in such audit with Contractor. Such monitoring and audit activities may include inspection of facilities, gathering information from such Person’s personnel, and reviewing relevant documentation and records.

2.7.2 Award of Supply Contracts for Portions of the Work; Copies of Major Supply Contracts.

(a) Without the prior written consent of Owner:

(i) Neither Contractor nor any of its Affiliates shall enter into Supply Contracts with respect to the portions of the Work identified on Appendix I with any Supplier other than the accepted Suppliers for such Work as identified therein;

(ii) Contractor shall not allow its specified Suppliers for the Scope of Work as described on Attachment I-1 to Appendix I to procure any Equipment listed on Attachment I-1 to Appendix I from any Supplier except from the accepted Suppliers of such Equipment as identified thereon;

(iii) Neither Contractor nor any of its Affiliates shall, and Contractor shall not allow any Supplier that procures any of the Equipment packages identified on Attachment I-2 to Appendix I to, procure any of the Equipment packages listed on Attachment I-2 to Appendix I, or any of the components of such Equipment packages as identified on Attachment I-2 to Appendix I, from any Supplier except the accepted Suppliers of such Equipment as identified in Appendix I; or

(iv) Neither Contractor nor any of its Affiliates shall allow Suppliers to enter into or issue Supply Contracts with or to lower tier Suppliers to a First-Tier Supply Contract that is a Major Supply Contract if the value of the Supply Contracts with such lower tier Suppliers (in the aggregate based on all Supply Contracts with each such lower tier Supplier and its Affiliates) is equal to or exceeds twenty five percent (25%) of the value of such First-Tier Supply Contract; provided, that the prior written consent of Owner shall not be required with respect to a Supply Contract with a lower tier Supplier that is identified as an accepted Supplier on Appendix I for the portion of the Work to be performed pursuant to that lower tier Supply Contract.

Notwithstanding anything to the contrary in the foregoing, the prior written consent of Owner shall not be required with respect to General Services Subcontracts. In determining the value of a First-Tier Supply Contract and any lower tier Supply Contracts for the purposes of this Section 2.7.2, the value of any raw materials or consumables procured under any such Supply Contracts shall be included in the calculation of the value of such Supply Contracts, and the value of any Supply Contracts that are solely for the supply of raw materials or consumables shall be included when calculating the aggregate value of multiple Supply Contracts with a Supplier and its Affiliates.

(b) Notwithstanding anything to the contrary herein, Contractor shall, provide Owner with drafts of: (i) the Licenses; and (ii) Supply Contracts with Baker Hughes, while Contractor is negotiating the terms and conditions of such Supply Contracts and Licenses with the respective Supplier or Licensor (provided that the actual price and payment terms, and other commercial terms related to liquidated damages provisions, performance security and limits of liability may be redacted from such copies except to the extent such terms are or will be applicable to Owner following assignment of such Supply Contract or License at Substantial Completion). Without limiting the foregoing, Contractor shall not redact any License fees that are or may be owed following Substantial Completion or any payment terms related thereto. With respect to the Licenses and Supply Contracts referenced in this Section 2.7.2(b), Contractor shall provide Owner with a full and complete Fully Functional PDF copy of the proposed final Supply Contract or License, including all attachments, specifications and performance guarantees, redacted only as permitted in this Section 2.7.2(b), of each such Supply Contract or License no less than ten (10) Business Days before Contractor expects to award, issue or sign such Supply Contract or License. Owner shall use commercially reasonable efforts to respond to Contractor as soon as practically possible and in any event within ten (10) Business Days after receiving such copy. Contractor shall not issue, award or sign the Licenses and Supply Contracts referenced in this Section 2.7.2(b) with any such Vendor during such ten (10) Business Day period without Owner’s prior written consent. Once signed, Contractor shall not amend the Licenses to adversely affect or limit the Technology License provided thereunder without Owner’s prior written consent.

(c) When issuing any requests for quotations or similar documents to potential Suppliers for the procurement of Contractor-Furnished Items or any Equipment that include any seismic requirements, and when issuing any Supply Contracts for the procurement for such items, Contractor shall include only those seismic requirements referenced in the Design

Criteria for Structures and Foundations (Document No. PAL-PJT-CIV-DEC-00-X-0002) and Basic Engineering Design Data (Document No. PAL-PJT-PRO-BOD-00-GEN-0002), and shall not include any other conflicting seismic requirements in any such requests for quotation or Supply Contracts.

2.7.3 Terms of Certain Supply Contracts.

(a) Except for (i) Supply Contracts between Contractor and [***]; and (ii) with respect to any other Supply Contracts with a value of less than [***] (as calculated based on the aggregate value of all Supply Contracts to which a Supplier or any of its Affiliates is a party), Contractor shall, and shall cause its Affiliates that enter into First-Tier Supply Contracts to, include the following ((i) through (x) below) in all such First-Tier Supply Contracts, and shall cause its other Suppliers to include the following ((i) through (x) below) in each Supply Contract entered into in connection with the Work by such Supplier; provided that Contractor shall only be required to use commercially reasonable efforts to include the provisions as stated in subclauses (i), (ii), (iii), (viii) and (ix) of this Section 2.7.3(a):

(i) provisions to preserve and protect the rights of Owner under this Agreement and to the Work to be performed to the extent applicable to such Supply Contract;

(ii) require the Supplier to agree, and to cause its Suppliers of all tiers to agree, to provisions consistent with Section 2.23 and Section 2.24, and require such Supplier to agree, and to cause its Suppliers of all tiers to agree, that Owner may audit, inspect and copy documents and interview personnel, in the presence of Contractor’s representatives, to the same extent as Owner may do so as to Contractor under Section 2.23.2;

(iii) require such Supplier to comply with requirements consistent with Section 2.7.10 and Section 2.29;

(iv) require such Supplier to provide lien subordinations and lien releases in accordance with Sections 2.9.1, 6.3.5 and 6.6;

(v) require such Supplier to cooperate with the FTZ requirements in accordance with Section 7.3;

(vi) require such Supplier to agree to suspension and termination rights consistent with Sections 19.1, 19.2 and 19.3;

(vii) require such Supplier to agree to terms consistent with Section 23.13, and to terms consistent with Section 11.1 and Article 12 to the extent applicable to such Supply Contract;

(viii) provide that Owner or any Lender (or its designee) may, by written notice to the other parties thereto but without their consent, take-over such Supply Contract in the event of a termination of this Agreement in accordance with Article 19, and,

following any such termination and prior to any such take-over, shall be entitled at their option to step-in and cure a default of Contractor under such Supply Contract;

(ix) include provisions in form and substance similar to those set forth in Section 20.4 (except Section 20.4.5), and require such Supplier to agree to arbitration and consolidation of disputes in accordance with Section 20.7; and

(x) in the case of BASF SE: (A) Owner may by written notice and without consent, take assignment of such License in the event of the termination of this Agreement; and (B) such License shall not terminate notwithstanding any breach or termination of the applicable Master License Agreement between Contractor or its Affiliate and BASF SE, whether such breach occurs before or after assignment of such License to Owner.

In determining the value of any Supply Contract for the purposes of this Section 2.7.3, the value of any raw materials or consumables procured under such Supply Contract shall be included in the calculation of the value of such Supply Contract, and the value of any Supply Contract with the same Supplier that is solely for the supply of raw materials or consumables, shall be included when calculating the aggregate value of multiple Supply Contracts with a Supplier and its Affiliates.

(b) Contractor shall cause all Supply Contracts (i) between (A) Contractor and any Supplier; or (B) any Affiliate of Contractor and any Supplier (each, a “First-Tier Supply Contract”), to include warranties consistent with the warranties provided by Contractor hereunder (to the extent appropriate for the scope of supply) that shall be assignable to Owner in accordance with Section 10.2.1; and (ii) with respect to the Extended Warranty Items, to provide a Warranty Period that meets the requirements of Section 10.2.2.

2.7.4 Supply Contracts with Affiliates. With respect to any and all Work performed by an Affiliate of Contractor, Contractor hereby agrees that Contractor shall be fully responsible for such Affiliate and the performance of such Work by such Affiliate as if the Affiliate were the Contractor hereunder. Notwithstanding anything to the contrary in Section 2.7.2, 2.7.3, 2.7.5 or 2.7.6, Supply Contracts between Contractor and Affiliates of Contractor that are wholly (one hundred percent (100%)) directly or indirectly owned by Contractor, the Contractor Guarantor, or any Person that directly or indirectly owns the equity interests of the Contractor Guarantor, need not comply with the requirements of Section 2.7.2(a)(iv), 2.7.3, 2.7.5 or 2.7.6 and which shall not be assignable to Owner upon termination of this Agreement; provided, that with respect to Work identified on Appendix I, the Supply Contract with such Affiliate is for performance of Work for which such Affiliate is identified as an acceptable Supplier on Appendix I; provided, further, that the foregoing shall not limit the application of Sections 2.7.2, 2.7.3, 2.7.5 and 2.7.6 to CIMTAS or to Supply Contracts between Affiliates of Contractor (including CIMTAS) and other Suppliers. Accordingly, if during the performance of the Work, an Affiliate of Contractor that is performing the Work changes its circumstances such that it is no longer wholly (one hundred percent (100%)) directly or indirectly owned by Contractor, the Contractor Guarantor or any Person that directly or indirectly owns the equity interests of the Contractor Guarantor, Contractor shall enter into a Supply Contract with such non-Affiliate that complies with the requirements of Sections 2.7.2,

2.7.3 and 2.7.5, which shall be assignable to Owner upon termination of this Agreement, and shall comply with the requirements of Section 2.7.6 with respect to such Supply Contract.

2.7.5 Terms of All Supply Contracts. All Work performed by any Supplier is to be performed in accordance with the requirements of this Agreement pertaining to conduct of the applicable Work. Subcontracted Work shall be accomplished pursuant to a written agreement between Contractor and the relevant Supplier, or between a Supplier and another Supplier. Contractor shall not, and shall not permit any of the Suppliers to, include pay-if-paid or pay-when-paid type provisions in any Supply Contract. Each Supply Contract shall, so far as reasonably practicable and as applicable to the scope of the Work to be performed under such Supply Contract, be consistent with the provisions of this Agreement, and shall, in addition to the requirements of Section 2.7.3 and where applicable to the scope of the Work to be performed under such Supply Contract, contain provisions that:

(a) require the Subcontractor to comply with the terms consistent with Section 2.3 and Section 2.17;

(b) require such Subcontractor to comply with the requirements consistent with Section 2.28;

(d) require such Subcontractor to either enroll in the Contractor-provided insurance program or provide and maintain adequate insurance in accordance with the requirements of Article 16;

(e) require such Subcontractor to comply with the policies and rules set forth in or produced pursuant to Section 2.18 and Section 2.20; and

(f) obligate such Subcontractor specifically to consent to terms consistent with this Section 2.7.5 and Section 2.7.6.

2.7.6 Copies of Supply Contracts. Contractor shall provide to Owner in downloadable (by Owner in its offices), read-only, but otherwise Fully Functional files, PDF copies of each Supply Contract for Equipment intended to be incorporated into the LNG Facility with a value greater than [***]; provided that Contractor may redact the actual price and payment terms, and other commercial terms related to liquidated damages provisions, performance security and limits of liability, before making such copies available to Owner. In addition, in accordance with Appendix U, Contractor shall provide to Owner downloadable (by Owner in its offices), read-only, but otherwise in Fully Functional files, PDF copies of the technical requirements sections (including specifications, descriptions and tag numbers/stock code) of all other Supply Contracts for the provision of Contractor-Furnished Items.

2.7.7 Relationship with Suppliers. Nothing contained herein shall create any contractual relationship between any Supplier and Owner. Owner shall have no obligation to

pay, or to cause the payment of, any monies to any Supplier or any other Person acting through, under or on behalf of Contractor.

2.7.8 Misconduct by Suppliers. If Owner notifies Contractor that a Supplier is failing to comply in any material respect with Applicable Laws, GECP, or the policies and procedures produced pursuant to Section 2.18 or Section 2.20, or that a Supplier otherwise persists in any conduct which is prejudicial to safety, health or the protection of the environment, Contractor shall consult with Owner in good faith regarding the actions that Contractor will take to cause such Supplier to comply with such policies or procedures or cease such conduct. Nothing herein shall be deemed to limit Contractor’s responsibility under this Agreement as a result of the acts or omissions of Suppliers.

2.7.9 Ethical Business Dealings. Contractor shall not, and shall provide that its Suppliers and agents or employees of any of them shall not: (a) pay any commissions or fees, or grant any rebates, to any employee, officer or consultant of Owner or its Affiliates, or to immediate family members of any of them; (b) favor employees, officers or consultants of Owner or its Affiliates or their immediate family members with gifts or entertainment of any significant cost or value; or (c) without Owner’s prior written acceptance, enter into any business arrangements with employees, officers or consultants of Owner or its Affiliates, or their immediate family members.

2.7.10 Use of Local Suppliers and Labor. Contractor understands the importance of utilizing Suppliers, located in Jefferson County, Texas, the City of Port Arthur, Texas and otherwise from the local region comprised of Orange, Hardin, Jasper, Newton, Liberty, Tyler and Chambers Counties, as well as the Bolivar Peninsula area of Galveston County, Texas (the “Region”), including any such Suppliers that are Minority or Women Owned Businesses, Historically Under Utilized Businesses or Disadvantaged Business Enterprises (“HUB/DBE Suppliers”) as described in the Tax Abatements (collectively, “Local Suppliers”), and employing qualified craft labor and other qualified personnel from County, City, and otherwise from the Region (“Local Labor”). Contractor has read the Tax Abatements as provided to it by Owner, and agrees to comply with the provisions of the Tax Abatements to the extent applicable to Contractor with respect to the use of Local Suppliers and Local Labor. Owner will provide Contractor with any extensions or amendments to the Tax Abatements that Owner enters into from time to time. Contractor shall use commercially reasonable efforts to utilize Local Suppliers, and employ Local Labor in the performance of the Work at the Site (or related thereto), and shall require its Major Subcontractors that perform Work at the Site to use commercially reasonable efforts to do the same. In using commercially reasonable efforts, Contractor shall not be required to award a Subcontract to a Local Supplier if, in Contractor’s reasonable judgment, such Local Supplier’s bid is significantly more expensive than other bids received or if awarding a Subcontract to a Local Supplier would result in significant added expense, substantial inconvenience or sacrifice of operating efficiency. In each case where a Local Supplier has bid for, but was not awarded a Subcontract for any of the foregoing reasons and such Subcontract is in excess of [***], then Contractor shall list such Subcontract in its Monthly Status Report, indicating the date of the latest update, but such list shall only be updated on a quarterly basis, in accordance with Attachment S-2 to Appendix S, together with the applicable reason for not awarding the Subcontract to the Local Supplier. In connection therewith, Contractor shall prepare and implement a program (the “Local Engagement

Program”) to encourage the utilization of Local Suppliers and Local Labor, including by: (a) setting goals for identifying opportunities for involvement of Local Suppliers and Local Labor; (b) developing and implementing an outreach process with businesses and trade organizations based in the Region, to identify and attract possible business interest of Local Suppliers; (c) working with Owner to provide job listing information to the City of Port Arthur in accordance with the First Source Referral Agreement; (d) a pre-qualification process to enable Contractor to assess the suitability, qualifications and financial capability of Persons resident within the Region to become a Local Supplier or provide Local Labor; (e) a bidding process inclusive of qualified Local Suppliers on subcontract bid lists early in the procurement process; (f) a monitoring process to provide statistical reporting as and in the format reasonably requested by Owner on opportunities and utilization; and (g) identifying opportunities to collaborate on apprenticeship or other training programs with local educational institutions within the Region. Contractor shall provide the Local Engagement Plan to Owner for review and acceptance (not to be unreasonably withheld) as soon as practicable after the LNTP Date or the FNTP Date, whichever is earlier, and in any event by the earlier of thirty (30) Days after such date. The Local Engagement Program will include KPIs with associated liability of up to [***] in the aggregate as determined and calculated in accordance with Appendix WW. Notwithstanding anything to the contrary in this Agreement, Owner’s sole and exclusive remedy, and Contractor’s sole and exclusive liability, for Contractor’s failure to comply with the Tax Abatements, this Section 2.7.10, the Local Engagement Program or the KPIs shall be the payment of liquidated damages as set forth in Appendix WW and Owner’s withholding rights under Section 6.2.2(b), and Contractor shall not be liable for any Tax Abatement benefit that either Owner or Common Facilities Owner did not obtain from the applicable Governmental Authorities or any Tax Abatements fines or assessments.

2.8 Construction Equipment.

2.8.1 Responsibility for Construction Equipment. Contractor shall furnish all Construction Equipment necessary and appropriate for the completion of the Work in compliance with this Agreement. Contractor shall only bring Construction Equipment onto the Site that is in good operating condition, with all safety gear in good working order, and shall maintain such Construction Equipment in good and safe working order, and repair and replace such Construction Equipment, as necessary to keep such Construction Equipment in good and safe working order, in accordance with Applicable Laws, manufacturers’ recommendations and GECP. Contractor shall and shall cause its Subcontractors to maintain inspection reports and maintenance logs at the Site for all Construction Equipment, in each case for which it is customary under GECP or recommended or required by the manufacturer of such Construction Equipment for Contractor to obtain such inspection reports and maintain such logs, and all such reports and logs shall be available for Owner’s review at any time. Notwithstanding anything to the contrary contained in this Agreement, Contractor shall be responsible for damage to or destruction or loss of, from any cause whatsoever, all such Construction Equipment.

2.8.2 Use of Affiliate Construction Equipment Upon Termination. If Owner terminates this Agreement pursuant to Article 19, all Construction Equipment that is (a) owned by Contractor or any Affiliate of Contractor that is wholly (one hundred percent (100%)) directly or indirectly owned by Contractor, the Contractor Guarantor, or any Person that directly or indirectly owns the equity interests of the Contractor Guarantor; or (b) after such termination, remains under contract with, Contractor or by any Affiliate of Contractor and is not assigned to

Owner in accordance with Section 2.8.3 or 19.7, and is then located (or at the time of any Contractor Event of Default was located) at the Site, in each case, shall be removed from the Site by Contractor.

2.8.3 Terms in Lease Agreements for Construction Equipment. Contractor shall require all lease agreements for Construction Equipment (other than lease agreements with its Affiliates) to permit assignment of any such lease agreement to Owner pursuant to the requirements of this Section 2.8.3 if Owner terminates this Agreement pursuant to Section 19.3. Any such lease agreement shall provide for the following:

(a) Within seven (7) Days after the date on which a termination of this Agreement by Owner pursuant to Section 19.3 has become effective, Owner may:

(i) notify the Supplier of any such Construction Equipment that such lease is assigned to Owner pursuant to this Section; and

(ii) undertake to pay all lease or hire charges in respect thereof from such date on the same terms in all respects as the same was leased to Contractor or its Subcontractor except that Owner shall be entitled to permit the use thereof by any other contractor employed by Owner for the purpose of completing the Work.

(b) Upon receipt of Owner’s notice and agreement described in Section 2.8.3(a), the owner of such Construction Equipment shall lease to Owner such Construction Equipment on the terms described in Section 2.8.3(a)(ii).

(i) If Owner enters into any agreement for the lease of any Construction Equipment pursuant to Section 2.8.3, all sums properly paid by Owner under the provisions of any such agreement and all expenses properly incurred by Owner (including stamp duties) in entering into such an agreement shall be deemed to be part of the cost of completing the Work in the event of the termination of this Agreement pursuant to Section 19.3.

(ii) Contractor, upon request made by Owner at any time in relation to any item of Construction Equipment (other than lease agreements with its Affiliates), shall promptly provide Owner with the name and address of the owner thereof and certify that the agreement for the hire of such Construction Equipment contains a provision in accordance with the requirements of Section 2.8.3.

2.8.4 Failure to Remove Construction Equipment. If any item of Construction Equipment that Owner does not rent or lease under this Agreement, including Construction Equipment described in Section 2.8.2, remains at the Site after the termination of this Agreement, or after Final Completion, then Owner may:

(a) return any such items that are the property of Contractor or its Affiliates to such Person at Contractor’s expense;

(b) return any such items that are not the property of Contractor or its Affiliates to the Supplier thereof at Contractor’s expense;

and all charges and expenses of and in connection with the return or movement (including the reasonable storage costs) of such Construction Equipment shall be a debt due from Contractor to Owner and Contractor shall reimburse Owner for such charges and expenses within thirty (30) Days after receipt of Owner’s request for reimbursement.

2.8.5 Certain Owner Rights with Respect to Equipment Safety. Should Owner at any time observe any Construction Equipment that is unsafe or being operated in an unsafe manner, or in a manner that may, if continued, become unsafe, then Owner shall have the right (but not the obligation) to require Contractor to stop operating such Construction Equipment until such time as the Construction Equipment has been rendered safe to the reasonable satisfaction of Owner; provided, however, that at no time shall Contractor be entitled to an adjustment of the Contract Price or Key Date Schedule based on such work stoppage. Notwithstanding anything to the contrary in the foregoing, if Contractor disagrees with any order to stop operation of Construction Equipment that it receives from Owner, and Contractor notifies Owner of such disagreement, Owner and Contractor shall each promptly escalate such disagreement to a higher supervisory level, up to the level of the Contractor Representative and Owner Representative, as applicable. If after such escalation, Owner continues to enforce the stop order and it is later determined that the Construction Equipment was safe to operate and such stop order delayed the performance of the Work by more than four (4) hours, such stop order shall constitute an Owner-Caused Delay for the purposes of this Agreement.

2.9 Liens.

2.9.1 Contractor Liens. Contractor hereby, to the extent permitted by Applicable Laws, subordinates any mechanics’ and materialmen’s or other Liens that may be brought by Contractor against any or all of the Work, the Site, the LNG Facility or any other property of Owner or the Common Facilities Owner to any Liens granted in favor of any Lender or its representative, whether such Lien in favor of such Person is created, attached or perfected prior to or after any such Contractor Liens, and shall require its Suppliers to similarly subordinate their Lien rights. Contractor agrees to comply with reasonable requests of Owner for supporting documentation required by any Lender or Lender representative, including any necessary Lien subordination agreements, affidavits or other documents that may be required to demonstrate that Owner’s property, the Common Facilities Owner’s property, the LNG Facility and the Site are free from Liens arising out of the furnishing of Work under this Agreement (including any Subcontract).

2.9.2 Supplier Liens. Contractor shall be solely responsible for payment of all its obligations and the payment by its Suppliers of their obligations. Contractor shall keep Owner’s property, the Common Facilities Owner’s property, the LNG Facility and the Site free of Liens filed by its Affiliates, and, subject to Owner having paid undisputed amounts due

hereunder to Contractor as of such date, Contractor shall keep Owner’s property, the Common Facilities Owner’s property, the LNG Facility and the Site free of Liens filed by its other Suppliers. If a Lien is filed against Owner’s property, the Common Facilities Owner’s property, the LNG Facility or the Site by an Affiliate of Contractor or another Supplier, Contractor will (in the case of Suppliers other than an Affiliate of Contractor, subject to Owner having paid undisputed amounts due hereunder to Contractor as of such date), promptly commence appropriate action to remove such Lien, and shall thereafter diligently pursue the release of such Lien in accordance with this Section 2.9.

2.9.3 Release or Discharge of Lien. Subject to Owner having paid undisputed amounts due hereunder to Contractor as of such date, if any Contractor Lien that is filed against the Owner’s property, the Common Facilities Owner’s property, the LNG Facility or the Site as a result of the Work is not removed within fifteen (15) Business Days after it is filed, Contractor shall (a) furnish a bond in accordance with Tex. Property Code Ann. Chapter 53, Subchapter H (§53.171, et. seq.) to obtain the release of such Lien; and (b) defend any action (i) based on any theory that Contractor or any of its Suppliers or any of Contractor’s Affiliates failed to properly pay its applicable employees as agreed or otherwise in accordance with Applicable Law; or (ii) which may result in the assertion of a Contractor Lien or other similar remedy in connection with the performance of the Work. Owner may audit Contractor’s relevant Books and Records if a Contractor Lien or other similar remedy is asserted and Contractor does not as soon as practicable secure the release of the same, whether by posting a bond or otherwise. If Contractor fails to remove or discharge any Lien within the required fifteen (15) Business Day period, then Owner may, in its sole and absolute discretion and in addition to any other rights that it has under this Agreement, remove or discharge such Contractor Lien using whatever means Owner, in its sole and absolute discretion, deems appropriate, including posting of a bond or payment of settlement amounts that Owner in its sole and absolute discretion deems appropriate. Subject to Owner having paid undisputed amounts due hereunder to Contractor as of such date, Contractor shall reimburse Owner, or Owner may withhold sufficient amounts to reimburse Owner, for all Claims and expenses (including court costs, attorneys’ fees and other litigation costs), and including contractual liability to any Person for any of the above, on account of or which may be incurred by any member of the Owner Group in connection with the removal or discharge of such Contractor Lien.

2.9.4 Affidavit of Completion. No later than thirty (30) Days prior to the scheduled Substantial Completion Date of Stage II, Contractor shall prepare and submit to Owner for review and acceptance, an affidavit of completion of the Work that complies with the requirements of Texas Prop. Code §53.106 and is otherwise in form and substance acceptable to Owner. Contractor shall respond to any comments that Owner may provide within ten (10) Days after Contractor receives such comments. Once Owner accepts the proposed affidavit, Owner shall sign such affidavit and Contractor shall file such affidavit of completion in the records of Jefferson County of the State of Texas no later than ten (10) Days after the Final Acceptance Date of the last Stage to achieve Final Acceptance, and shall on the same date as the affidavit is filed (but subject to Owner having provided Contractor with a list of Persons that have sent a notice of Lien liability to Owner or requested a copy of the affidavit of completion), send a copy

of the affidavit to any Supplier that is or Person on the list provided by Owner and provide Owner with a copy of such recorded affidavit no later than five (5) Days after such filing.

2.10 Contractor Permits; Owner Permits.

2.10.1 Contractor Permits. Contractor shall obtain and maintain all Contractor Permits, including those identified or described in Appendix J-2, on or before the date that they are required for performance of the Work in accordance with the Project Schedule.

2.10.2 Owner Permits.

(a) Without limiting Contractor’s rights under Section 8.3.1, Contractor shall cooperate with and shall provide reasonable assistance to Owner in obtaining and maintaining any Owner Permits, including preparing and developing supporting drawings, models, documentation and other information requested by the FERC, PHMSA or other Governmental Authorities (such as in connection with the FERC-approved Implementation Plan) pursuant to or in connection with any Owner Permit, consistent with, or reasonably inferable from, Contractor’s Permitting Plan. Contractor shall collect and provide data and other information reasonably available to Contractor required for any applications for the Owner Permits and any amendments or modifications to such Permits that Owner determines has become necessary during the performance of the Work or are requested by the FERC, PHMSA or other Governmental Authorities.

(b) With respect to any clarifications to the Owner Permits, including any applicable amendments, modifications or variances to the Owner Permits, as described on Appendix J-3, Owner shall obtain such amendment, modification or variance as Owner determines is necessary or appropriate. For purposes of clarity, other than with respect to the clarifications set forth on Appendix J-3 (and, with respect to the such clarifications set forth on Appendix J-3, Contractor is required to perform the Work in accordance with such clarifications) and the exclusions set forth in Section 13 of Appendix A, Contractor is required to perform the Work in accordance with all conditions set forth in the applicable Owner Permits.

(c) Where any amendments or modifications to an Owner Permit is required due to a Contractor-initiated change or modification to the engineering and design of the LNG Facility after [***] (such amendment or modification to an Owner Permit, a “Proposed Permit Modification”), Contractor shall promptly notify the Owner Representative in writing at the time that such change to the engineering or design is proposed, which notice shall include (i) a justification, with reasonable backup documentation, for why Contractor believes such amendment or modification is required; (ii) any potential impacts to any other Owner Permit or Contractor Permit, including the need to modify or acquire any additional Permit to perform such amendment or modification. To the extent that Owner agrees to such change and agrees to obtain the Proposed Permit Modification, Contractor shall prepare the necessary engineering and other technical documentation for such amendments or modifications, and submit the same to Owner for review and comment. Once Owner has no further comments to the proposed documentation, Owner shall submit an application to amend or modify the relevant Owner Permit to the applicable Governmental Authority. Any delays in issuance of such Permits shall not constitute an Owner-Caused Delay except to the extent expressly provided in clause (d) of

the definition of Owner Caused Delay, or otherwise serve as the basis for a Change Order, and any additional requirements to the Work imposed as a condition of such Permits shall not serve as the basis for a Change In Law or any other Change Order hereunder. Contractor may request that Owner request expedited reviews of modifications or amendments to Owner Permits. To the extent that Contractor makes such a request and other Owner Permit applications, or amendments or modifications of Owner Permits, are delayed as a result of the applicable Governmental Authority expediting its review as requested, any delays related to issuance of such delayed Owner Permit or amendment or modification shall not constitute an Owner-Caused Delay or serve as the basis of a Change Order. Unless and until (1) Owner approves in writing the pursuit by the Parties of any such Proposed Permit Modification; (2) any such Proposed Permit Modification so approved by Owner is also approved by the applicable Governmental Authority; and (iii) Owner notifies Contractor in writing that it accepts the Governmental Authority’s conditions, deviations, or clarifications, if any, to such approved Proposed Permit Modification, Contractor is obligated to continue to perform the Work in accordance with the requirements of such Owner Permit without reference to such Proposed Permit Modification. Nothing in this Section 2.10.2(c) shall be deemed to modify the definition of Change In Law.

(d) Contractor understands that the Owner Permits may require the satisfaction of conditions for the continuing performance of the Work, and that Owner’s ability to maintain such Permits and satisfy such conditions, including obtaining further approvals or authorizations from Governmental Authorities such as FERC and PHMSA for the performance of the Work, is in part dependent on Contractor’s reasonable assistance and cooperation. Contractor acknowledges and agrees that the Baseline CPM Schedule includes customary time for FERC and PHMSA reviews and inspections and that the requirements of Governmental Authorities with respect to the Owner Permits shall not serve as the basis for a Change Order, unless such approvals or authorizations from such Governmental Authorities are received more than sixty (60) Days after Contractor’s submission of complete and accurate supporting documentation to Owner. Contractor shall be responsible for providing the necessary engineering and technical information and preparing supporting documentation for Owner to demonstrate that the Owner Permit conditions are satisfied. The Parties intend that the supporting documentation to be provided by Contractor will be consistent with or reasonably inferable from the documentation that is contemplated in Contractor’s Permitting Plan as of the Effective Date, but acknowledge that the relevant Governmental Authority may require additional or different documentation. In such case, Contractor shall provide such documentation as is reasonably available to Contractor, and Contractor’s Permitting Plan may be updated accordingly from time to time as the Parties agree. Contractor shall submit to Owner a complete and accurate package of engineering and technical documentation in accordance with the relevant Owner Permit for each such further approval or authorization, no less than sixty (60) Days prior to the date receipt of such approval or authorization is required in order to avoid delays to the performance of the Work, or such shorter period of time as Owner and Contractor agree are appropriate under the circumstances of the required approval or authorization. Owner shall endeavor to submit such package for approval or authorization within fourteen (14) Business Days after Contractor’s submission of same to Owner. Notwithstanding anything to the contrary in the foregoing, the Parties acknowledge and agree that the sixty (60) Day requirement in the foregoing does not apply in the case of engineering and technical documentation that is

submitted in response to Condition No. 30(b) of the FERC Order. Contractor shall respond to any Owner comments, provide additional documentation reasonably available to Contractor requested by an applicable Governmental Authority, assist Owner in responding to questions or requests for further information from the applicable Governmental Authorities, and coordinate with Owner so that any such further approvals or authorizations are obtained in time so as to not delay performance of the Work in accordance with this Agreement. Any delay by Owner in obtaining any such further approval or authorization due to Contractor’s failure to provide such assistance or to reasonably cooperate with Owner with respect to the permitting process shall not constitute an Owner-Caused Delay for the purposes of this Agreement.

(i) Contractor shall promptly notify Owner of any conflict or discrepancy between or among the Owner Permits, the Basis of Design, the Scope of Work and the design of the LNG Facility (other than as identified on Appendix J-3) as and when such conflicts or discrepancies are identified, and confer with Owner to determine how Owner desires to resolve such conflicts. If Owner elects to resolve the conflict by amending or modifying an Owner Permit, Contractor will provide assistance in accordance with the applicable provisions of this Section 2.10.2.

(e) Contractor and Owner shall regularly schedule meetings to review the schedule for submission of Permit applications, establish priorities, and monitor progress on the preparation of Permit applications and issuance of Permits. Both Parties shall use commercially reasonable efforts to provide the other Party with relevant information and Permit applications at least thirty (30) Days prior to the submission date of a Permit application.

(f) During the course of obtaining the Contractor Permits, Contractor and Owner shall meet as mutually agreed to determine which, if any, of the Contractor Permits will be necessary for Owner to operate each Stage of the LNG Facility following Substantial Completion. If any such Contractor Permits are identified, such Contractor Permits shall be obtained in Owner’s name, where applicable and subject to the other provisions of this Section 2.10, or assigned or transferred to Owner at Substantial Completion of the relevant Stage. Any necessary modification or amendment to such Contractor Permits that must be made following Substantial Completion with respect to Owner’s operation of the LNG Facility after Substantial Completion shall be Owner’s responsibility.

(g) To the extent a Permit that is identified following the Effective Date as being required for operation of the LNG Facility is not listed as a Contractor Permit or Owner Permit on Appendix J-2 or Appendix J-1, respectively, and such Permit is legally required to be issued in Owner’s name, such Permit shall be an Owner Permit for purposes of this Section 2.10 and Contractor shall cooperate with and shall provide reasonable assistance to Owner until Substantial Completion of the applicable Stage in obtaining and maintaining such Permits, including preparing and developing supporting documentation and other information reasonably available to Contractor that is requested by the Governmental Authorities, in a timely manner so as to not delay the review or issuance of such Permit by the applicable Governmental Authority.

2.10.3 Interactions with Governmental Authorities. Contractor shall at all times cooperate and coordinate with Owner with respect to all interactions with Governmental Authorities related to the Work or the Liquefaction Project. Specifically, without limiting the foregoing, Contractor shall:

(a) dedicate an individual to coordinate with Owner to expedite the development of responses to technical queries from Governmental Authorities such as FERC and PHMSA, and the submission of supporting documentation necessary to satisfy Permit conditions so that Owner can obtain further approvals or authorizations for the continued performance of the Work;

(b) notify Owner of Contractor’s intent to obtain or renew any Contractor Permit at least five (5) Business Days in advance of such filing wherever practicable or otherwise as soon as practicable;

(c) copy Owner on all filings, applications and written correspondence with any Governmental Authority as such relates to Contractor’s execution of the Work;

(d) invite Owner to attend and participate in each meeting between Contractor and any Governmental Authority relating to the Work;

(e) if Contractor encounters any issue or problem with any Governmental Authority in connection with the Work or any of Contractor’s obligations hereunder, (i) promptly notify Owner thereof; and (ii) coordinate and cooperate fully with Owner to solve such issue or problem; and

(f) promptly notify Owner (which notice shall include a copy of the relevant correspondence from the applicable Governmental Authority) if Contractor or any Supplier receives any notice of violation or similar notification from a Governmental Authority which asserts or alleges any breach or violation of any Permit.

Notwithstanding the foregoing, Contractor acknowledges and agrees that:

(g) inspections or reviews by Governmental Authorities may extend for a number of days and Contractor and the relevant Suppliers of Work being inspected or reviewed must be available to and reasonably cooperate with Owner and representatives of such Governmental Authorities during the period of the inspection or review, and respond promptly to requests of representatives of Governmental Authorities that relate to the Work, so as to facilitate such inspection or review;

(h) no such cooperation or coordination nor provision of any assistance or advice by Owner shall reduce, diminish or otherwise affect any obligation of Contractor hereunder; and

(i) Without limiting Contractor’s rights with respect to an Excusable Event, Contractor shall not be entitled to a Change Order as a result of any such cooperation or

coordination or provision of assistance or advice provided in accordance with this Section 2.10.3, regardless of whether Owner is successful in addressing any issue or problem.

2.11 Use of the Site.

2.11.1 Use of the Site. From and after the FNTP Date and until Substantial Completion of Stage II, Contractor shall, subject to the other provisions of this Section 2.11, Section 2.28 and Appendix M, be entitled to full use of the Site for the conduct of the Work in compliance with the terms of this Agreement such that Contractor may progress with construction on a continuous basis without material interruption or interference. Subject to Sections 2.5.3 and 14.1, Contractor shall not allow any Persons (other than Contractor’s or any Supplier’s employees or officers) to access the Site except directly in connection with the performance of the Work, without providing prior written notice to Owner of the identity of such Persons. Thereafter, Contractor shall be entitled to use the Site as reasonably necessary to fulfill its obligations under Section 2.11.9, but in any event for no longer than thirty (30) Days after the Final Acceptance Date of Stage II, after which Contractor shall have no further right to access or use the Site except in accordance with Article 10. Contractor acknowledges and agrees that (a) following the initial introduction of hydrocarbons in Stage I, access to Stage I and the Common Facilities may be further restricted in accordance with Permit requirements; (b) following Substantial Completion of Stage I, access to the controlled areas related to Stage I and the Common Facilities: (i) for the purpose of completing any unfinished and planned Work, shall be on the terms set forth in Section 2.11.2(a); and (ii) for the purpose of performing unplanned Work, including Punch List Items and any Corrective Work, shall be on the terms set forth in Section 2.11.2(b); and (c) after Substantial Completion of a Stage, Owner’s operating procedures and the Owner HSSE Program shall apply to all Work performed on the areas of the Site and the LNG Facility that are controlled by Owner following Substantial Completion of that Stage, in addition to any further procedures adopted by Contractor.

2.11.2 Use of the Site After Stage I Has Achieved Substantial Completion.

(a) Planned Activities. Contractor shall provide Owner with notice in writing of the expected dates for performance of Work on a Stage after such Stage has achieved Substantial Completion in accordance with Appendix M, including providing the updates as described therein. Contractor shall submit a detailed written plan to Owner for Owner’s review and comment or acceptance at such time as described in Appendix M, for the performance of Work that may interfere with operation of a Stage that has achieved Substantial Completion. Contractor’s plan shall minimize, to the greatest extent reasonably possible, interference with the operation of any Stage that has achieved Substantial Completion, and shall identify any such interference that may occur. Once Contractor’s plan is accepted by Owner, Contractor shall perform such Work in accordance with such plan. Owner shall permit Contractor with access when and as set forth in such approved plan.

(b) Unplanned Activities. No Work shall be performed on any part of a Stage that has already achieved Substantial Completion except in accordance with Appendix M. During the performance of the Work, if a situation arises that requires Work to be performed on a Stage that has achieved Substantial Completion in addition to that planned

pursuant to Section 2.11.2(a), or if Contractor intends or desires to perform any aspect of the Work which Contractor reasonably believes has the potential of interfering with the operation of a Stage that has achieved Substantial Completion, in each case other than the Work planned in accordance with Section 2.11.2(a) and Appendix M, Contractor shall follow the procedures for preparation and submission of a plan for unplanned activities set forth in Appendix M. Such plans shall provide for the performance of such Work in a manner that minimizes, to the greatest extent reasonably possible, interference with the operation of any Stage that has achieved Substantial Completion, and shall identify any such interference that may occur. Contractor shall submit such plan to Owner for review and comment or acceptance, and once such plan is accepted by Owner, Contractor shall perform such Work in accordance with such plan. Notwithstanding Owner’s agreement to the schedule and the plan for the performance of such Work, Owner may, in its sole and absolute discretion, subsequently prohibit the performance of such Work on such scheduled date, and Contractor shall work with Owner to develop a new plan and date for performing such Work in accordance with this Section 2.11.2(b).

(c) Plan Requirements. In addition to the requirements set forth in Section 2.11.2(a), Section 2.11.2(b) or Appendix M, as applicable, Contractor shall specifically note in each plan prepared pursuant to Section 2.11.2(a) or Section 2.11.2(b), any interconnection activities or other portions of the Work that would involve shutting down or curtailing production of LNG or NGLs for any Stage that has achieved Substantial Completion, or would diminish the capacity or performance of the Common Facilities in any manner.

2.11.3 Other Locations. Contractor shall carry out the Work so as not to interfere unnecessarily or improperly with, or damage, any access to, use or occupation of, public or private roads and footpaths or properties whether in the possession of Owner or of any other Person. Contractor shall liaise with, and ascertain the requirements of, all Governmental Authorities in relation to vehicular access to and egress from the Site and access via waterways, and shall comply with those requirements. Contractor shall so organize the Work as to minimize, and if required by any Governmental Authorities having jurisdiction over such roads or footpaths, avoid, vehicular travel during peak travel time on public roads, such as (but not limited to) school start and finish times. Contractor shall use commercially reasonable efforts, in accordance with GECP, to prevent damage to any highway or bridge by any traffic of Contractor or any Supplier and in particular, but without limitation, shall: (a) select routes, obtain all Contractor Permits from, and post any and all bonds for potential damage required by, relevant Governmental Authorities; and (b) choose and use vehicles and restrict and distribute loads so that any traffic interference or damage to roads and bridges which may arise from the moving of equipment and materials to and from the Site shall be limited as far as reasonably possible, consistent with those standards. Contractor shall maintain all access routes so as to minimize dust and dirt accumulation on public roads adjacent to the Site, as well as within the Site. Contractor shall be deemed to have satisfied itself as to and shall be fully responsible for the routing for delivery of heavy or large loads to the Site. Contractor shall implement appropriate traffic control measures with respect to the performance and delivery of the Work, including those required under Applicable Laws. As between Owner and Contractor, Contractor shall be fully responsible for all Claims made by third parties for damages, losses, costs, expenses and charges arising out of damage to roads, bridges and other third-party property caused by

Contractor or any Supplier during performance of the Work and shall promptly restore at its own cost and expense such property to the condition it was in before such damage to the extent required by such third-party Claim. Contractor shall and shall cause its Suppliers to coordinate and conduct the performance of the Work so as to not interfere with or disrupt the use and peaceful enjoyment of any property adjacent to the Site. For the avoidance of doubt, Contractor and Suppliers conducting the Work in accordance with Applicable Laws and Permits shall not be deemed to disrupt the use and peaceful enjoyment of any property adjacent to the Site. Where the nature of the Work is such as to require the use by Contractor of waterborne transport or Contractor’s or any Supplier’s use any of the waterways, Contractor shall and shall cause its Suppliers to, coordinate with the applicable Governmental Authorities so as to avoid, or minimize to the extent possible, any interference by Contractor or its Suppliers with the access by and use of the waterways by other Persons, and shall comply with all Applicable Laws during use of waterborne transport or any other use of waterways in connection with the performance of the Work. Contractor shall promptly address any complaints from the local communities and harbors and waterways arising from any such damage or interference described in this Section 2.11.3 in an expedient and professional manner. Contractor shall ensure that the construction dock complies with the terms of the Owner Permits, as applicable, and all other Applicable Laws. Contractor acknowledges that busy harbors, waterways and jetties and the use of such facilities by other Persons shall not constitute a Force Majeure event or an Owner-Caused Delay.

2.11.4 Owner Agreements. At all times during the performance of the Work at the Site, Contractor shall comply, and shall cause all Subcontractors performing Work at the Site to comply, with the requirements of the leases, easement and other rights affecting Owner’s or the Common Facilities Owner’s real property as set forth in Appendix LL, including allowing third parties to access the Site in accordance with such rights.

2.11.5 Pipeline Crossings Rights-of-Way. Contractor shall provide Owner with the design of the pipeline crossings in the locations as depicted on Attachment L-4 to Appendix L as Owner reasonably requires in order to obtain the necessary rights-of-way for such pipeline crossings in accordance with Section 3.14. In designing the crossings, Contractor shall design the crossing such that it would not cause any adverse effect on the utilities, and such design shall be subject to approval by the utilities.

2.11.6 Off-Site Laydown Yard Lease. Contractor’s lease agreement with respect to its selected off-Site laydown yard in Jefferson County, Texas shall be assignable to Owner at Owner’s request without the consent of the landlord upon a termination of this Agreement. If Owner requests assignment of such lease in connection with the termination of this Agreement, Contractor shall provide Owner with a true, correct and complete copy of such lease.

2.11.7 No Commercial Activities. Neither Contractor nor its Subcontractors nor its or their employees shall establish any commercial activity or issue concessions or permits of any kind to third parties for establishing commercial activities on the Site or any other lands owned, leased or otherwise controlled by Owner; provided, that lunch wagons and vending machines may be permitted upon prior written acceptance by Owner.

2.11.8 Hunting, Fishing and Firearms. Contractor shall cause its personnel not to, and shall cause each member of Contractor Group to cause its personnel not to, hunt, fish or carry any weapons, firearms or other similar items at the Site or any other property owned, leased or controlled by Owner or any of its Affiliates, including the Common Affiliates Owner. Owner may inspect the personnel of any member of Contractor Group to confirm compliance with this Section 2.11.8. Contractor shall notify its personnel and shall require each member of Contractor Group to notify its personnel that a violation of this Section 2.11.8 may result in prosecution under Applicable Laws, including Applicable Laws related to trespassing or the possession of weapons, firearms and other similar items.

2.11.9 Clean-Up. Contractor shall, to Owner’s reasonable satisfaction, at all times and in a professional manner in accordance with all Applicable Laws, appropriately manage and remove and dispose of all waste materials or rubbish caused by the activities of Contractor or any of its Subcontractors. Without limitation of the foregoing or limiting Contractor’s obligations, Contractor shall clean up all such waste materials or rubbish at Owner’s request with reasonable notice. As soon as practicable following Substantial Completion of a Stage, Contractor shall remove, at its own cost, all of its equipment, materials and other items not constituting part of the LNG Facility and remove all waste material and rubbish (but not including Pre-Existing Hazardous Materials) from the areas of the Site related to that Stage. As soon as practicable after completion of all of the Punch List Items with respect to both Stages, or upon Owner’s election to complete the Punch List Items under Section 9.9.4, Contractor shall, and shall cause the Suppliers to, remove, at Contractor’s cost, all waste material and rubbish (but not including Pre-Existing Hazardous Materials) and all of Contractor’s or such Supplier’s equipment, materials and other items not constituting part of the LNG Facility, and restore the Site (to the extent applicable) in accordance with all Permits and this Agreement. In the event of Contractor’s failure to comply with any of the foregoing, Owner, having given Contractor five (5) Days’ notice and Contractor having failed to commence and thereafter diligence pursue a cure for such failure to comply, may accomplish the same at Contractor’s expense.

2.11.10 TGS Development Property. As of the FNTP Date, Contractor shall take assignment of the Sublease Agreement dated as of June 24, 2019 between Owner and TGS Development, L.P., with respect to certain real property located south of the Site that Contractor desires to use during performance of the Work, pursuant to an assignment and assumption agreement in form and substance mutually agreeable to Contractor and Owner. The assignment and assumption agreement shall provide that notwithstanding such assignment, Owner will shall have the right to access and use the two existing trailers that are currently located on such property in accordance with the terms of the assignment and assumption agreement until the date that Contractor installs the office trailer for Owner personnel at the Site pursuant to Section 2.5.3.

2.12 Roads; Shipping and Storage; Laydown Areas; Importing Equipment.

2.12.1 Roads and Site Access Infrastructure. Contractor shall be responsible for providing or constructing any access roads, haul roads, docks, or other site access infrastructure necessary for Contractor to transport materials, including Equipment and Construction

Equipment, to the Site. Contractor shall use the locations of entrances onto the Site as identified in the Owner Permits. Any activities of Contractor in connection with the foregoing that require Contractor to access to, or that may cause interference with the operation of, any Stage that has achieved Substantial Completion, including any potential interference with traffic in the Sabine Neches Waterway, shall be subject to the requirements of Section 2.11.2.

2.12.2 Shipping and Storage.

(a) Contractor shall, as part of the Work: (i) arrange for complete handling of all Equipment, including inspection, expediting, quality assurance, shipping, loading, unloading, FTZ admission, customs clearance, receiving, and storage; (ii) make all necessary arrangements for tugs, escort services and any other arrangements necessary for the use of waterborne transport of any items, including Equipment, to the Site; and (iii) construct and maintain the heavy haul road for use in transporting items delivered to the materials offloading facility as described in Appendix A, until Substantial Completion of Stage II occurs and care, custody and control of Stage II has been transferred to Owner. Contractor has provided Owner with a shipping Plan as part of the Project Execution Plan that lays out the methodology and logistics of transporting the Equipment, the Construction Equipment and all other items and materials incorporated into the LNG Facility as part of the Work or used in connection with or necessary to conduct the Work but which do not form a permanent part of the LNG Facility, which Contractor shall follow in shipping all Equipment to the Site. If Contractor determines that any access roads over which it will transport items, including Equipment, to the Site, must be widened or otherwise improved under applicable requirements of the Department of Transportation, FERC or other Governmental Authorities in connection with Contractor’s proposed use, Contractor shall be responsible to obtain any Permit or prepare any applications to modify any Owner Permit and, subject to Owner’s rights with respect to the Owner Permits, submit such application and obtain the necessary modifications to such Owner Permit, and subject to Contractor’s rights with respect to a Change in Law, shall bear the risk of delay with respect to issuance of any such Permit or modification.

(b) All Equipment, including operating spare parts and Capital Spare Parts, and other items comprising part of the Work stored at a location other than the Site or with respect to which title has passed to Owner under this Agreement shall be segregated from other goods and shall be clearly marked as “Property of Port Arthur LNG, LLC” or “Property of PALNG Common Facilities Company, LLC,” as applicable. Contractor shall be solely responsible for the preservation and maintenance of all Equipment, including operating spare parts and Capital Spare Parts, Construction Equipment and any other items of the Work, whether stored in any warehouse, stored on or off the Site, or installed in the LNG Facility, until transfer of care, custody and control of the respective Stage to Owner in accordance with Section 11.2, as applicable. Without limiting the generality of the foregoing or the requirements of the Quality Assurance Plan, Contractor shall store all Equipment, including operating spare parts and Capital Spare Parts, and shall maintain all Equipment while in storage, in accordance with the requirements of the applicable Supplier’s requirements for the preservation and maintenance of the relevant Equipment, and the requirements of the Scope of Work, Applicable Laws, if any, and any insurance programs related to such Equipment.

(c) Contractor shall not store any imported Equipment which is required to be imported through a FTZ hereunder and for which Owner is responsible for Customs Duties in accordance with Section 7.3 in any location other than a location designated as part of a FTZ. Notwithstanding the foregoing, Equipment that is not imported or is not eligible to be imported through a FTZ, may be stored off the Site at such locations as may be permissible under the Owner Permits.

(d) In any event, if Contractor elects to store any component or item of Equipment at any location other than the Site, Contractor shall: (i) prior to or concurrently with placing any component or item of Equipment into storage at any location other than the Site, tag the Equipment as provided in Section 2.12.2(b); (ii) on a quarterly basis (as of the end of each calendar quarter), provide written notice of the storage location of any component or item of Equipment where the value of the item of Equipment, or the item of Equipment of which such component is a part of, exceeds [***], specifying in such notice the components or items of Equipment currently stored at such location; (iii) provide a quarterly inventory (as of the end of each calendar quarter) to Owner of all components or items of Equipment in storage with values as described in subclause (ii) of this Section 2.12.2(d), specifying the location of each such component and item of Equipment; and (iv) provide Owner with reasonable access to each such storage location and such components or items of Equipment to allow Owner or its designee to inspect such components or items of Equipment for the purpose of verifying Contractor’s compliance with the requirements of Section 2.12.2(b) and this Section 2.12.2(d). The notices and quarterly inventories provided by Contractor pursuant to this Section 2.12.2(d) shall be provided in the form and format as described in Attachment S-4 to Appendix S.

(e) References to the Equipment or any component or item thereof in this Section 2.12.2 shall in all cases include operating spare parts and Capital Spare Parts.

2.12.3 Laydown Areas. All of the off-Site laydown areas that Contractor will utilize during performance of the Work are defined in Contractor’s Project Execution Plan. Contractor shall not utilize any other off-Site laydown areas in connection with the performance of the Work without obtaining Owner’s prior written approval to the use of such laydown area; provided, however, if a proposed off-Site laydown area complies with the Owner Permits and complies with the requirements of Section 7.3, then Contractor shall notify Owner in advance in writing of the use of such other off-Site laydown area, but need not obtain Owner’s prior written approval.

2.12.4 Importing Equipment. Contractor shall make all arrangements, including the processing of all documentation, necessary to import Equipment and any other equipment and other items necessary to perform the Work into the U.S., and shall coordinate with the applicable Governmental Authorities in achieving clearance of U.S. customs for all such Equipment and other items. Equipment and other Contractor-Furnished Items for which Owner is responsible for Customs Duties pursuant to this Agreement shall be imported through a FTZ in accordance with Section 7.3. If the applicable FTZ is not activated as of the date on which Contractor is importing the relevant Equipment, then Contractor shall import the relevant Equipment and Customs Duties will be paid by the Parties in accordance with Section 7.3 regardless of the fact that the applicable FTZ has not been activated. If the FTZ for the Liquefaction Project that applies to the Site is not activated or does not include Contractor’s

selected off-Site laydown yard in Jefferson County, Texas as identified in Appendix ZZ, Contractor may nevertheless import the Equipment that it intended to store at such location and store it at the selected off-Site laydown yard as may be permissible under the Owner Permits, and Owner will reimburse Contractor for Customs Duties incurred as a result thereof in accordance with Section 7.3.2. If Equipment or any Contractor-Furnished Items for which Owner is responsible for Customs Duties pursuant to this Agreement are imported through a FTZ location other than the FTZ for the Site, Contractor shall comply with Applicable Laws when transporting such Equipment or Contractor-Furnished Items to the Site so that such Equipment or Contractor-Furnished Items are still eligible to utilize the applicable FTZ for the Liquefaction Project. Without limiting the requirements of Section 2.12.2(a) or this Section 2.12.4, Contractor shall as part of its shipping plan identify the proposed locations and other relevant logistics and timing of the importation of any Equipment into the U.S. and shall notify Owner of any changes in the location of import or other relevant logistics or timing of the importation of any Equipment as promptly as practicable.

2.12.5 [***].

2.13 Fuel, Utilities and Consumable Items.

2.13.1 Fuel. Contractor shall provide all fuel, including installation of all connections, necessary for the performance of the Work, and including costs of Permits and usage (other than the Fuel Gas and Feed Gas to be provided by Owner under Section 3.8).

2.13.2 Utilities. Contractor shall provide all utilities (e.g., electricity, water, communication, cable, telephone, waste and sewer), including installation of all connections and substations, necessary for the performance of the Work and as necessary for all office trailers to be provided by Contractor hereunder as part of its Work (whether for use by Contractor, Owner or any Subcontractor), and including costs of Permits and usage, except that Owner shall provide electricity to the extent specifically set forth in Section 3.2. Contractor shall not, and shall prohibit its Subcontractors from, utilizing any electricity provided by Owner pursuant to Section 3.2 for any purposes other than to supply permanent power to Equipment, substation buildings and other parts of the LNG Facility as necessary during pre-commissioning, commissioning, start-up and testing of each Stage. Contractor affirms that it has reviewed and familiarized itself with the quality and quantity of electrical power to be supplied by Entergy as described in Appendix B, and the LNG Facility shall be designed such that the LNG Facility shall be capable of producing LNG as contemplated under this Agreement, including Appendix A and Appendix B.

2.13.3 Consumable Items. Contractor shall provide or cause to be provided all necessary consumables (other than the Feed Gas to be provided by Owner under Section 3.8) as required in connection with construction, commissioning and start-up of the LNG Facility. A “first fill” schedule that sets forth the amount of consumables to be supplied by Contractor to provide a complete or full first fill, and the name of the Suppliers providing such consumables, shall be proposed by Contractor and submitted to Owner on or before three hundred sixty five (365) Days before the scheduled date of Ready for Start-Up of Stage I, for Owner’s review. At all times while Contractor maintains a diesel vehicle fueling station on the Site, Contractor shall

allow Owner to gas-up up to twelve (12) of Owner’s ATV vehicles at Contractor’s vehicle fueling station, as part of the Contract Price.

2.13.4 Minimizing Feed Gas Flaring, Venting and Loss. Without limiting the provisions of Appendix M, during the performance of the Work, Contractor shall use safe and reasonable efforts to minimize the amount of LNG lost and to minimize the amount of Feed Gas used prior to Substantial Completion of each Stage that is consumed by flaring, venting or loss, giving consideration, however, to completion of the Work, including Performance Tests, by the Guaranteed Substantial Completion Date of such Stage.

2.14 Spare Parts; Special Tools.

2.14.1 Commissioning Spare Parts. Contractor shall provide all pre-commissioning, commissioning, testing and start-up spare parts necessary for each Stage to achieve Substantial Completion in accordance with this Agreement. The cost associated with all Work related to such pre-commissioning, commissioning, testing and start-up spare parts is included in the Contract Price, including the cost to procure and furnish such spare parts and the actual purchase price of such spare parts.

2.14.2 Operating Spare Parts. With respect to operating spare parts for the Equipment for use after Substantial Completion, no later than five hundred fifty (550) Days after the FNTP Date, Contractor shall deliver to Owner for Owner’s review and comment a detailed list of the manufacturer- and Contractor-recommended operating spare parts for each applicable item of Equipment necessary for operating such Equipment (including components and systems of such Equipment). If Contractor is not able to obtain the necessary information with respect to the recommended operating spare parts from a Supplier by such date due to the Supplier’s inability to identify the recommended operating spare parts based on the progress of the relevant Purchase Order, Contractor shall notify Owner as to the date by which such operating spare parts shall be identified. In any event, Contractor shall deliver the required information with respect to the recommended operating spare parts from such Suppliers by no later than seven hundred (700) Days after the FNTP Date. The list shall consist of spare parts to support two (2) years of normal operation, and shall include details of each proposed operating spare part to fully enable its procurement (including the manufacturer, ordering contact information, pricing, lead-time for ordering such part, complete item description, part number, quantity to order based on manufacturer’s recommendation and a separate column indicating the quantity recommended by Contractor based on its experience for each part necessary for operating such Equipment (including components and systems of such Equipment)). The list shall contain an interchangeability matrix for the operating spare parts indicating which operating spare parts may be used across different items of Equipment. Owner shall have forty-five (45) Business Days to comment on such operating spare parts list. Contractor shall update such list and provide a revised list to Owner within thirty (30) Business Days after receipt of comments from Owner to such list. Owner shall then have ten (10) Business Days to respond to Contractor identifying the operating spare parts, if any, that Owner wishes Contractor to procure as part of its execution of a Purchase Order. Prior to execution of the applicable Purchase Orders, or addendums or releases to Purchase Orders that were previously placed, under which such

operating spare parts will be ordered, Contractor shall deliver the pricing and schedule for the operating spare parts to be ordered under each such Purchase Order to Owner (but Contractor may redact the other commercial terms related to liquidated damages provisions, performance security and limits of liability, before making such copies available to Owner). The cost associated with all Work related to the two (2) years’ operating spare parts is included in the Contract Price, except for the actual purchase price, property taxes associated with storage if Owner agrees in the applicable Change Order that such operating spare parts will not be delivered directly to the Site, and delivery costs of such operating spare parts (which, subject to Contractor’s compliance with the timely preparation and delivery of the list of operating spare parts in accordance with this Section 2.14.2, and timely placement of the Purchase Order, may include costs to expedite delivery so that the operating spare parts are delivered prior to Substantial Completion of the Stage for which such operating spare parts are being procured). In the event Owner requests in writing that Contractor procure any operating spare parts for Owner, Contractor shall be entitled to a Change Order to the extent provided in Section 8.3.1(a). The operating spare parts so requested by Owner shall be delivered to the Site (or to another location reasonably requested by Owner) as a condition of Substantial Completion of the relevant Stage. Contractor shall maintain, and update as necessary, a spreadsheet listing all of the operating spare parts ordered and delivered, that includes detailed information regarding the operating spare parts delivered, including the manufacturer, complete item description, part number, quantity ordered, and amount paid for such operating spare parts, in a format mutually agreed by the Parties to allow Owner to upload such list into Owner’s inventory management system in advance of delivery of such operating spare parts.

2.14.3 Capital Spare Parts. Contractor shall, as part of the Work, procure the spare parts identified on Appendix TT (the “Capital Spare Parts”). If during further development of the design and engineering of the project and during procurement, Contractor or Owner determines that additional, fewer or different Capital Spare Parts would be appropriate or are necessary, the Parties shall notify each other, discuss the reasons for the change and update the list of Capital Spare Parts as agreed by Owner. In no event shall Contractor update, modify or change the list of Capital Spare Parts except as agreed in writing by Owner. At FNTP, Contractor shall deliver to Owner detailed information regarding each proposed Capital Spare Part with respect to its procurement (including the manufacturer, ordering contact information, complete item description, pricing, part number, quantity ordered or to be ordered, including components and systems of such Equipment). Contractor shall notify Owner no less than ten (10) Days in advance of when Contractor will place Purchase Orders for the procurement of any Capital Spare Parts, identifying which Capital Spare Parts are being ordered and quantities, and the date on which such Purchase Order is scheduled to be issued. If Owner notifies Contractor that Owner does not want to purchase a Capital Spare Part no later than three (3) Business Days before such Purchase Order is scheduled to be issued, Contractor shall not include such Capital Spare Parts in its applicable Purchase Orders. The cost associated with all Work related to the procurement of the Capital Spare Parts is included in the Contract Price, along with a Provisional Sum for the estimated purchase price and delivery costs of such Capital Spare Parts as set forth in Appendix C. In the event the actual purchase price and delivery costs of the Capital Spare Parts differs from the Provisional Sum set forth in Appendix C, Contractor shall submit a Change Order request to Owner in accordance with Section 8.3.1(b). The Capital Spare Parts shall be

delivered to the Site (or to another location reasonably requested by Owner) as a condition of Substantial Completion, but in any event no earlier than sixty (60) Days before the scheduled Substantial Completion Date. Contractor shall maintain, and update as necessary, a spreadsheet listing all of the Capital Spare Parts ordered and delivered, that includes detailed information regarding the Capital Spare Parts delivered, including the manufacturer, complete item description, part number, quantity ordered, and amount paid for such Capital Spare Parts, in a format mutually agreed by the Parties to allow Owner to upload such list into Owner’s inventory management system in advance of delivery of such Capital Spare Parts.

2.14.4 Contractor Use of Owner Spare Parts. Contractor shall not utilize any of the operating spare parts procured by Contractor pursuant to Section 2.14.2 or otherwise procured by Owner, or any Capital Spare Parts, in the course of performing the Work without Owner’s prior written consent. In the event Contractor utilizes any such spare parts, Contractor shall supply Owner free of charge with spare parts equivalent in quality and quantity of such spare parts used by Contractor (which shall be new except as otherwise agreed by Owner), from the original manufacturer of the spare parts used, or otherwise as agreed to be Owner, soon as possible following Contractor’s use of such spare parts, or shall reimburse Owner for the complete replacement costs incurred by Owner to replace such spare parts.

2.14.5 Special Tools. No later than the date that is seven hundred thirty (730) Days prior to the Guaranteed Substantial Completion Date for Stage I, Contractor shall deliver to Owner a list of the special tools, based on Suppliers’ recommendations, that Contractor intends to acquire in connection with the Liquefaction Project, for Owner’s review, comment and acceptance, such acceptance not to be unreasonably withheld. Such list shall include only one set of such special tools for the Liquefaction Project. Owner shall have the right to use the special tools for the operation of Stage I, but shall return the special tools to Contractor and Contractor will maintain possession of the special tools until Substantial Completion of Stage II. Contractor shall maintain a tracking system that identifies the special tools being used by Owner for operation of Stage I following Substantial Completion of Stage I.

2.15 Materials at the Site. Contractor shall dispose of water, soil, rock, gravel, sand, minerals, timber, and any other materials developed or obtained in the excavation or other operations of Contractor or any Supplier on the Site in accordance with Applicable Laws, except for Pre-Existing Hazardous Materials, and except that Owner may take title to, use or dispose of any minerals developed or obtained by Contractor on the Site. Contractor may use in the Work soil developed or obtained on the Site for fill purposes. Contractor may only use any such materials if Contractor determines that they comply with the requirements of this Agreement and are suitable for the purposes for which Contractor is using them. OWNER HEREBY EXPRESSLY DISCLAIMS, AND CONTRACTOR ACKNOWLEDGES THAT OWNER IS NOT MAKING, ANY REPRESENTATION OR WARRANTY, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ANY SUCH MATERIALS.

2.16 Personnel Training.

2.16.1 Contractor’s Obligation. As part of the Work, operating personnel engaged by Owner or an Affiliate of Owner (including operators, maintenance personnel, safety, engineering and other operating support personnel), as designated by Owner in its sole and absolute discretion (“Operating Personnel”) shall be given training designed and administered by Contractor at its expense, which shall be based on the program requirements contained in Appendix P. The anticipated number of Operating Personnel that will be trained by Contractor is set forth in Appendix P. Owner will update the number of Operating Personnel that will be available for training by notice to Contractor in accordance with Section 3.6.1; provided that the number of Operating Personnel to be trained shall not exceed the anticipated number set forth in Appendix P. The training provided by Contractor shall include instruction for the Operating Personnel in the operation and routine maintenance of each item of Equipment in accordance with Appendix P. As part of the training, Contractor shall provide the Operating Personnel with full access to the LNG Facility during commissioning, testing and start-up of each item of Equipment, including each LNG Train. Training shall be provided by personnel who have actual experience in the subject area and who, in Contractor’s and the relevant Supplier’s reasonable judgment, as applicable, are otherwise qualified to provide such training, subject to Owner’s review and acceptance. Training shall take place at such locations and at such times as agreed upon by the Parties. Contractor shall provide Owner and the Operating Personnel with the training materials as described in Appendix P.

2.16.2 Implementation of Training Program. Contractor shall complete the training of the Operating Personnel on or before the date as described in Section 2.5 of Appendix P. Contractor’s training program shall include testing of the Operating Personnel to verify that each of the Operating Personnel: (a) (i) has completed the training program and passed the tests administered as part of that program; and (ii) is fully qualified to perform the work covered under the training program; or (b) has failed to complete the training program or failed the tests administered as part of the program and is not qualified to perform the work covered under the training program. Contractor shall provide Owner with the evaluations, test results and other information to be provided to Owner in accordance with Appendix P.

2.17 Environmental Compliance; Hazardous Materials and Explosives.

2.17.1 Environmental Compliance. Without limitation of Section 2.3, Contractor is responsible for ensuring that the Work is performed using GECP and in compliance with all provisions of this Agreement, all Applicable Laws regarding the environment, and in compliance with the Contractor HSSE Program policies and procedures regarding the environment; provided that if there is a conflict between Applicable Laws and GECP, Applicable Laws shall govern. Contractor shall, and shall cause each of its Suppliers to, cause its and their respective personnel to comply with the Environmental Plan, the Owner Permits, Applicable Laws and such policies and procedures. Contractor shall follow the requirements of the Environmental Plan, the Owner Permits, Applicable Laws and such policies and procedures pursuant to Section 2.18 in performing any Work on the Site in areas in which Owner has disclosed to Contractor that Archeological Finds or Pre-Existing Hazardous Materials have been identified, if any.

2.17.2 Limitation on Hazardous Materials. Contractor shall not, nor shall it permit or allow any Supplier to, bring any Hazardous Materials on the Site except as provided in this Section 2.17.2. Contractor and its Suppliers may bring onto the Site such Hazardous Materials as are necessary to perform the Work using GECP so long as Contractor and its Suppliers do so in compliance with all provisions of this Agreement, Applicable Laws regarding the environment, and the Contractor HSSE Program policies and procedures regarding the environment, including those policies and procedures related to the transportation, storage and disposal of Hazardous Materials. Contractor shall bear all responsibility and liability for Hazardous Materials brought onto the Site by or on behalf of Contractor or its Suppliers.

2.17.3 Handling of Hazardous Materials. Contractor shall, at its sole cost and expense, safely store, use and dispose of all non-hazardous wastes and Hazardous Materials that Contractor or any of its Suppliers bring onto the Site, including non-hazardous wastes that Contractor generates during performance of the Work and Hazardous Materials that Contractor generates during performance of the Work from Hazardous Materials brought onto the Site by Contractor or any of its Suppliers. All such non-hazardous waste and Hazardous Materials shall be disposed at disposal facilities not located on the Site and that are permitted to receive such non-hazardous waste and Hazardous Materials, as applicable, in compliance with all Applicable Laws regarding the environment, and the Contractor HSSE Program policies and procedures regarding the environment. Contractor shall keep accurate records of the disposal of non-hazardous waste from the Site. Contractor shall also keep accurate records of Hazardous Materials disposed from the Site, and provide Owner with copies of all transportation and disposal records of all Hazardous Materials disposed of by Contractor. Contractor shall report to Owner any violation of or failure to comply with the requirements of Section 2.17 by Contractor or any other member of the Contractor Group, as soon as reasonably possible after having knowledge thereof and in no event later than twenty-four (24) hours thereafter. Contractor shall promptly, and in accordance with all Applicable Laws, remediate any Release of any Hazardous Materials that Contractor or any of its Suppliers bring onto the Site, including any Release of Hazardous Materials generated during performance of the Work from such Hazardous Materials.

2.17.4 Discovery of Archeological Finds or Pre-Existing Hazardous Materials. Contractor shall not disturb any Archeological Find or Pre-Existing Hazardous Materials the presence of which was disclosed by Owner or otherwise known to Contractor pursuant to the FERC resource report or the Geotechnical Reports or otherwise known to Contractor prior to the Effective Date pursuant to work conducted under the EDSA or the SWSA. If Contractor should encounter or Release any Archeological Find or Pre-Existing Hazardous Materials on the Site, Contractor shall promptly cease working in the affected area, notify Owner of such occurrence or encounter and take such other actions as described in the Environmental Plan with respect to any such discovery (except that Contractor shall not handle test, treat, transport, dispose of or remediate Pre-Existing Hazardous Materials). Contractor shall proceed, to the extent reasonably possible in the event of such discovery of an Archeological Find or Pre-Existing Hazardous Materials, with other portions of the Work unless otherwise directed by Owner. Work in the affected area shall be resumed after the Archeological Find has been addressed or the Pre-Existing Hazardous Materials have been removed or rendered harmless or appropriate safety measures have been taken, as applicable, by Owner in accordance with Applicable Laws.

2.17.5 Right to Stop Work. Should Owner at any time observe Contractor, or any of its Subcontractors, performing any part of the Work in a manner that does not comply with the Environmental Plan or the environmental requirements of Appendix Q, or in a manner that may, if continued, fail to comply with the Environmental Plan or the environmental requirements of Appendix Q, Owner shall have the right (but not the obligation) to require Contractor to stop such portion of the Work, as applicable, until such time as the manner of performing the Work complies with the Environmental Plan or the environmental requirements of Appendix Q to the reasonable satisfaction of Owner; provided, however, that at no time shall Contractor be entitled to an adjustment of the Contract Price or Key Date Schedule based on such work stoppage. Notwithstanding anything to the contrary in the foregoing, if Contractor disagrees with any order to stop the Work due to failure to comply with the Environmental Plan or the environmental requirements of Appendix Q that it receives from Owner, and Contractor notifies Owner of such disagreement, Owner and Contractor shall each promptly escalate such disagreement to a higher supervisory level, up to the level of the Contractor Representative and Owner Representative, as applicable. If after such escalation, Owner continues to enforce the stop order and it is later determined that the Work was being performed in accordance with the Environmental Plan and the environmental requirements of Appendix Q, as applicable, and such stop order delayed the performance of the Work by more than four (4) hours, such stop order shall constitute an Owner-Caused Delay for the purposes of this Agreement.

2.17.6 Explosives. Contractor acknowledges and agrees that the use of explosives is not necessary or desirable for the performance of the Work, and as a result thereof Contractor shall not, and shall not permit any of its Subcontractors to, utilize explosives in any part of the Work, with the exception of the use of powder-actuated tools or similar devices where, by design, the tool is powered from an explosive charge, in accordance with GECP.

2.18 HSSE Plans and Policies; Site Rules; Security.

2.18.1 Safety. Contractor shall take all necessary safety and other precautions to protect persons and property from injury, illness or damage arising out of the performance of the Work. Without limitation of Section 2.3, Contractor is solely responsible for ensuring that the Work is performed using GECP in a safe manner and in compliance with all provisions of this Agreement, and Applicable Laws, regarding worker health and safety, including the Occupational Safety and Health Act of 1970 (84 U.S. §§ 1590 et seq.) and any state plans approved thereunder, and regulations thereunder, to the extent applicable. In addition, when Contractor conducts operations on any portion of the Site over which Owner has care, custody and control pursuant to this Agreement, Contractor shall comply with the Owner HSSE Program. Contractor shall comply at all times with all of Owner’s Site-specific orientation and training requirements, which shall be made available to Contractor upon request. Contractor shall inspect the places where any of its employees, contract workers, agents, or Subcontractors are or may be present on the Site, and shall promptly take action to correct conditions which are or may become an unsafe place of employment.

2.18.2 HSSE Plan and Program.

(a) Attached as Appendix Q is Contractor’s health, safety, security and environmental plan and program (the “Contractor HSSE Program”). The Contractor HSSE Program is consistent with GECP and complies with Applicable Laws and the other requirements of this Section 2.18, and includes, among other things: (i) a drug testing program that meets U.S. Department of Transportation drug and alcohol testing requirements applicable to Contractor’s personnel performing Work on any Stage which has achieved Substantial Completion; (ii) policies and procedures regarding the transportation, storage and disposal of Hazardous Material for which Contractor is responsible under this Agreement; (iii) an environmental and social management plan that is consistent with the Environmental Plan, including any Permit conditions regarding mitigation of any biodiversity impacts or other environmental impacts; (iv) a water and waste management plan, including a management strategy for contaminated land; (v) an emergency response plan covering Contractor’s response to emergencies during performance of the Work on the Site; (vi) policies and procedures to maintain compliance with applicable Permits during dredging and construction of the marine berths and the materials offloading facility, including, if applicable, establishing any monitoring programs that may be required by applicable Permits or otherwise under Applicable Laws; (vii) compliance with the requirements of any insurers that provide any of the coverage maintained by Contractor; (viii) Contractor perform a root cause analysis of any reportable incident or series of accidents, injuries or lost time incidents, whether similar in type or not, that indicate the Site is becoming less safe; (ix) security policies and procedures, including with regard to the security of the Site, the Work, and as otherwise described in Section 2.18.5; and (x) includes Site-specific COVID-19 mitigation plans which detail the means, methods and procedures to protect all personnel to mitigate exposure to COVID-19 while performing the Work in accordance with all Applicable Law.

(b) Contractor shall prepare and provide Owner with a copy of a labor and working conditions policy with respect to on-Site labor and the Site, and set standards for the design and operation of temporary housing, if any, for Contractor’s labor force, in each case that complies with all Applicable Laws. Contractor’s labor policy shall also include a plan to mitigate the impacts and effects of the influx of a sizeable temporary workforce on the local communities and the area around the Site. Contractor shall provide Owner with such labor policy prior to the date on which construction activities, other than site preparation activities, commence at the Site.

(c) Contractor shall implement the Contractor HSSE Program and such other Plans and programs as contemplated under this Section 2.18 and shall assume all costs associated with compliance therewith. Any updates, modifications, amendments or other changes to the Contractor HSSE Program shall be furnished to Owner and shall be subject to review and approval in accordance with Section 2.4.6.

(d) In addition to the Contractor HSSE Program and such other Plans and programs, when working on any portion of the Site over which Owner has care, custody and control in accordance with this Agreement, Contractor shall comply with the Owner HSSE Program. Owner may update the Owner HSSE Program by providing written notice to Contractor to address any health, safety, security and environmental requirements that Owner

deems necessary, including by adding requirements to the Owner HSSE Program to address areas of the LNG Facility after Substantial Completion of each Stage. If Owner modifies the Owner HSSE Program prior to Substantial Completion of a Stage and such modification adversely impacts Contractor’s costs or schedule to perform the Work, Contractor shall, subject to Section 8.4, have the right to a Change Order in accordance with Section 8.3.1(n).

(e) In the event of any conflict between any of Contractor’s applicable health, safety and environmental plans and programs, the more specific requirement will prevail. When Contractor is performing Work that is subject to Owner HSSE Program, in the event of a conflict between any of Contractor’s applicable Plans and the Owner HSSE Program, the requirement containing the stricter performance standard will prevail. Contractor shall promptly notify Owner if it determines that there is a conflict between any of Contractor’s Plans and Owner’s health, safety, security and environmental plans and programs.

2.18.3 Implementation of HSSE Practices. Contractor shall appoint one (1) or more (as appropriate) safety and environmental representative(s) acceptable to Owner who shall be stationed at the Site during any period in which Work is being performed at the Site, and shall have responsibility to correct unsafe conditions or unsafe acts associated with the Work and the LNG Facility as soon as possible, act on behalf of Contractor on safety, health, security and environmental matters, and participate in periodic health, safety, security and environmental meetings with Owner after Work has commenced at the Site. Contractor further agrees to provide or cause to be provided necessary training and safety equipment to its employees, contract workers and Subcontractors, and to the employees, contract workers and subcontractors of Owner or the Other Contractors entering the Site, to ensure their compliance with the foregoing health, safety, security and environmental rules and standards, and enforce the use of such training and equipment. Contractor shall maintain accident, injury and any other Books and Records with respect to safety, health, security and environmental matters as required by Applicable Laws or any additional Books and Records with respect thereto as may be required under this Agreement. Contractor’s classification of any accidents, injuries or lost time incidents shall comply with OSHA and other applicable Governmental Authorities reporting practices and policies.

2.18.4 Certain Owner Rights with Respect to Safety. Should Owner at any time observe Contractor, or any of its Subcontractors, performing the Work in an unsafe manner, or in a manner that may, if continued, become unsafe, then Owner shall have the right (but not the obligation) to require Contractor to stop the affected Work activity and coordinate with Contractor until such time as the manner of performing such Work has been rendered safe, to the reasonable satisfaction of Owner; provided, however, that at no time shall Contractor be entitled to an adjustment of the Contract Price or Key Date Schedule based on such work stoppage. Notwithstanding anything to the contrary in the foregoing, if Contractor disagrees with any order to stop the Work due to safety concerns that it receives from Owner, and Contractor notifies Owner of such disagreement, Owner and Contractor shall each promptly escalate such disagreement to a higher supervisory level, up to the level of the Contractor Representative and Owner Representative, as applicable. If after such escalation, Owner continues to enforce the stop order and it is later determined that the Work was being performed safely or was rendered

safe, and such stop order delayed the performance of the Work by more than four (4) hours, such stop order shall constitute an Owner-Caused Delay for the purposes of this Agreement.

2.18.5 Security.

(a) Contractor shall be responsible for the security, fencing, guarding and lighting of the Site until Substantial Completion of Stage II, and shall hire guards and watchmen as reasonably required to control access and egress to and from the Site, and to watch and guard the Site so as to prevent loss or damage to the LNG Facility and Equipment and prevent unauthorized personnel from entering the Site for those portions for which Contractor is responsible; provided, however, that following the transfer, care, custody and control of Stage I to Owner in accordance with this Agreement, Owner shall be responsible for security within those portion of the Site for which care, custody and control has been transferred to Owner. Prior to commencing any Work on the Site, as part of the Work, Contractor shall have completed the training of its security personnel, including training on the use of force, and implemented its security Plan with respect to the Site as agreed to as part of the Contractor HSSE Program. Contractor’s security Plan shall comply with the requirements of this Agreement, requires the coordination of Contractor’s security program with Owner’s security requirements and policies, including coordination with Owner’s security team, and complies with the safety and security requirements of all Applicable Laws, including, as applicable, 33 C.F.R. Part 127, 49 C.F.R. 193.2905(a), 49 C.F.R. 193.2913, 33 C.F.R. Part 105, and 33 C.F.R. 127.709; provided that Contractor shall not be required to make material modifications to its security Plan except for those reasonably necessary to address imminent threats to safety or security.

(b) As part of the Work, Contractor shall furnish, construct and install the permanent security system for the LNG Facility. Upon Substantial Completion of Stage I, Owner shall take over the permanent security system and shall implement the Owner HSSE Program with respect to accessing and performing Work on Stage I, while Contractor retains responsibility for security with respect to other areas of the Site. Upon Substantial Completion of Stage II, the Site shall be fully incorporated into the security perimeter maintained by Owner and thereafter access thereto, and Work therein, will be subject to Owner’s site safety and security requirements and other obligations under this Agreement with respect to performing Work at the Site.

2.18.6 Compliance with Federal Regulatory Requirements.

(a) All Work performed hereunder shall comply with the minimum federal safety standards for the design, installation, inspection, testing, construction, extension, operation, replacement, and maintenance of facilities contained in Title 49 of the Code of Federal Regulations (C.F.R.), Parts 192 (to the extent applicable) and 193 and in 33 C.F.R. Part 127. Contractor shall comply with requirements of the Operator Qualification Program that are outlined in 49 C.F.R. Part 193 Subpart H and 49 C.F.R. Part 195 Sub-Part G of C.F.R. Part 195, where applicable.

(b) Without limiting the generality of Section 2.18.6(a), Contractor shall participate in inspections and reviews required by Governmental Authorities, including

FERC and PHMSA, from time to time during performance of the Work. Contractor shall appoint an individual to coordinate with Owner and to serve as a single point of contact with Contractor with respect to all such matters, and acknowledges and agrees that it shall provide personnel from the appropriate disciplines as requested by Owner or a Governmental Authority to participate in such inspections and reviews.

(c) Contractor shall implement and utilize a permit to work system during construction, pre-commissioning, commissioning and start-up of the LNG Facility utilizing forms and procedures as specified in the Contractor HSSE Program. Contractor shall administer the permit to work system under the Contractor HSSE program until Substantial Completion, and Contractor shall allow for a reasonable transition to incorporate Owner’s requirements for permits to work used in an operating plant under the Owner HSSE Program for use once hydrocarbons are introduced into a Stage for LNG production (which, for purposes of clarity, will occur after RFSU and prior to Substantial Completion). Each Contractor or Supplier employee, contract worker or representative needing access to a “secure area” (as that term is defined in the regulations of the U.S. Coast Guard and Transportation Security Administration) of the Site shall have valid Transportation Worker Identification Credentials (“TWIC Card”). In addition, each such employee, contract worker or representative performing Work on the Site shall have a valid TWIC Card when, and to the extent, all or portions of the Site become regulated by the Transportation Security Administration, which, in any event, shall be no later than when such portion of the Site is incorporated into the security perimeter pursuant to Section 2.18.5. Contractor acknowledges that it has fully investigated such Owner’s access requirements and procedures, as well as its site safety and security rules and procedures, and has taken such requirements, rules and procedures into account in preparing the Project Execution Plan and planning the Work to be performed in accordance with the Project Schedule. As such, Contractor shall not be entitled to a Change Order as a result of its and its Suppliers’ personnel’s compliance (or failure to comply) with such access, safety and security requirements, rules and procedures.

(d) Contractor shall, and shall cause its Suppliers to, attend training by Owner as required by Applicable Laws, including such training as is required by the Commission.

2.18.7 Certain Owner Rights with Respect to Security. Should Owner at any time observe Contractor, or any of its Suppliers, failing to comply with Contractor’s security plan, as accepted by Owner as part of the Contractor HSSE Program, or if Contractor or its Suppliers are acting or omitting to act in a manner that may, if it continued, fail to comply with such security plan, then Owner shall have the right (but not the obligation) to require Contractor to comply with such security plan and to stop the affected Work activity until such time as Contractor has corrected its implementation of such security plan and Contractor and its Suppliers, as applicable, are once again in compliance with such security plan; provided, that at no time shall Contractor be entitled to an adjustment of the Contract Price or Key Date Schedule based on such work stoppage. Notwithstanding anything to the contrary in the foregoing, if Contractor disagrees with any order that it receives from Owner to stop the Work for failure to comply with such security plan, and Contractor notifies Owner of such disagreement, Owner and

Contractor shall each promptly escalate such disagreement to a higher supervisory level, up to the level of the Contractor Representative and Owner Representative, as applicable. If after such escalation, Owner continues to enforce the stop order and it is later determined that the Contractor was in compliance with, and would be in compliance with, such security plan, and such stop order delayed the performance of the Work by more than four (4) hours, such stop order shall constitute an Owner-Caused Delay for the purposes of this Agreement.

2.18.8 Local Community Relations. Contractor understands the importance of maintaining good relations with the communities located near the Site and the LNG Facility, and shall endeavor to emphasize the importance of good community relations to its Subcontractors, and its and their respective employees and other Persons under Contractor’s supervision on the Site. Contractor shall cooperate and coordinate with Owner in Owner’s outreach efforts to the local communities and the State of Texas, including, as requested by Owner, by participating in public meetings, meetings with Governmental Authorities and Owner’s other outreach activities; provided that Contractor’s personnel shall not, without Contractor’s prior consent, be asked by Owner to provide testimony at any such meetings. Among other things, Contractor shall establish a grievance and complaint mechanism for use by the local communities around the Site, and shall maintain a log at the Site of any grievances or complaints received by Contractor from whatever source and promptly notify Owner of same. Owner shall have the right to review Contractor’s grievance and complaint logs at any time upon request. Contractor shall coordinate and cooperate with Owner in resolving any grievances or complaints as soon as reasonably possible and in a manner that does not delay or adversely impact performance of the Work, whether submitted to Contractor or to Owner.

2.18.9 HSSE Monitoring and Audit Rights. Without limiting any of its other rights of inspection, review, acceptance or audit hereunder, Owner and its designees (but not including Competitors), including representatives of any of Owner’s insurers, shall have the right to from time to time as determined in Owner’s sole and absolute discretion, monitor Contractor’s performance of the Work, and review, inspect and audit Contractor’s Books and Records related to Contractor’s or Subcontractor’s compliance with the Contractor HSSE Program, Owner’s HSSE Program, as applicable, Applicable Laws and any other requirements of this Section 2.18. Without limiting Owner’s rights to stop work in accordance with Section 2.18.4 and Section 2.18.7, Owner shall minimize interference with the performance of the Work during such inspections, reviews and audits to the extent reasonably possible. Contractor shall and shall cause its Subcontractors to cooperate with Owner and its designees when engaged in a monitoring program or during any such inspections, reviews or audits, and shall develop and implement a corrective action plan, in the event such inspections, reviews or audits indicate the Contractor HSSE Program, Contractor or its Subcontractors are not in compliance with the Contractor HSSE Program or the requirements of this Section 2.18, as applicable. Owner’s monitoring, review, inspection or audit, or Owner’s failure to monitor or to conduct a review, inspection or audit Contractor’s compliance with the requirements of this Section 2.18, shall in no way affect Contractor’s obligations hereunder.

2.19 Emergencies. In the event of any emergency endangering life or property or the environment in any way relating to the Work, the LNG Facility, the Site or otherwise, Contractor

shall: (a) take such action as may be reasonable and necessary to prevent, avoid or mitigate injury, damage or loss; and (b) as soon as possible, report any such incidents, including Contractor’s response thereto, in writing to Owner. If Contractor has not taken reasonable precautions for the safety of the public or the protection of the Work, the LNG Facility or the Site, and such failure creates an emergency requiring immediate action, then Owner, with or without notice to Contractor may, but shall be under no obligation to, take reasonable action as required to address such emergency. All reasonable costs of taking of any such action by Owner shall be reimbursed by Contractor. Owner’s taking of, or failure to take any action, or providing any directions with respect to an emergency, shall not alter Contractor’s obligations, responsibilities or liability hereunder.

2.20 Quality Assurance/Quality Control Plan.

2.20.1 Implementation of Quality Assurance Plan. Attached as Appendix R is a quality assurance/quality control procedure and plan and Supplier source inspection plan detailing Contractor’s system, including quality plans and procedures, to direct and control its organization with regard to quality (the “Quality Assurance Plan”). Contractor’s Quality Assurance Plan as set forth in Appendix R shall be consistent with Applicable Laws, ISO 9001 criteria, Applicable Codes and Standards and GECP. Contractor shall perform the Work in compliance with the Quality Assurance Plan and assume all costs associated with compliance therewith. Contractor shall cause each of its Suppliers to implement a quality assurance program that complies with the Quality Assurance Plan as applicable to the Work that such Supplier performs, including the implementation and maintenance of a rigorous inspection program, maintaining daily logs of inspections performed in compliance therewith, and the implementation and adherence to the “build it clean, build it tight” requirements of the Quality Assurance Plan.

2.20.2 Modifications. Any updates, modifications, amendments or other changes to the Quality Assurance Plan shall be furnished to Owner and shall be subject to review and approval in accordance with Section 2.4.6.

2.20.3 Records. As part of the Quality Assurance Plan (including the Supplier source inspection plan contained therein), Contractor agrees that it shall keep a daily log of inspections that it or any Supplier subject to such inspection plan performs. Contractor shall make a copy of Books and Records related to the Quality Assurance Plan, including the daily logs of inspections performed, available at the Site for Owner’s and any Lender’s (including the Independent Engineer’s) review.

2.20.4 Quality of Equipment. Contractor shall only use Equipment for the Work as specified in or as is otherwise consistent with this Agreement. All Equipment shall be fabricated, applied, installed, connected, operated (during start-up and testing), cleaned and conditioned in a manner that meets or exceeds the written instructions of the applicable Vendor.

2.21 Correction of Work in Progress.

2.21.1 Correction of Work in Progress. Upon Contractor becoming aware of a Defect, Contractor shall, as part of the Work, correct such Defective Work, whether by repair, replacement or otherwise. If during the course of conduct of the Work, Owner reasonably believes that any Work is Defective, Owner may provide written notice to Contractor identifying and describing with reasonable specificity that portion of the Work that Owner believes is Defective. If Contractor believes the Work is not Defective, Contractor shall notify Owner, including notice as to when a final determination as to whether the Work is Defective must be made so as to avoid impacting the scheduled performance of the Work. During the period before such determination must be made, the Parties shall work together in good faith to resolve any disagreements or reach resolution regarding such Work. Contractor shall determine when Defects are corrected; provided, however, that (a) Contractor shall promptly correct Defects (i) as necessary to prevent voiding or limiting of any Supplier warranties, including correction of Defects related to the preservation of Equipment as required by the manufacturer’s specifications or written recommendations; (ii) if such Defective Work presents an imminent threat to safety, health or the environment, or the structural integrity of an item or component of a Stage or the LNG Facility; (iii) if such Defective Work directly impacts any Other Contractor’s work to tie-in to the LNG Facility; and (b) correction of Defective Work identified prior to Substantial Completion of a Stage will be completed before Substantial Completion of the applicable Stage unless such Defective Work is included on the agreed Punch List as a Punch List C Item. If there is a disagreement about whether the Work is Defective and the Parties have not reached resolution, without limiting Contractor’s right to Dispute whether the Work is Defective, Contractor shall correct such Defect if requested by Owner while pursuing any such Dispute in accordance with the timing set forth in the foregoing sentence as applicable to such Defect. Contractor shall implement a management of change process and track rework to correct Defects during the courses of the Work in accordance with Appendix S. If Contractor fails to correct Defective Work in accordance with subclause (a) above, Owner may, it its sole and absolute discretion, upon no less than ten (10) Business Days prior written notice to Contractor, either correct or remove and replace such Defective Work and Contractor shall pay Owner the costs to correct such Defective Work within thirty (30) Days after receipt of Owner’s invoice for such costs and expenses.

2.21.2 Deviations. If Contractor or Owner determines that any of the Work is Defective, and would if completed be Defective, and such Defect or potential Defect: (a) does not or is not reasonably likely to result in the Work or the LNG Facility failing to satisfy any Applicable Laws or the conditions of any Permits; and (b) would otherwise satisfy the requirements to be a Punch List C Item, the Parties shall meet within seven (7) Days of when such Defect is identified or proposed to find a remedy for such deviation or non-conformance. If the Parties agree on a remedy for such Defective Work that modifies the scope of the Work or includes any adjustments to the Contract Price or the Key Date Schedule, Owner shall issue a Change Order, which shall be in the form of Appendix F-1, and such Change Order shall become binding on the Parties as part of this Agreement upon execution thereof by the Parties. Agreed remedies for such Defects or potential Defects shall constitute a waiver of the relevant requirements of this Agreement only so far as mutually agreed and in no event shall such agreed

remedies constitute an adjustment or change or modification of any relevant Specification, the Basis of Design or any other requirement of this Agreement.

2.22 Reports.

2.22.1 Contractor Reports. Contractor shall provide Owner and, if so requested by Owner, Lenders’ Agent, with an electronic copy of progress reports and such other information as reasonably requested by Owner, including the following:

(a) formal minutes and any action items for all status and other Project-related meetings within four (4) Business Days following such meeting;

(b) safety or environmental incident reports within twenty-four (24) hours after the occurrence of any such incident (including “near miss” incidents where no individual was injured or property was damaged), except for any safety or environmental incident involving a significant non-scheduled event such as LNG or Natural Gas releases, fires, explosions, mechanical failures (not including minor or insignificant failures), unusual over-pressurizations or major injuries which shall be provided to Owner within two (2) hours of the occurrence of such incident where possible and if not possible, within twenty-four (24) hours and in any event no later than notices are provided to any Governmental Authority; provided, however, notification shall be provided to Owner as promptly as practicable by all reasonably practical methods if any safety or environmental incident threatens public or employee safety, causes significant property damage, or interrupts the Work; provided, further, that Contractor shall not be required to provide Owner with any attorney-client privileged reports;

(c) Weekly status reports generally reporting on the progress of the Work (“Weekly Status Reports”) containing the information described in Attachment S-2 to Appendix S, which shall be provided one (1) Day prior to the Weekly status meeting and shall cover all activities up to the cutoff date as described in Appendix S. Contractor shall arrange for the electronic distribution of the Weekly Status Report as Owner may reasonably request;

(d) Monthly status reports generally reporting on the progress of the Work (“Monthly Status Reports”) containing the information described in Attachment S-2 to Appendix S. Contractor shall provide the Monthly Status Report no later than five (5) Days after the end of each Month, and the Monthly Status Report shall cover activities up through the end of the previous Month (which for the purposes of this Section 2.22.1(d) shall end as of the second to last Friday of each Month). Contractor shall arrange for the electronic distribution of the Monthly Status Report as Owner may reasonably request; and

(e) promptly upon completion of the last foundation for Stage II, Contractor shall send Owner a written notice stating that the last foundation for Stage II has been completed.

2.22.2 Access to Site Records. Without limiting Owner’s rights under Section 2.23, during the performance of the Work at the Site, Owner shall have the right to have access to and to review all of Contractor’s daily reports, logs and records that Contractor

maintains at the Site, for purposes of Owner’s reviews related to HSSE, quality and Equipment inventory and preservation.

2.22.3 No Notice; Owner Not Bound by Reports. Notwithstanding anything to the contrary in any minutes, reports or other documentation delivered by Contractor under Section 2.22.1, Owner shall not be bound by any such documents, shall not be required to take any actions based on any such documents, and shall not be deemed to have consented to or accepted the contents of any such documents. In no event shall any such minutes, reports or other documentation, or any comments or statements made by the Contractor Representative or other Contractor personnel, or any Supplier personnel, during any meeting or otherwise in connection with any such minutes, reports or documentation, constitute notice to Owner for any purpose under this Agreement.

2.23 Books, Records and Audits.

2.23.1 Maintenance of Books and Records. Contractor shall keep full and detailed books, construction logs, records, daily reports, accounts, schedules, payroll records, receipts, statements, correspondence, vouchers, memoranda, electronic files, job cost reports, accounting records, written policies and procedures, Supplier or sub-consultant files, external correspondence, change order files (including non-privileged documentation covering negotiated settlements), and other pertinent documents related to the Work and as may be required under Applicable Laws or this Agreement (collectively “Books and Records”). Contractor shall maintain all such Books and Records in accordance with GAAP applicable in the U.S. and shall retain all such Books and Records for a minimum period of four (4) years after the Final Completion Date, or such greater period of time as may be required under Applicable Laws. To the extent Contractor does not have any of the foregoing information (if audited by Owner), Contractor shall certify the same in writing to the extent requested by Owner.

2.23.2 Audit.

(a) Upon reasonable notice, until the fourth anniversary of the Final Completion Date, and with respect to any matters related to Taxes (including the Tax Abatements) until the expiration of the constitutional or statutory period in which an applicable Governmental Authority may audit Owner (each such period, an “Audit Period”), Owner, any Lender, and any of their representatives and consultants (excluding any Competitors), including the Independent Engineer, shall have the right to audit or to have audited the Books and Records with respect to: (i) ensuring that Contractor is using GECP and acting in compliance with any and all Applicable Laws, including any documents relating to safety (in accordance with Section 2.18.9), security, quality or Permits relating to the Liquefaction Project, the LNG Facility or the Work; (ii) any Provisional Sums or amounts billed on a provisional basis and later reconciled to actual amounts, or billed under cost reimbursable or unit price Change Orders, or that are otherwise reimbursed or are reimbursable under this Agreement, such as unit price or cost reimbursable Rehabilitation Costs, certain Taxes, Customs Duties and hedging costs; provided that such other reimbursable items do not include the fixed price components of the Contract Price or disputed amounts subject to Appendix XX; (iii) claims for amounts due and payable under Section 19.1.1 or otherwise due to any suspension or termination of the Work or this Agreement; (iv) Contractor’s information submitted in the Monthly Status Reports with

respect to Local Labor, Local Suppliers and Qualifying Jobs, information in connection with the Tax Abatements as set forth in Section 2.7.10; or (v) Taxes pursuant to Section 7.5.4; provided, however, notwithstanding anything herein to the contrary, (A) such Persons shall not have the right to audit or have audited the Books and Records in connection with the internal composition of any compensation that is fixed in amount hereunder (including the composition of any markups, unit rates or fixed percentages or multipliers specified in this Agreement); and (B) Owner, Common Facilities Owner, any Lender, and any of their representatives and consultants, including the Independent Engineer, shall not have the right to audit either the Updated HVO Quote or the Updated Combined HVO Quote (as such terms are defined in Attachment C-5 to Appendix C), except only as set forth in Attachment C-5 to Appendix C. Any Owner consultant or other contractor performing any such audit shall be required to enter into a reasonable and customary non-disclosure agreement with Contractor before such consultant or contractor may audit any of the Books and Records, and any such Person shall be governed by the provisions in Section 14.2.1 (including entering into confidentiality agreements with Owner to the extent required under Section 14.2.1) before such other Person may audit any of the Books and Records.

(b) When requested by Owner during any applicable Audit Period, Contractor shall provide the auditors permitted to audit pursuant to Section 2.23 with reasonable access to all of the Books and Records, including providing such Persons with copies of all such Books and Records in the format as maintained or as required under this Agreement to be maintained by Contractor (including scanned versions of hardcopy documents and electronic copies of native electronic data files), organized in a manner consistent with Contractor’s records, during normal business hours, and Contractor’s personnel shall reasonably cooperate with such auditors to effectuate the audit or audits hereunder. The auditors shall have the right to copy all such Books and Records (including hard copy and electronic data), subject to the use and disclosure rights under the applicable confidentiality agreements required in Section 2.23.2, at Owner’s expense. Contractor shall bear at its own cost and expense all costs incurred by it in assisting Owner with audits performed pursuant to this Section 2.23.2.

(c) Except as otherwise provided in Article 20, the restrictions in this Section 2.23.2 to the audit rights of Owner, the Lenders or their consultants or representatives (excluding Competitors), including the Independent Engineer, shall not limit or restrict any rights such Persons have under Applicable Laws with respect to discovery in any arbitration or litigation arising out of or related to this Agreement or the Contractor Guarantee.

(d) Owner shall conduct any such audit at its own cost and expense. In all events, Contractor shall reimburse Owner for overpayments made to Contractor.

(e) Nothing in this Section 2.23 shall be deemed to limit or otherwise affect Owner’s rights to have access to and to review Contractor’s reports, logs and records in connection with the safety and quality of the Work performed or as otherwise permitted under this Agreement.

2.24 Inspections and Testing.

2.24.1 Generally. Contractor shall conduct all inspections of the Work in accordance with the inspection and testing plan prepared by Contractor or Suppliers in

accordance with Appendix R. Contractor shall provide notices or status updates to Owner of testing and inspections in accordance with Section 2.24.3 and Section 2.24.4, as applicable depending on whether such test or inspection will be conducted on the Site or off-Site. Owner shall have the opportunity to witness any such inspection. Owner’s Engineer and any equity participant in Owner or Common Facilities Owner shall also have the opportunity to witness any such inspection. Other Persons, including customers, that are Invitees of Owner may observe or witness any such testing or inspections, on Site or off-Site, subject to Contractor’s prior consent, not to be unreasonably withheld or delayed. Owner will be entitled to monitor all aspects of the Work, including the fabrication shops and construction means, methods, techniques, sequences and procedures for coordinating all portions of the Work. Inspection or failure to inspect any or all of the Work by Owner shall not constitute acceptance of the same or act in any way to release Contractor from any or all of its obligations and liabilities hereunder, it being the intent of the Parties that Contractor shall remain responsible for performance of the Work in accordance with the requirements of this Agreement, including attainment of the Guaranteed Performance Levels.

2.24.2 Inspection and Test Plans. In addition to conducting the Performance Tests, the Performance Test Procedures and requirements that are described in Section 9.7, Contractor shall, during the course of performing the Work, perform, or cooperate and assist in the performance of, all tests and inspections of the Work or portions thereof that are: (a) required under any Applicable Laws or by any Vendor in writing; (b) in accordance with the Specifications; or (c) in accordance with GECP. Contractor shall develop detailed inspection and test plans, by discipline, with respect to off-site (factory) and on-Site inspections and tests, including with respect to Work performed at fabrication or module yards. Such plans shall include all notifications required to be provided to Owner, including notifications with respecting the activities and testing described in Appendix T-1 and the activities and testing described in Appendix T-2. Such plans shall be provided to Owner for information. Contractor shall implement and follow the inspection and test plan in connection with the performance of the Work. The tests, inspections or activities that shall be hold points where Contractor may not proceed unless Owner is present, or Owner has waived the requirement to be present in writing, are designated on Appendix T-1 and Appendix T-2, as applicable.

2.24.3 On-Site Testing and Activities. Contractor shall provide Owner with weekly inspection and testing tracker of anticipated on-Site inspections and testing, including anticipated on-Site activities and tests as described on Appendix T-2, and Owner shall be included in Contractor’s standard distribution method to be notified of any updates or schedule modifications of such activities, inspections or tests; provided that Owner shall be provided notice at least twenty four (24) hours in advance of any schedule modification. Owner, Lenders’ Agent and the Independent Engineer, as well as Owner’s Engineer and any equity participant in Owner or Common Facilities Owner, may observe the performance of any such test and activity or inspection, and review the results of such tests and inspections. Such Persons, as well as Owner’s Engineer and any equity participant in Owner or Common Facilities Owner may also observe the performance of any other on-Site test and inspection. Contractor shall not be required to delay any such test or inspection in the event any such Persons are not present at the notified time and location unless such test or inspection has been expressly designated as a hold point in connection with the inspection and test plan covering such Work.

2.24.4 Off-Site Testing and Inspections. Contractor shall provide Owner, Lenders’ Agent and the Independent Engineer with no less than ten (10) Business Days written notice (or such other advance written notice as provided in Appendix T-1) of the scheduled dates for the conduct of, and opportunity to witness, the off-site (factory acceptance and other) tests as described on Appendix T-1. Once Contractor notifies Owner of the scheduled date for the conduct of a tests as described on Appendix T-1, Contractor shall not conduct such test on an earlier date or re-schedule the test to an earlier date without prior agreement of Owner, and if Contractor delays conduct of a test, Contractor shall notify Owner as soon as practicable of the re-scheduled date. If the schedule for the conduct of any such tests changes or re-testing is required, Contractor shall provide Owner, Lenders’ Agent and the Independent Engineer with written notice of the revised schedule, or the schedule for re-testing, as applicable, as promptly as practicable. Contractor shall not be required to delay any such test or inspection in the event any such Persons are not present at the notified time and location unless such test or inspection has been expressly designated as a hold point in connection with the inspection and test plan covering such Work. With respect to the tests identified on Appendix T-1, Contractor shall provide Owner with copies of all off-site test results once each Month, or earlier upon Owner’s reasonable request, whether or not any Owner Group member witnesses such test. With respect to any off-site testing of Equipment or components thereof not listed on Appendix T-1, Contractor shall provide Owner with copies of off-site test results upon Owner’s reasonable request. Owner’s Engineer and any equity participant in Owner or Common Facilities Owner, shall also have the right to witness off-site tests and receive copies of all off-site test results to the same extent as Owner. Owner shall communicate any questions or comments relating to such off-site testing or inspections to Contractor rather than directly to Vendors.

2.24.5 Uncovering.

(a) No portion of the Work that has been designed as a hold point pursuant to the inspection and test plan agreed to by the Parties shall be covered contrary to the requirements of this Agreement and prior to giving Owner reasonable opportunity to inspect such portion of the Work, subject where applicable to the provisions of Section 2.24.3 or 2.24.4. If any such portion of the Work should be covered contrary to the foregoing sentence, it must, if required in writing by Owner, be uncovered for inspection and subsequently be recovered, all at Contractor’s expense.

(b) At any time prior to Substantial Completion if Owner reasonably believes that a portion of the Work is Defective, Owner may request that Owner or the Independent Engineer be afforded the opportunity to inspect a portion of the Work which has been properly covered (i.e., Owner has been given a reasonably opportunity to inspect such portion of the Work before it was covered, subject where applicable to the provisions of Section 2.24.3 or 2.24.4), and Contractor shall uncover the same. If the Work that is uncovered is determined to be Defective, Contractor shall bear the costs of such covering and uncovering and the costs to bring the applicable portion of the Work into conformance with the terms of this Agreement. If the Work that is uncovered as a result of Owner’s request is not Defective, Owner’s request shall be an Owner-Caused Delay.

2.24.6 No Obligation to Inspect. Neither Owner’s, Lender’s Agent’s nor the Independent Engineer’s right to conduct inspections under this Section 2.24 obligates Owner, Lender’s Agent or the Independent Engineer to do so. Neither the exercise by Owner, Lender’s Agent or the Independent Engineer of any such right, nor any failure on the part of Owner, Lender’s Agent or the Independent Engineer to discover or reject Defective Work, shall be construed to imply an acceptance of such Defective Work or a waiver of such Defect.

2.25 Design and Engineering Work.

2.25.1 General. Contractor shall, as part of the Work, perform, or cause to be performed, all design and engineering Work necessary so that the Work meets the requirements of this Agreement and is otherwise capable of achieving the Guaranteed Performance Levels while meeting the Emission Guarantees and the Noise Guarantee. All design Work shall be performed by Persons who are (a) engineers or other professionals qualified, experienced and competent in the disciplines of the design for which they are responsible; and (b) hold the professional licenses required under Applicable Laws to design the Work.

2.25.2 Drawings and Specifications. The Drawings and Specifications shall be delivered to Owner in Fully Functional files and shall conform and comply with the requirements of this Agreement, including the Scope of Work, Basis of Design, Applicable Laws, and GECP.

2.25.3 Review Process.

(a) Periodic Reviews. During the development of the Drawings and Specifications, Contractor shall periodically conduct reviews of the design and engineering in progress with Owner in accordance with Appendix A, Attachment A-1 to Appendix A, and Appendix U, and provide Owner with the opportunity to provide comments during such reviews. Such reviews may be conducted at Contractor’s office located in Houston, Texas, at any of its Supplier’s offices, or remotely by electronic internet access, as the Parties agree.

(b) Submission by Contractor. Contractor shall submit copies of the Drawings and Specifications and other Deliverables to Owner for formal review, comment, or acceptance in accordance with Attachment A-1 to Appendix A and Appendix U.

(c) Review Periods. Owner shall have up to ten (10) Business Days from its receipt of Drawings and Specifications and other Deliverables submitted in accordance with Section 2.25.3(b) or Section 2.25.3(e) to issue written comments (which may include mark-ups of Drawings) or written acceptances of such Drawings and Specifications to Contractor.

(d) No Owner Response. If Owner does not issue any comments, proposed changes or written acceptance or rejections within such time periods, Contractor may proceed with the development of such Drawings and Specifications and any construction relating thereto, but Owner’s lack of comments or acceptance, if applicable, shall in no event constitute an acceptance, approval or waiver by Owner with respect to the Drawings and Specifications received.

(e) Rejection by Owner. In the event that Owner rejects the Drawings or Specifications, Owner shall provide Contractor with a written statement of the reasons why such Drawing or Specification does not comply with this Agreement or does not comply with the version of the applicable Drawing last accepted by Owner (except as modified in accordance with Section 2.25.4), within the time period required for Owner’s response under Section 2.25.3(c). Contractor shall respond to Owner’s statement and, as applicable, shall provide Owner with revised and corrected Drawings and Specifications as soon as possible thereafter. Owner’s rights with respect to the issuing of comments, proposed changes or acceptances or rejections of such revised and corrected Drawings or Specifications shall be governed by the procedures specified in this Section 2.25.3; provided, that Contractor shall not be entitled to any extensions of time to the Key Date Schedule, an adjustment to the Contract Price or any other adjustment as a result of the need for such revisions and corrections. If Contractor disagrees that such Drawing or Specification fails to comply with the Agreement, or does not comply with the version of the applicable Drawing last accepted by Owner (except as modified in accordance with Section 2.25.4), contrary to Owner’s rejection, then in accordance with Section 8.5.1, Contractor shall identify any resulting change in the Change Request Log.

(f) Acceptance or Non-Response by Owner. Upon Owner’s written acceptance of the Drawings and Specifications, or if Owner does not issue any comments, proposed changes or written acceptances or rejections of such Drawings and Specifications pursuant to Section 2.25.3(c), such Drawings and Specifications shall be the Drawings and Specifications that Contractor shall use to construct the Work; provided, that Owner’s review or acceptance of any Drawings and Specifications (or Owner’s lack of comments or written rejection thereof) shall not in any way be deemed to limit or in any way alter Contractor’s responsibility to perform and complete the Work in accordance with the requirements of this Agreement.

2.25.4 Technical Deviations. During the performance of the Work, Contractor shall utilize a technical deviation protocol to address any modifications or changes to any Specifications, which shall provide for notice to and prior approval of Owner of any such pending modifications or changes (not to be unreasonably withheld) before such modification or change is utilized in the Liquefaction Project, and shall be subject to Section 2.21.2, as applicable.

2.25.5 Management of Change. Contractor shall prepare a management of change procedure (“MOC”) for Owner review and approval. Any changes to piping and instrument diagrams (P&IDs) following completion of the hazard and operability analysis shall be managed through implementation of Contractor’s MOC procedure. HAZOP reviews for any changes which have safety or operability implications will be conducted with Owner participation and documented in the HAZOP LOPA Reports as MOC addendums.

2.25.6 Design Licenses. Contractor shall perform, or cause to be performed, all design and engineering Work using GECP and in accordance with Applicable Laws, and all Drawings and Specifications and design and engineering Work shall be signed and stamped by design professionals licensed in accordance with Applicable Laws.

2.25.7 CAD Drawings. Unless otherwise expressly provided under this Agreement, all Drawings and Record As-Built Drawings prepared by Contractor or its Suppliers under this Agreement shall be prepared using computer aided design (“CAD”), in such formats and delivered in accordance with Appendix U.

2.25.8 As-Built Drawings. During construction, Contractor shall keep a redlined, marked, up-to-date set of As-Built Drawings on the Site as required under Appendix U. Contractor shall deliver to Owner the As-Built Drawings for each Stage in accordance with Appendix U. The Record As-Built Drawings shall be delivered by Contractor for each Stage no later than one hundred twenty (120) Days after the Substantial Completion Date of such Stage, but in any event, no later than Final Acceptance.

2.25.9 3D Model. Contractor shall develop and deliver to Owner a 3D model that complies with the applicable requirements of Appendix U. Contractor shall coordinate and cooperate with Owner to update such 3D model during performance of the Work.

2.25.10 Deliverables. Contractor shall deliver copies of all Deliverables in Fully Functional files, and in the formats and in accordance with timing and other requirements set forth in Appendix U and Attachment U-1.

2.26 Survey Control Points. Contractor shall establish all survey control points and layout the entire Work in accordance with the requirements of this Agreement. If Contractor or any of its Subcontractors or any of the representatives or employees of any of them move or destroy or render inaccurate the survey control point provided by Owner, such control point shall be replaced by Contractor at Contractor’s own expense and Contractor shall be liable to Owner for all other damages, costs, losses and expenses arising out of such relocation or destruction.

2.27 Operation Prior to Substantial Completion.

2.27.1 Use of Operating Personnel. Contractor shall provide all labor, administrative personnel, materials, supplies and other items which may be required in connection with operation of each Stage prior to Substantial Completion except for the Operating Personnel. Training of Operating Personnel for the operation and maintenance of the LNG Facility shall be in accordance with Section 2.16. Until Substantial Completion of the applicable Stage, the Operating Personnel providing support to such Stage, including during Contractor’s pre-commissioning, commissioning, start-up and operation of such Stage and the conduct of Performance Tests and any other tests for such Stage, shall be under the control of and supervised by Contractor; provided, that, notwithstanding the foregoing, such Operating Personnel shall remain employees or agents of Owner and shall not be considered employees of Contractor for any reason; provided, further, that the foregoing shall not be deemed or construed to limit Contractor’s obligation to provide personnel during commissioning and Performance Testing, and Contractor agrees that it shall remain responsible for direct supervision of Operating Personnel that perform such activities.

2.27.2 Plan for Utilization of Operating Personnel. Contractor shall, no later than two hundred seventy (270) Days before the date on which the first tranche of Operating

Personnel are scheduled to complete training in accordance with Appendix P, prepare for Owner’s review a proposed plan regarding the utilization of the Operating Personnel and the interface with Contractor’s personnel during pre-commissioning, commissioning, start-up and operation of such Stage, and the conduct of Performance Tests and any other tests for such Stage. Each such utilization plan shall, among other things, be prepared (a) so as to minimize, to the extent reasonably possible under the circumstances (considering the obligation to keep any Stage which has achieved Substantial Completion operable), any impact on the operation of any Stage that has achieved Substantial Completion; (b) to take into account Owner’s operating and maintenance procedures; (c) based on the number of the Operating Personnel available for participation in pre-commissioning, commissioning, start-up and Performance Testing, and taking into consideration that after commissioning of Stage I is completed, all Operating Personnel assigned to maintenance and all other Operating Personnel that were part of the first tranche of training, shall be assigned to work on Stage I; (d) with consideration of any specific safety issues for such Stage; and (e) taking into account the type of activities to be performed. Such utilization plan shall be mutually agreed-upon by the Parties no later than forty-five (45) Days after Owner’s receipt of Contractor’s proposed plan.

2.27.3 No Relationship with Operating Personnel. Nothing in this Agreement, including this Section 2.27, shall be interpreted to create a principal-agent relationship between Contractor and any of the Operating Personnel. Notwithstanding anything in this Agreement to the contrary, Contractor will not be entitled to a Change Order or any adjustment to its obligations hereunder as a result of the performance, skill or actions of the Operating Personnel.

2.28 Coordination with Others Performing Work. Contractor acknowledges that Persons (including the Other Contractors), contracting with Owner, other Owner Group members or subcontracting with Other Contractors, may perform certain work on or near the Site, or may require working and operational spaces outside the berm for utility line corridors and rights of way for third party utility suppliers, which are considered Other Contractors under this Agreement, that will provide permanent utilities to the LNG Facility. Contractor shall: (a) in accordance with the Interface Management Plan, coordinate the Work with the work of such Persons and cooperate with such Persons to minimize the impact of any interference; (b) attend any meeting reasonably requested by Owner or the Other Contractors (whether or not Owner is an attendee of such meeting) for the purpose of coordinating performance of the Work or to resolve concerns relating to the Work, either Person’s employees, or either Person’s subcontractors; and (c) use its commercially reasonable efforts, and cause its Subcontractors to use commercially reasonable efforts to, maintain good working relationships with Other Contractors and their employees and such Other Contractors’ subcontractors and their employees. If any Other Contractor that is performing any work on the Site fails to reasonably cooperate or coordinate with Contractor and interferes with Contractor in the performance of the Work, Contractor shall promptly notify Owner, reasonably explaining the facts and circumstances surrounding such delay, and Owner shall use reasonable efforts to cause the Other Contractor to avoid interfering with Contractor and to cooperate and coordinate their activities with Contractor.

2.29 Compliance with Lender Requirements.

2.29.1 Financing of Liquefaction Project; Agreements with Lenders. Contractor acknowledges that the Liquefaction Project will be financed with assistance provided by Lenders. Contractor agrees to deliver, at its expense and as a condition to any such financing or refinancing, such documentation and information as is customary for a financing or refinancing of such type. Without limitation on the preceding sentence, Contractor agrees, when so requested by Owner, to: (a) enter into, and cause Contractor’s Guarantor to enter into, direct agreements with any such Lender or Lenders’ Agent substantially in the form attached hereto as Appendix OO-1 and Appendix OO-2, respectively (each, a “Direct Agreement”), with such modifications thereto as required by such Lender or Lenders’ Agent but that do not increase Contractor’s liability or obligations to Owner or the Common Facilities Owner, or limit Contractor’s rights with respect to Owner under this Agreement; (b) deliver to Lenders or Lenders’ Agent certified copies of Contractor’s and any Contractor Guarantor’s corporate charter and by-laws, resolutions, incumbency certificates, legal opinions (covering, without limitation, such items as the validity and enforceability of this Agreement and any Contractor Guarantee, Letter of Credit or other credit support provided hereunder, the due organization and existence of Contractor and any Contractor Guarantor, that Contractor and any Contractor Guarantor has obtained all necessary governmental consents, and that no material litigation exists), financial information that is customarily provided to Lenders (in a form and format to be reasonably acceptable to Contractor), evidence of insurance, a consent to receive service of process in New York, New York and such other items as Lenders or Lenders’ Agent may reasonably request, or that Owner may request in order to meet the reasonable information requests of rating agencies that are rating debt to be issued by Owner for the purposes of financing the Liquefaction Project (subject to customary rating agency confidentiality terms); (c) deliver such other information, documents or data as customarily required by Lenders for purposes of preparing an offering memorandum, prospectus or similar sales document for a financing or capital markets offering, including by providing reasonable access to management for due diligence discussions in connection with any capital markets offering; and (d) fulfill all obligations and comply with all procedures, and require Suppliers, to the extent applicable, to fulfill all obligations and comply with all procedures, that may reasonably result from Owner’s financing arrangements, including providing all information and reports reasonably requested by Lenders or Lenders’ Agent to facilitate the financing or refinancing of the LNG Facility and the Liquefaction Project, including lien waivers in accordance with Sections 6.3.5 and 6.6. Contractor acknowledges that Owner will from time to time seek the consent of the Lenders, Lenders’ Agent or the Independent Engineer in connection with actions that Owner may take under this Agreement as necessary or appropriate under the terms of Owner’s agreements with Lenders, and that seeking such consent shall not be deemed or construed to be unreasonable.

2.29.2 Lender Requirements. Contractor agrees, as part of the Work:

(a) to make available financing expertise within its organization to work with and assist Owner’s financial advisors;

(b) to promptly advise Owner of any significant change in financial position or rating;

(c) to allow Lenders, their representatives and designees (including any advisors and consultants) access to the Site, any other location where the Work is performed, and the Work, upon prior request, during normal working hours and in a manner that does not delay or disrupt construction of the LNG Facility in any respect, subject to Contractor and the Lenders having agreed on reasonably satisfactory confidentiality arrangements;

(d) to allow Lenders, their representatives and designees (including any advisors and consultants) to witness any Performance Tests conducted in connection with the Work, subject to Contractor and the Lenders having agreed on reasonably satisfactory confidentiality arrangements;

(e) to cooperate with Owner and its Affiliates in providing such documentation and information as is required by any of the Lenders with respect to the proper and ethical operation of Contractor’s businesses, including assurances to the effect that Contractor, and to the extent required by Applicable Law or Lender requirements, Contractor’s Affiliates, are in compliance with Section 23.13;

(f) to provide certificates, notices and other information reasonably requested by Lenders as necessary to reasonably demonstrate to the Lenders that Contractor has achieved Ready for Feed Gas Introduction for a Stage, Ready for Start-Up for a Stage, Substantial Completion of a Stage, Final Acceptance of a Stage, and Final Completion; and

(g) to execute promptly any reasonable amendment or modification of this Agreement required by any Lender that does not increase Contractor’s liability or obligations to Owner or the Common Facilities Owner, or limit Contractor’s rights with respect to Owner under this Agreement.

2.30 COVID-19.

(a)The Parties acknowledge and agree that the Ramp-Up LNTP, the February 2023 LNTP and the Full Notice to Proceed may be issued, and Work may be performed, during the COVID-19 pandemic. [***], subject to Contractor’s rights and obligations pursuant to Section 8.3.1(q) and Section 8.3.1(r), as applicable, and Article 18, should a COVID-19 Event occur. The Parties have agreed to certain means and methods and counter-measures (as set forth in Appendix YY), some of which are to be implemented throughout the Work (as set forth in Part II of Appendix YY), and some of which are to be implemented for the period of time as set forth in Part III of Appendix YY, in each case, to protect personnel from exposure, or to mitigate the exposure of personnel to COVID-19 and to permit the Work to be performed in accordance with all Applicable Laws during the COVID-19 pandemic (subject to Contractor’s rights and obligations pursuant to Section 8.3.1(q) and Section 8.3.1(r), as applicable, and Article 18 should a COVID-19 Event occur). Such means, methods and counter-measures have been incorporated into the Work, included in the Contract Price and incorporated into the Project Schedule. Accordingly, with the exception of Contractor’s rights and obligations pursuant to Section 8.3.1(q) and Section 8.3.1(r), as applicable, and Article 18, should a COVID-19 Event occur, in addition to Contractor’s acknowledgement with respect to

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the matters contemplated in Section 2.4.1(d), Contractor hereby agrees that: (i) the COVID-19 pandemic, including any [***] or any other worsening of the COVID-19 pandemic, wherever the same may occur, [***]; (ii) [***] with respect to the impacts to the Work caused by COVID-19 or any Applicable Laws related thereto; and (iii) [***] with respect to any present or future impacts to the Work caused by COVID-19 or any Applicable Laws related thereto, and with respect to all matters described in subclauses (i) through (iii) of this Section 2.30(a), Contractor, subject to Contractor’s rights and obligations pursuant to Section 8.3.1(q) and Section 8.3.1(r), as applicable, and Article 18, should a COVID-19 Event occur, [***] from and against such Claims. This Section 2.30 shall not limit Contractor’s rights under Section 8.3.1(q) and Section 8.3.1(r), as applicable, and Article 18 in connection with a COVID-19 Event.

(b)The Parties have established the PCSC that shall consist of representatives selected by Contractor and one representative selected by Owner. From and after the FNTP Date and until the Parties agree otherwise (but in all cases ending at Substantial Completion of Stage II), [***] that a COVID-19 Event has occurred. [***] the Work at the Site or at any other location where the Work is being performed. At each meeting of the PCSC the Contractor shall [***]. If Contractor claims a COVID-19 Event has occurred, the PCSC shall discuss what COVID-19 Type A Counter-Measures, COVID-19 Type B Counter-Measures [***], is appropriate, as applicable, with respect to the applicable COVID-19 Event that Contractor claims has occurred, and make recommendations of the same to the Owner Representative and Contractor Representative. The Parties acknowledge that the Owner representative who attends the PCSC is not empowered to make any decisions on behalf of Owner. Statements made by Contractor or any of its representatives at any meeting held by the PCSC shall not constitute a notice which is otherwise required pursuant to Article 18.

(c)If Contractor claims that a COVID-19 PCSC Event has occurred, the PCSC shall meet within [***] Business Days of Contractor’s delivery to Owner of a notice of occurrence required pursuant to Section 18.2.1. The PCSC shall report to the Owner Representative and the Contractor Representative if such committee recommends implementation and proposed identification of any COVID-19 Type B Counter-Measures, [***], COVID-19 Type B Counter-Measure Extension [***], as the case may be for the applicable COVID-19 PCSC Event, [***] (collectively, the “COVID-19 Recommended Additional Counter-Measures”). If the COVID Committee recommends any COVID-19 Recommended Additional Counter-Measures, the Owner Representative and Contractor Representative [***]. At such meeting of the Owner Representative and Contractor Representative, Contractor Representative shall present, based upon information available to it at that time, a non-binding, good faith, estimate of the impact (if any) to the Contract Price and Project Schedule of the COVID-19 Recommended Additional Counter-Measures. If the Owner Representative and Contractor Representative agree that the COVID-19 PCSC Event has occurred and also agree on the adoption of the COVID-19 Recommended Additional Counter-Measures recommended by the PCSC with respect to such COVID-19 PCSC Event, then Contractor shall prepare a Change Order pursuant to Section 8.3.1(r) to document such agreement (and Owner and Contractor shall sign the agreed upon Change Order) and Contractor shall implement such agreed upon COVID-19 Recommended Additional Counter-Measures immediately after such meeting. If the Owner Representative and Contractor Representative do not agree that either (i) the applicable COVID-19 PCSC Event occurred; or (ii) that the applicable COVID-19 Recommended Additional Counter-Measures should be implemented, then the Parties shall escalate such matter

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to the Project Sponsors for discussion, which discussion shall occur within three (3) Business Days, or sooner if possible, after the conclusion of the meeting of the Owner Representative and the Contractor Representative. If the Project Sponsors agree that that the applicable COVID-19 PCSC Event has occurred and also agree on the COVID-19 Recommended Additional Counter-Measures, then Contractor shall prepare a Change Order pursuant to Section 8.3.1(r) to document such agreement (and Owner and Contractor shall sign the agreed upon Change Order) and Contractor shall implement such agreed upon COVID-19 Recommended Additional Counter-Measures immediately after such meeting. [***].

(d)[***].

(e)[***].

(f)[***].

ARTICLE 3

OWNER’S RESPONSIBILITIES

3.1 Payment of the Contract Price.

3.1.1 Owner Obligation. Owner shall timely pay the Contract Price in accordance with the provisions of Article 6.

3.1.2 NO OBLIGATION OF COMMON FACILITIES OWNER. CONTRACTOR ACKNOWLEDGES AND AGREES THAT NOTWITHSTANDING THAT THE COMMON FACILITIES OWNER IS A PARTY HERETO, THE COMMON FACILITIES OWNER SHALL NOT HAVE ANY OBLIGATION OR LIABILITY WHATSOEVER FOR THE PAYMENT OF ANY AMOUNTS DUE TO CONTRACTOR HEREUNDER, WHETHER ARISING UNDER CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, PRODUCTS LIABILITY, INDEMNITY, CONTRIBUTION, OR ANY OTHER CAUSE OF ACTION, AND CONTRACTOR HEREBY WAIVES AND RELEASES THE COMMON FACILITIES OWNER FROM ANY AND ALL CLAIMS FOR COMPENSATION OR PAYMENT OF ANY OTHER AMOUNTS DUE HEREUNDER, AND AGREES TO LOOK SOLELY TO OWNER WITH RESPECT TO PAYMENT OF ANY AMOUNTS OWED TO CONTRACTOR PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT.

3.1.3 [***].

3.2 Owner Supply of Electricity during Pre-Commissioning, Commissioning, Start-up and Testing. Subject to Contractor’s performance of the Work in accordance with Appendix A and Appendix B and otherwise in accordance with this Agreement, that is required to interconnect the LNG Facility with the new facilities to be constructed by Entergy, Owner shall supply electricity to each Stage of the LNG Facility for use during pre-commissioning, commissioning, start-up and testing of such Stage at such dates and in the amount identified in Appendix E-1. During such periods, Contractor shall remain responsible for obtaining electrical

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power as otherwise required for performance of the Work in accordance with Section 2.13.2. The electricity supplied by Owner pursuant to this Section 3.2 shall be used only for operation of Equipment installed in each Stage during pre-commissioning, commissioning, start-up and testing, and shall not be used by Contractor for any other purpose.

3.3 Owner-Furnished Information.

3.3.1 Owner-Furnished Information; Non-Verified Information. Owner has provided, and may from time to time provide, Contractor with certain information relative to the LNG Facility, the Work, other aspects of the Liquefaction Project or related matters (such information, the “Owner-Furnished Information”). Contractor acknowledges that the Owner-Furnished Information has been provided as background information and as an accommodation to Contractor. In addition, Owner has provided Contractor with certain Non-Verified Information as identified in Appendix N. Owner acknowledges that Contractor is relying upon such information and has not verified and shall not verify the Non-Verified Information.

3.3.2 NO WARRANTIES. OWNER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, TO CONTRACTOR OR ANY OTHER PERSON, AS TO THE ACCURACY, SUFFICIENCY OR CONTENT OF THE OWNER-FURNISHED INFORMATION OR THE OPINIONS THEREIN CONTAINED OR EXPRESSED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ANY ERROR IDENTIFIED IN ANY SUCH OWNER-FURNISHED INFORMATION SHALL NOT BE A BREACH OF ANY COVENANT, CONDITION, REPRESENTATION OR WARRANTY OF OWNER, SHALL NOT FORM A BASIS FOR AN OWNER EVENT OF DEFAULT, SHALL NOT BE AN EVENT OF FORCE MAJEURE, AND SHALL NOT BE AN EXCUSABLE EVENT (EXCEPT WITH RESPECT TO ERRORS OR INACCURACIES IN THE NON-VERIFIED INFORMATION WHICH SHALL BE AN OWNER-CAUSED DELAY).

3.4 Appointment of Authorized Representative. Owner hereby appoints [###] to be the Owner Representative. The Owner Representative shall have full authority to act on Owner’s behalf under this Agreement; provided, however, that the Owner Representative shall not be entitled to amend or terminate this Agreement without further written authorization from Owner; provided, further, that Owner may from time to time by notice to Contractor limit the authority of the Owner Representative to take certain actions on Owner’s behalf under this Agreement, which notices will be effective only prospectively from and after the date that the notices are deemed to have been given under Article 22. Owner may from time to time by notice to Contractor remove any person from his appointment as the Owner Representative and appoint another person in his place with effect from a future date to be specified in the notice. Owner shall at all times throughout the term of this Agreement ensure that some person continues to act as the Owner Representative.

3.5 Access to the Site. Subject to Contractor obtaining and maintaining any applicable Permits, Owner shall provide Contractor with such access to the Site as agreed by the Parties pursuant to the Ramp-Up LNTP and if issued, the February 2023 LNTP, in each case as authorized thereunder, and in accordance with this Agreement, and shall provide Contractor with access to the Site following the FNTP Date in accordance with Sections 2.11.1 and 2.11.4 as of the FNTP Date. Since the SWSA has been terminated and Owner has taken back care, custody

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and control of the Site from Contractor under the SWSA, (a) Owner shall perform, or cause to be performed, the Site maintenance activities as described in the Site preservation and maintenance plan (PAL-PJT-CON-PRO-00-GEN-0001) as agreed to by the Parties under the SWSA, until the FNTP Date; and (b) if the work performed under the SWSA is damaged, by Force Majeure or otherwise, Owner shall repair such work with respect to such damage before the FNTP Date. Subject to Owner having issued the Ramp-Up LNTP, and if issued, the February 2023 LNTP, Contractor and Owner shall conduct monthly joint inspections of the Site and Contractor shall submit to Owner in writing any issues where Contractor believes that Owner did not follow the Site preservation and maintenance plan (PAL-PJT-CON-PRO-00-GEN-0001) or where Owner failed to repair damage to the work performed under the SWSA caused by Force Majeure or otherwise, and how such issues may be corrected so as to satisfy the requirements of the Site maintenance plan (PAL-PJT-CON-PRO-00-GEN-0001). Owner’s correction of such issues, submitted by Contractor to Owner in writing, prior to the FNTP Date, shall prevent such corrected issue from qualifying as an Excusable Event under clause (m) of the definition of “Owner Caused Delay”.

3.6 Personnel Provided by Owner.

3.6.1 Personnel for Operations. Owner shall provide, or contract for, between eighty (80) and one hundred (100) Operating Personnel as Owner determines necessary for the operation and maintenance of the LNG Facility. Owner shall notify Contractor by no later than three hundred sixty five (365) Days after the FNTP Date of the number of Operating Personnel and the job disciplines of such Persons that Owner will make available for training. Owner will make Operating Personnel available in accordance with Section 3.6.2 to complete field training and work under the direction of Contractor during pre-commissioning, commissioning, start-up and operation of a Stage until Substantial Completion of such Stage in accordance with the utilization plan agreed to by Owner and Contractor as described in Section 2.27.2. For the avoidance of doubt, Owner shall be responsible for payment of all wages, fringe benefits, taxes and insurance for the Operating Personnel, and the provision of any computers or tablet devices as Owner determines necessary for the Operating Personnel.

3.6.2 Personnel for Training. Owner shall ensure that, subject to Owner’s sick leave and other employee policies, the Operating Personnel are available for training at the times required under the training schedule agreed to by Owner and Contractor in accordance with Appendix P.

3.7 Owner Permits. Owner shall confer with Contractor upon receipt of a notice of a proposed modification or amendment or extension of an Owner Permit, and shall sign such applications for the amendment or modification or extension of any Owner Permit as Owner reasonably agrees are desirable and appropriate and in a form reasonably acceptable to Owner. Owner shall have the right to, at Owner’s request, submit any proposed modification, amendment or extension of an Owner Permit to the relevant Governmental Authority and participate in any meetings with Governmental Authorities regarding any Owner Permit. Owner shall provide such information as reasonably requested by Contractor and otherwise provide reasonable assistance to Contractor in obtaining the Contractor Permits. Owner shall obtain and maintain the Owner Permits. In connection with the FERC Order, Owner shall: (a) provide the turning lanes as and when required under Condition No. 81; (b) provide the hazard analysis

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reports and studies as and when required under Condition No. 88; (c) provide the operational plans and programs for each Stage as and when required under Condition No. 123, other than the O&M Manuals to be provided by Contractor as part of the Work; and (d) provide procedures for management of off-Site contractors following Substantial Completion of Stage II as and when required under Condition No. 124, other than with respect to management of Suppliers performing Warranty Work.

3.8 Feed Gas; Fuel Gas. On or before the dates set forth on the Key Date Schedule, Owner shall procure and make Fuel Gas and Feed Gas available for commissioning, start-up, cool down and testing of the LNG Facility as required for Contractor to achieve Substantial Completion of each Stage (including Natural Gas or LNG utilized in the initial cool down of the LNG Facility). Such Fuel Gas and Feed Gas shall be made available by Owner at the outlet of the applicable meter stations to be constructed by Other Contractors. When made available to Contractor, the Fuel Gas and Feed Gas will meet the Feed Gas Specifications. Fuel Gas and Feed Gas to be provided by Owner in accordance with this Section 3.8 shall be nominated and scheduled in accordance with Section 9.5.3.

3.9 Owner Provision of LNG Tankers; LNG Tanker Loading; Cool-Down Cargos. Subject to Contractor’s having provided the notices and information required under Section 9.6.1, on or before the dates set forth on the Key Date Schedule, Owner shall cause LNG Tankers to be available for Loading of LNG, including for purposes of the Ship Loading Rate Performance Test. Subject to Contractor’s having provided the notices and information required under Section 9.6.7; Owner shall use commercially reasonable efforts to provide a LNG Tanker carrying at least the volume of LNG and at such time as requested by Contractor under Section 9.6.7 for use in the cool-down of applicable Stage I components.

3.10 Disposition and Title to Products. As between Contractor and Owner, Owner shall be responsible for the disposition of the produced LNG and NGLs, including LNG and NGLs produced during the commissioning, start-up, cool down and testing of the LNG Facility. As between Contractor and Owner, Owner (or its customers) shall have title to, and be entitled to retain, all revenues received from the sale of LNG, NGLs and other products.

3.11 Pre-Existing Hazardous Materials and Archeological Finds. Owner shall, as promptly as practicable following receipt of notice from Contractor in accordance with Section 2.17, and to the extent required by any Applicable Law or any Governmental Authority, remediate, or cause the remediation of, any Pre-Existing Hazardous Materials present at the Site and address Archeological Finds with the appropriate Governmental Authority, as applicable.

3.12 LNG Storage. Following Substantial Completion of Stage I and subject to Contractor providing the notices and information required in accordance with Sections 9.5.1 and 9.6, Owner shall provide sufficient storage volume for Contractor to perform the commissioning activities for Stage II.

3.13 Tipping Fees. Owner shall pay any tipping fees related to disposal of dredge material into area 9A-9B of the Sabine Naches Navigation District disposal site or area 8 of the U.S. Army Corp of Engineers site.

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3.14 Rights-of-Way. Owner shall obtain rights-of-way from utility owners to allow Contractor to cross over existing and relocated utilities in the locations as depicted on Attachment L-4 to Appendix L by the dates set forth in the Key Date Schedule, subject to Contractor having provided the design of the cross-overs in accordance with Section 2.11.5 and approval of the proposed design by the applicable utilities.

Additionally:

(a)[***].

(b)By the applicable dates set forth in the Key Date Schedule, Owner shall obtain leasehold rights from the applicable Governmental Authority in order for Contractor to perform the dredging Work in the turning basin east bank area as shown in Attachment L-1 to Appendix L as Owner-Leased for Permanent Impacts, as well as temporary rights to the areas immediately surrounding such area as shown in Attachment L-1 to Appendix L as Owner-Leased for Temporary Access but within the channel so as to permit Contractor to perform such dredging Work. With the exception of the foregoing, Contractor shall remain responsible hereunder for all other coordinating activities with Governmental Authorities and any other parties necessary to perform such dredging Work.

3.15 No Other Responsibilities. Without limiting its obligations under this Article 3, Owner shall have no responsibilities with respect to the engineering, construction, pre-commissioning, commissioning, start-up or testing of the LNG Facility, any Stage, or operation of any Stage prior to Substantial Completion of such Stage.

3.16 Owner’s Failure to Perform. A failure of Owner to perform any obligation or covenant in accordance with this Article 3 (other than Section 3.1) shall not be considered a breach of any covenant, condition, representation or warranty of Owner, and shall not be construed as an Owner Event of Default, it being understood that any such failure may constitute an Owner-Caused Delay, the sole and exclusive remedy for which is set forth in Article 8 and Article 18.

ARTICLE 4

COMMENCEMENT OF WORK; PROJECT SCHEDULE

4.1 Commencement of Work.

4.1.1 Ramp-Up LNTP and February 2023 LNTP. Owner shall issue the Ramp-Up LNTP on or before November 15, 2022, authorizing Contractor to commence performance of the Work as specified in the form set forth in Appendix NN-1. If Owner has issued the Ramp-Up LNTP but has not issued the Full Notice to Proceed on or before February 8, 2023, Owner shall issue the February 2023 LNTP on or before February 8, 2023, authorizing Contractor to commence performance of the Work as specified in the form set forth in Appendix NN-2. Owner shall issue a Pre-FNTP Site Work Notice to Contractor at least [***] Days before Owner anticipates authorizing Contractor to commence the Pre-FNTP Site Work under the Ramp-Up LNTP or the February 2023 LNTP, as applicable; provided, however, if Owner does not issue

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Pre-FNTP Site Work Notice to Contractor by such date, then the provisions of Section 4.2.1 shall apply. Notwithstanding the foregoing, Owner shall have no obligation to issue the Ramp-Up LNTP, the February 2023 LNTP or any other limited noticed to proceed hereunder; provided, however, if (i) Owner does not issue Ramp-Up LNTP hereunder; or (ii) Owner has not issued the Full Notice to Proceed on or before February 8, 2023 and does not issue the February 2023 LNTP, then the provisions of Sections 4.1.4 and 4.2.1 shall apply. Upon the issuance of the Ramp-Up LNTP or the February 2023 LNTP, as applicable, Contractor shall execute the same and shall commence with the performance of the Work as and when described in the Ramp-Up LNTP or the February 2023 LNTP, respectively. Except as expressly stated in the Ramp-Up LNTP when issued, Contractor shall not be entitled to any compensation with respect to the Work performed under the Ramp-Up LNTP, and Owner shall not be obligated to make any payments with respect to the Work performed pursuant to the Ramp-Up LNTP. Except as expressly stated in the February 2023 LNTP when issued, Contractor shall not be entitled to any compensation with respect to the Work performed under the February 2023 LNTP, and Owner shall not be obligated to make any payments with respect to the Work performed pursuant to the February 2023 LNTP. Any payments made to Contractor pursuant to the Ramp-Up LNTP or, if applicable, the February 2023 LNTP, shall be credited against the Contract Price.

4.1.2 Effect of Full Notice to Proceed. The Full Notice to Proceed shall authorize Contractor to commence performance of all of the Work. Until Owner issues the Full Notice to Proceed and it has become effective in accordance with its terms, Contractor shall not have the right or obligation to perform any Work hereunder; provided, however, that Contractor shall have the obligations to perform the Work as described in the Ramp-Up LNTP when issued in accordance with Section 4.1.1, and if the February 2023 LNTP is issued, the obligations to perform the Work as described in the February 2023 LNTP when issued in accordance with Section 4.1.1, and Contractor shall have the obligations as set forth in Section 18.2.5 beginning upon the Effective Date. Upon the date that the Full Notice to Proceed becomes effective in accordance with its terms and subject to the provisions of Sections 4.1.4 and 4.2.1, Contractor shall promptly commence the Work in accordance with the Baseline CPM Schedule. IN THE ABSENCE OF OWNER’S ISSUANCE OF THE FULL NOTICE TO PROCEED AND SUCH FULL NOTICE TO PROCEED HAVING BECOME EFFECTIVE, IF CONTRACTOR PERFORMS OR COMMENCES PERFORMANCE OF A PART OF THE WORK OTHER THAN AS AUTHORIZED UNDER THE RAMP-UP LNTP ISSUED BY OWNER, CONTRACTOR SHALL NOT BE ENTITLED TO ANY COMPENSATION HEREUNDER, PERFORMANCE OF THAT PART OF THE WORK SHALL BE AT CONTRACTOR’S SOLE RISK AND EXPENSE AND SHALL BE REVERSED UPON THE WRITTEN ORDER OF OWNER AT CONTRACTOR’S RISK AND EXPENSE, AND CONTRACTOR SHALL NOT BE ENTITLED TO ANY ADJUSTMENT TO THE SCOPE OF WORK, CONTRACT PRICE, MILESTONES, PAYMENT SCHEDULE OR THE KEY DATE SCHEDULE, OR ANY OTHER TERMS OR CONDITIONS OF THIS AGREEMENT, IN CONNECTION WITH THE PERFORMANCE OF THAT PART OF THE WORK OR ANY SUCH REVERSAL.

4.1.3 Issuance of Full Notice to Proceed. Subject to Sections 4.1.4 and 4.2.1, Owner, in its sole discretion, may issue the Full Notice to Proceed with a FNTP Date that occurs on or before May 8, 2023. Owner shall have no obligation to issue the Full Notice to Proceed and shall issue or shall not issue the Full Notice to Proceed in its sole discretion. Contractor, and Owner will communicate regularly about Owner’s plans to issue a Full Notice to Proceed.

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4.1.4 Delay in FNTP Date.

(a) Provided Owner (i) has funded the September 2022 Letter Agreement in accordance with its terms; (ii) has issued the Ramp-Up LNTP in accordance with Section 4.1.1 and funded all amounts due thereunder in accordance with its terms, but has not issued the Full Notice to Proceed such that the FNTP Date occurs on or before February 8, 2023; (iii) if the Full Notice to Proceed has not been issued by February 8, 2023, Owner has issued the February 2023 LNTP on or before February 8, 2023 and funded all amounts due thereunder in accordance with its terms; and (iv) does not partially or fully suspend or terminate the applicable limited notice to proceed, then upon Owner’s issuance of the Full Notice to Proceed with a FNTP Date that occurs on or before May 8, 2023, Contractor shall have the right to a Change Order in accordance with Section 8.3.1(v) for an increase in the Contract Price equal to [***] for each Month of delay (pro-rated for each Day or portion thereof of delay in issuing the Full Notice to Proceed after February 8, 2023). Except for the adjustment to the Contract Price as contemplated in this Section 4.1.4(a) and corresponding adjustments to the Milestones and Payment Schedules, and the Change Order to be issued in connection with the determination of the Guaranteed Substantial Completion Dates in accordance with Section 4.2.1 and Section 4.2.2, Contractor shall not have any right to a Change Order with respect to any further adjustments to the Contract Price, or any adjustment to the Milestones, the Payment Schedule, the Key Dates, including the Guaranteed Substantial Completion Date, or the Guaranteed Performance Levels, or any other terms or conditions of this Agreement, in connection with a delay in issuing the Full Notice to Proceed as contemplated in this Section 4.1.4(a).

(b) If Owner (i) has not funded the September 2022 Letter Agreement in accordance with its terms; (ii) either does not issue the Ramp-Up LNTP in accordance with Section 4.1.1 or does not fund all amounts due thereunder in accordance with the Ramp-Up LNTP; (iii) has not issued the Full Notice to Proceed by February 8, 2023, and Owner has either not issued the February 2023 LNTP on or before February 8, 2023 or does not fund all amounts due thereunder in accordance with the February 2023 LNTP; (iv) partially or fully suspends or terminates the applicable limited notice to proceed; or (v) does not issue the Full Notice to Proceed such that the FNTP Date occurs on or before May 8, 2023, then, unless the Parties otherwise agree, the Parties shall meet and discuss whether and how to proceed with this Agreement and the Work, including agreeing on any amendments to this Agreement that may be required. Prior to such meeting, Contractor shall, if requested by Owner, to the extent reasonably possible, provide its revised proposal for the Work, or provide a proposal to develop a revised proposal, including revisions to the Contract Price and the Key Date Schedule, reasonably anticipated to result from such delay in issuance of the Ramp-Up LNTP, the February 2023 LNTP or the Full Notice to Proceed. Adjustments proposed and agreed to by the Parties shall not be subject to the requirements or the limitations or waivers described in Article 8 or Article 18, but shall not include any changes in design, quantities or Equipment (unless such changes have been requested or directed by Owner), or adjustments to correct for errors or omissions in Contractor’s assumptions; provided, however, that no such limitation on changes shall apply if the Parties have not agreed to the proposed adjustments on or before the date that is [***] Days after May 8, 2023. If the Parties reach agreement on how to proceed with this Agreement,

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Contractor and Owner shall prepare a Change Order, and any necessary amendments to this Agreement as the Parties agree, to adjust the Guaranteed Substantial Completion Dates in accordance with Section 4.2.2, and document the adjustments to the Contract Price, if any, and update Appendix C and the Payment Schedule accordingly, as agreed; provided that such Change Order shall not include any adjustments to the Milestones or the Guaranteed Performance Levels. If the Parties are unable to agree on how to proceed with this Agreement on or before May 8, 2024, either Party may terminate this Agreement pursuant to Section 19.8. In no event shall Owner’s rights to issue unilateral Change Orders apply under the circumstances described in this Section 4.1.4.

4.1.5 CONTRACT PRICE ADJUSTMENTS AS LIQUIDATED DAMAGES. ANY INCREASE TO THE CONTRACT PRICE PURSUANT TO SECTION 4.1.4, WILL BE DEEMED TO BE A LIQUIDATED DAMAGE. CONTRACTOR SHALL NOT HAVE ANY RIGHT TO A CHANGE ORDER WITH RESPECT TO THE CONTRACT PRICE, THE MILESTONES, THE PAYMENT SCHEDULE, THE KEY DATE SCHEDULE, INCLUDING THE GUARANTEED SUBSTANTIAL COMPLETION DATE, OR THE GUARANTEED PERFORMANCE LEVELS, OR ANY OTHER TERMS AND CONDITIONS OF THIS AGREEMENT, EXCEPT AS SPECIFIED IN SECTIONS 4.1.4 AND 4.2.1. THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT IT WOULD BE DIFFICULT IF NOT IMPOSSIBLE TO ASCERTAIN AND QUANTIFY THE ACTUAL DAMAGES THAT CONTRACTOR WOULD INCUR UNDER THE CIRCUMSTANCES SET FORTH IN SECTION 4.1.4. ACCORDINGLY, IT IS EXPRESSLY AGREED THAT NONE OF THE AMOUNTS PAYABLE UNDER SECTION 4.1.4 CONSTITUTE A PENALTY AND THAT THE PARTIES, HAVING NEGOTIATED IN GOOD FAITH FOR SUCH SPECIFIC AMOUNTS AND HAVING AGREED THAT SUCH AMOUNTS ARE REASONABLE IN LIGHT OF THE ANTICIPATED HARM CAUSED BY THE DELAY IN THE FNTP DATE, ARE ESTOPPED FROM CONTESTING THE VALIDITY OR ENFORCEABILITY OF THE AMOUNTS AS SET FORTH IN SECTION 4.1.4 ON THE BASIS THAT SUCH AMOUNTS CONSTITUTE A PENALTY OR ARE OTHERWISE UNENFORCEABLE OR INVALID. NOTHING IN THIS SECTION 4.1.5 SHALL LIMIT CONTRACTOR’S RIGHTS UNDER SECTION 4.1.4 OR 18.2.5 IN THE EVENT OF A CLAIM SUBMISSION EVENT THAT OCCURS PRIOR TO THE FNTP DATE.

4.2 Project Schedule. Contractor shall perform the Work in accordance with the Project Schedule and this Section 4.2. Attached hereto as Appendix E-1 is the Key Date Schedule which lists the Key Date Items, including the Guaranteed Substantial Completion Dates, and the applicable dates of completion for each such Key Date Item. Attached hereto as Appendix E-2 is the Baseline CPM Schedule, incorporating all of the Key Date Items consistent with the Key Date Schedule. The Baseline CPM Schedule shall not be subject to adjustment during the performance of the Work unless to reflect the actual (i.e. calendar date) FNTP Date in accordance with Section 4.2.2 or otherwise agreed to by the Parties pursuant to an amendment to this Agreement (and not by Change Order). The Key Date Items on the Key Date Schedule, including the Guaranteed Substantial Completion Dates, shall be subject to adjustment only in accordance with Section 4.4 or as agreed to by Owner (or determined in accordance with Article 20) pursuant to a Change Order issued in accordance with the applicable provisions of Article 8,

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except that certain Key Date Items may be added to the Key Date Schedule or adjusted pursuant to Section 9.6.3.

4.2.1 Guaranteed Completion Dates. Provided that (a) Owner funds the September 2022 Letter Agreement in accordance with its terms; (b) Owner issues the Ramp-Up LNTP on or before November 15, 2022 and funds the Ramp-Up LNTP in accordance with its terms; (c) if Owner has not issued the Full Notice to Proceed on or before February 8, 2023, Owner issues the February 2023 LNTP on or before February 8, 2023 and funds the February 2023 LNTP in accordance with its terms; (d) Owner issues the Pre-FNTP Site Work Notice at least fifteen (15) Days before Owner authorizes Contractor to commence the Pre-FNTP Site Work; (e) Owner does not partially or fully suspend or terminate the applicable limited notice to proceed; and (f) Owner issues the Full Notice to Proceed such that the FNTP Date occurs on or before May 8, 2023, then (i) Contractor shall cause Substantial Completion of Stage I to be achieved on or before the date that is [***] Days after the FNTP Date, plus any applicable Ramp-Up LNTP Adjustment (the “Guaranteed Stage I Substantial Completion Date”); and (ii) Contractor shall cause Substantial Completion of Stage II to be achieved on or before the date that is [***] Days after the FNTP Date, plus any applicable Ramp-Up LNTP Adjustment (the “Guaranteed Stage II Substantial Completion Date”). If Owner has not met the conditions described in subparagraphs (a) through (e) of this Section 4.2.1, as applicable, but issues the Full Notice to Proceed such that the FNTP Date occurs on or before May 8, 2023, then, as a condition precedent to Owner’s issuance of Full Notice to Proceed, the Parties shall agree upon a Change Order to adjust the Key Date Items.

4.2.2 Administrative Adjustment to Key Date Schedule and Baseline CPM Schedule. If Owner issues the Full Notice to Proceed pursuant to Section 4.2.1 then within thirty (30) Days after the FNTP Date, Contractor and Owner shall prepare a Change Order that documents the Guaranteed Substantial Completion Dates as dates certain (i.e. expressed as calendar dates) as determined in accordance with Section 4.2.1, and updates the Key Date Schedule and the Baseline CPM Schedule to reflect the actual FNTP Date, the Guaranteed Substantial Completion Dates and dates certain (i.e. expressed as calendar dates) for each other Key Date Item as determined pursuant to this Section 4.2.2; provided, that, without limiting Section 18.2.5, such Change Order shall not include any adjustments to the Contract Price, the Milestones and the Payment Schedule or the Project Schedule (except with respect to incorporating the Guaranteed Substantial Completion Dates and the other Key Date Items as dates certain), or the Guaranteed Performance Levels. Once Owner issues the Change Order in accordance with this Section 4.2.2, the updated Baseline CPM Schedule shall be the Baseline CPM Schedule for all purposes hereunder.

4.2.3 ENFORCING SCHEDULE. WITHOUT LIMITING CONTRACTOR’S RIGHTS PURSUANT TO ARTICLE 8, CONTRACTOR HEREBY WAIVES, ON ITS OWN BEHALF AND ANYONE CLAIMING THROUGH IT, ANY RIGHT CONTRACTOR MAY HAVE IN LAW OR IN EQUITY TO CHALLENGE THE SCHEDULED DATE FOR ANY OF THE KEY DATE ITEMS, INCLUDING WAIVING ANY RIGHT IT MAY HAVE TO SEEK AN ORDER FROM A COURT OR A FINDING BY AN ARBITRATOR THAT THE SCHEDULED DATE FOR ANY OF THE KEY DATE ITEMS SHOULD NOT BE ENFORCEABLE OR SHOULD BE MODIFIED IN ANY WAY FROM THE THEN-

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CURRENT KEY DATE SCHEDULE, AS MODIFIED FROM TIME TO TIME IN ACCORDANCE WITH THIS AGREEMENT. CONTRACTOR ACKNOWLEDGES AND AGREES THAT THE WAIVER PROVIDED BY CONTRACTOR UNDER THIS SECTION 4.2.3 WAS A MATERIAL CONSIDERATION FOR OWNER AND COMMON FACILITIES OWNER IN ENTERING INTO THIS AGREEMENT.

4.3 Liquidated Damages.

4.3.1 Delay Liquidated Damages.

(a) Subject to Section 8.4.1(e), and Section 3(b)(ii) and Exhibit B to Attachment C-5 to Appendix C, if Substantial Completion of Stage I occurs after the Guaranteed Stage I Substantial Completion Date, Contractor shall pay to Owner the following amounts as liquidated damages per Day for each Day, or portion thereof, commencing on the Day immediately following the Guaranteed Stage I Substantial Completion Date and ending on (but including) the date on which Substantial Completion of Stage I occurs (the “Stage I Delay Liquidated Damages”):

[***]

(b) Subject to Section 8.4.1(e), if Substantial Completion of Stage II occurs after the Guaranteed Stage II Substantial Completion Date, Contractor shall pay to Owner the following amounts as liquidated damages per Day for each Day, or portion thereof, commencing on the Day immediately following the Guaranteed Stage II Substantial Completion Date and ending on (but including) the date on which Substantial Completion of Stage II occurs (the “Stage II Delay Liquidated Damages”):

[***]

4.3.2 Delay LD Cap; Delay Liquidated Damages Not a Penalty.

(a) Contractor’s maximum liability to Owner for Delay Liquidated Damages for a Stage is the Delay LD Cap for such Stage.

(b) THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT IT WOULD BE DIFFICULT IF NOT IMPOSSIBLE TO ASCERTAIN AND QUANTIFY THE ACTUAL DAMAGES THAT OWNER WOULD INCUR IF CONTRACTOR SHOULD FAIL TO MEET ANY OF THE GUARANTEED SUBSTANTIAL COMPLETION DATES. ACCORDINGLY, IT IS EXPRESSLY AGREED THAT LIQUIDATED DAMAGES PAYABLE UNDER THIS AGREEMENT DO NOT CONSTITUTE A PENALTY AND THAT THE PARTIES, HAVING NEGOTIATED IN GOOD FAITH FOR SUCH SPECIFIC DELAY LIQUIDATED DAMAGES AND HAVING AGREED THAT THE AMOUNT OF SUCH DELAY LIQUIDATED DAMAGES IS REASONABLE IN LIGHT OF THE ANTICIPATED HARM CAUSED BY THE BREACH RELATED THERETO, ARE ESTOPPED FROM CONTESTING THE VALIDITY OR ENFORCEABILITY OF THE PER-DAY RATE OF THE DELAY LIQUIDATED DAMAGES

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ON THE BASIS THAT SUCH PER-DAY RATE CONSTITUTES A PENALTY OR IS OTHERWISE UNENFORCEABLE OR INVALID.

(c) During any period in which Delay Liquidated Damages have accrued or are accruing, Owner may prepare and submit an invoice to Contractor once each Month with respect to Delay Liquidated Damages that have accrued prior to such date. Contractor shall pay such Delay Liquidated Damages within thirty (30) Days after such invoice is submitted to Contractor. Payment of any Delay Liquidated Damages with respect to any Work shall be in addition to, and not in lieu of, Contractor’s other obligations under this Agreement.

(d) PAYMENT OF ANY DELAY LIQUIDATED DAMAGES WITH RESPECT TO ANY WORK SHALL BE IN ADDITION TO, AND NOT IN LIEU OF, CONTRACTOR’S OTHER OBLIGATIONS UNDER THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING, SUBJECT TO OWNER’S RIGHTS AND REMEDIES PURSUANT TO SECTION 4.4.2, SECTION 4.4.4, SECTIONS 19.3.1(d), 19.3.1(l), 19.3.1(m) AND 19.3.1(n), AND SECTION 21.2, DELAY LIQUIDATED DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF OWNER AND COMMON FACILITIES OWNER FOR ANY DELAY IN THE PERFORMANCE OR COMPLETION OF THE WORK IN ACCORDANCE WITH THE BASELINE CPM SCHEDULE OR KEY DATE SCHEDULE; PROVIDED, THAT THE FOREGOING SHALL NOT BE CONSTRUED OR DEEMED TO LIMIT OWNER’S RIGHT TO RECEIVE AND CONTRACTOR’S OBLIGATION TO PAY PERFORMANCE LIQUIDATED DAMAGES IN ACCORDANCE WITH SECTION 5.2 IF CONTRACTOR FAILS TO CAUSE A STAGE TO ACHIEVE THE APPLICABLE GUARANTEED PERFORMANCE LEVELS.

4.4 Critical Path Method Schedule; Acceleration and Schedule Recovery.

4.4.1 Critical Path Method Schedule. In accordance with Appendix S, Contractor shall prepare, manage, update and deliver to Owner a CPM Schedule (and updates thereto) covering the duration of the performance of the Work and showing the actual schedule of the Work. Each CPM Schedule delivered by Contractor hereunder shall represent Contractor’s best judgment as to how it shall complete the Work in compliance with the Guaranteed Substantial Completion Dates and the Key Date Schedule, and shall comply with the requirements of this Section 4.4 and the applicable requirements of Appendix S. In the event that a CPM Schedule delivered to Owner does not meet the requirements of this Agreement, Contractor shall promptly revise and resubmit the CPM Schedule to Owner. Owner shall be entitled to reasonably rely upon the Baseline CPM Schedule (as the Key Date Items may be adjusted by Change Order in accordance with this Agreement), and any CPM Schedules provided by Contractor, including reliance that Contractor has developed a comprehensive, reasonable and accurate schedule to plan, organize, direct, coordinate, perform, execute and complete each portion of the Work.

4.4.2 Recovery and Recovery Plan. If, at any time during the prosecution of the Work, the CPM Schedule or the Monthly Status Report shows, or if Contractor fails to provide a current updated CPM Schedule or a Monthly Status Report in compliance with the requirements of this Agreement and Owner reasonably determines that (each, a “Recovery Plan Triggering

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Event”): [***], Owner may, in addition to any other remedies that it may have under this Agreement, require that Contractor prepare a plan and associated schedule to explain and display how it intends to regain compliance with the Key Date Schedule or as close thereto as reasonably possible using the means described in Section 4.4.2(f) (collectively, a “Recovery Plan”). Except as set forth in the next sentence, Contractor shall prepare and prosecute a Recovery Plan even if Contractor Disputes Owner’s determination of the need for a Recovery Plan. As the only exception to the foregoing sentence, Contractor shall not be required to prepare and prosecute a Recovery Plan if a Recovery Plan Triggering Event occurs if, and only if: (i) Contractor claims (by Notice to Owner after Owner requests Contractor to prepare such Recovery Plan) that the occurrence of a Claim Submission Event is the cause of the Recovery Plan Triggering Event; (ii) Contractor has submitted a Claim for relief (or provided notice of the same under Section 18.2.1 or 18.2.2) under the Key Date Schedule by the Claim Submission Deadline for such Claim Submission Event pursuant to and in accordance with Section 18.2.3; and (iii) Owner is still evaluating such Claim pursuant to the provisions of Section 8.5.4 and has yet to advise Contractor on whether or not Owner has accepted or rejected such Claim. In all other circumstances, Contractor shall be required to prepare a Recovery Plan if a Recovery Plan Triggering Event occurs. Contractor shall take the following actions after written notification by Owner of the requirement for a Recovery Plan:

(a) Within ten (10) Business Days after such written notification, Contractor shall prepare the Recovery Plan in accordance with GECP and to a similar level of detail as the CPM Schedule, and submit it to Owner for Owner’s review and comment. Owner shall have the right to accept or reject such Recovery Plan, such acceptance not to be unreasonably withheld or delayed. The Recovery Plan shall represent Contractor’s best judgment as to how Contractor shall regain compliance with the Key Date Schedule or as close thereto as reasonably possible using the means described in Section 4.4.2(f).

(b) Within ten (10) Business Days after Contractor submits a Recovery Plan, Contractor shall participate in a conference with Owner to review and evaluate the Recovery Plan. Such conference shall include Suppliers that Owner requests participate in the conference, subject to Contractor’s consent to such participation, which consent shall not be unreasonably denied if the Supplier is material to the Recovery Plan. Any revisions necessary as a result of this review shall be resubmitted to Owner within three (3) Business Days after the conference, and Owner will have the right to accept or reject such revised Recovery Plan such acceptance not to be unreasonably withheld or delayed. This process shall be repeated until Contractor provides a Recovery Plan that is accepted by Owner, such acceptance not to be unreasonably withheld or delayed. During this process, the Parties and agreed participants (including Suppliers, as set forth above) shall continue to meet daily to discuss and attempt to resolve any differences with respect to the proposed Recovery Plan. If Owner indicates in writing that it accepts the revised Recovery Plan, the revised Recovery Plan shall then be the plan which Contractor shall use in planning, organizing, directing, coordinating, performing, and executing the Work (including all activities of Suppliers).

(c) Contractor shall perform the Work covered by the Recovery Plan in accordance therewith until Contractor achieves the results agreed on in the Recovery Plan.

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(d) During the performance of the Recovery Plan, Contractor shall meet with Owner once each Week at the Site to review the effectiveness of the Recovery Plan and to determine whether Contractor has regained compliance with the Key Date Schedule. At the direction of Owner and without limiting Owner’s rights under Section 19.3.1(m) or 19.3.1(n), Contractor shall prepare another Recovery Plan in accordance with Section 4.4.2(a) if any of the following circumstances occur:

(i) Contractor does not comply with the Recovery Plan, including if Contractor fails to ramp-up or add additional resources, or to add additional shifts, in accordance with the agreed Recovery Plan; or

(ii) Contractor complies with the Recovery Plan but fails to achieve the agreed results set forth in such Recovery Plan.

(e) If Contractor has regained compliance with the Key Date Schedule or otherwise achieved the results agreed in the Recovery Plan, Contractor shall return to the use of the CPM Schedule.

(f) In preparing and executing the Recovery Plan, Contractor shall take [***] designed to regain compliance with the Key Date Schedule or as close thereto as reasonably possible, including establishing additional shifts, hiring additional manpower, paying or authorizing overtime, providing additional Construction Equipment, and resequencing activities.

(g) The cost of preparing the Recovery Plan, and performing in accordance therewith, shall be for Contractor’s account, regardless of its success or failure.

(h) Owner’s requirement, review and acceptance of the Recovery Plan, or its decision not to request a Recovery Plan, shall not relieve Contractor of any obligations for the performance of the Work, change the Guaranteed Substantial Completion Dates or other Key Date Items, or be construed to establish the reasonableness of the Recovery Plan.

(i) Nothing herein shall limit Contractor’s rights under Article 8 or Section 18.1 for Force Majeure, Excusable Events, COVID-19 Events or other item(s) for which Contractor has a right to a Change Order under Section 8.3.1 that occur during performance of a Recovery Plan.

4.4.3 No Constructive Acceleration. In no event shall Owner’s request for a Recovery Plan or its rejection of or comments to any proposed Recovery Plan in accordance with Section 4.4.2, Owner’s notice to Contractor of the continued application of the Key Dates or the Guaranteed Dates or any of Contractor’s obligations to perform the Work in accordance with the Key Date Schedule, or Owner’s rejection or denial of a request from Contractor to issue a Change Order to adjust the Guaranteed Dates under circumstances where Owner reasonably believes that Contractor is responsible for the delay, constitute the acceleration of the Work, and Contractor waives all claims it may have against Owner based on a theory of constructive acceleration or similar claim.

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4.4.4 Acceleration and Acceleration Plan. Even if the Work is otherwise in compliance with the Key Date Schedule, Owner may, at any time, direct Contractor by unilateral or mutually agreed Change Order to accelerate the Work by, among other things, establishing additional shifts, paying or authorizing overtime, providing additional Construction Equipment or expediting Equipment orders; provided, however, that if the Work is being performed in compliance with the Key Date Schedule, Contractor shall have agreed pursuant to a mutually agreed Change Order to accelerate the Work; [***]. In no event will a Recovery Plan be deemed to be an Acceleration Plan, and this Section 4.4.4 does not apply to the matters described in Section 4.4.2. If Owner directs Contractor in writing to accelerate the Work, Contractor shall prepare a plan and associated schedule to explain and display how it intends to accelerate the Work and how that acceleration will affect the critical path of the CPM Schedule (an “Acceleration Plan”), and upon receipt of a mutually-agreed Change Order or unilateral Change Order, as applicable, promptly commence and diligently perform the acceleration of the Work in accordance with the Acceleration Plan. With respect to an Acceleration Plan:

(a) The Acceleration Plan shall represent Contractor’s best judgment as to how it shall satisfy Owner’s acceleration directive and shall reflect Contractor’s best estimate of the additional costs that will be incurred, with reasonable explanation thereof. The Acceleration Plan shall be prepared in accordance with GECP and to a similar level of detail as the CPM Schedule.

(b) On the tenth (10th) Business Day after submittal of the Acceleration Plan to Owner (or such longer time as may be mutually agreed in writing by the Parties), Contractor shall participate in a conference with Owner to review and evaluate the Acceleration Plan. Any revisions to the Acceleration Plan necessary as a result of this review shall be resubmitted to Owner no later than the tenth (10th) Business Day after such meeting or such other date as may be agreed in writing by the Parties, and Owner will have the right to accept or reject such revised Acceleration Plan. The agreed Acceleration Plan shall be the schedule which Contractor shall use in planning, organizing, directing, coordinating, performing, and executing that portion of the Work that is affected by such acceleration, with the CPM Schedule governing the performance of all other Work.

(c) Owner’s review and acceptance of the Acceleration Plan shall not constitute an independent evaluation or determination by Owner of the workability, feasibility, or reasonableness of that schedule.

4.5 Incentive Bonus Payment. [***].

ARTICLE 5

PROJECT PERFORMANCE

5.1 Guaranteed Performance Levels. Contractor guarantees that each Stage will meet all of the Guaranteed Performance Levels for such Stage under the Performance Conditions during the applicable Performance Tests or Contractor shall take the actions provided for in Section 9.10.

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5.2 Liquidated Damages.

5.2.1 Performance Damage Amounts. If a Stage meets the Minimum Performance Standards but fails to meet the Guaranteed Performance Levels by the last Performance Test conducted by Contractor prior to the Guaranteed Substantial Completion Date, Contractor shall take the actions to cure the applicable deficiencies and pay to Owner the Performance Liquidated Damages in accordance with Section 9.10 and Appendix G, as applicable.

5.2.2 Performance LD Cap; Performance Liquidated Damages Not a Penalty.

(a) Contractor’s maximum liability to Owner for Performance Liquidated Damages for a Stage is the Performance LD Cap for such Stage.

(b) THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT IT WOULD BE DIFFICULT IF NOT IMPOSSIBLE TO ASCERTAIN AND QUANTIFY THE ACTUAL DAMAGES THAT OWNER WOULD INCUR IF CONTRACTOR SHOULD FAIL TO MEET ANY OF THE GUARANTEED PERFORMANCE LEVELS. ACCORDINGLY, IT IS EXPRESSLY AGREED THAT THE PERFORMANCE LIQUIDATED DAMAGES PAYABLE UNDER THIS AGREEMENT DO NOT CONSTITUTE A PENALTY AND THAT THE PARTIES, HAVING NEGOTIATED IN GOOD FAITH FOR SUCH SPECIFIC PERFORMANCE DAMAGES AND HAVING AGREED THAT THE AMOUNT OF SUCH PERFORMANCE LIQUIDATED DAMAGES IS REASONABLE IN LIGHT OF THE ANTICIPATED HARM CAUSED BY THE BREACH RELATED THERETO, ARE ESTOPPED FROM CONTESTING THE VALIDITY OR ENFORCEABILITY OF THE RATE OF PERFORMANCE LIQUIDATED DAMAGES ON THE BASIS THAT SUCH RATE CONSTITUTES A PENALTY OR IS OTHERWISE UNENFORCEABLE OR INVALID.

(c) PAYMENT OF ANY PERFORMANCE LIQUIDATED DAMAGES FOR A STAGE WITH RESPECT TO ANY WORK SHALL BE IN ADDITION TO, AND NOT IN LIEU OF, CONTRACTOR’S OTHER OBLIGATIONS UNDER THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING, SUBJECT TO CONTRACTOR HAVING ACHIEVED THE MINIMUM PERFORMANCE STANDARDS AND OWNER’S RIGHTS AND REMEDIES PURSUANT TO SECTION 9.10, AND SECTION 21.2, PERFORMANCE LIQUIDATED DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF OWNER AND COMMON FACILITIES OWNER FOR THE FAILURE OF CONTRACTOR TO ACHIEVE THE GUARANTEED PERFORMANCE LEVELS TO WHICH SUCH MINIMUM PERFORMANCE STANDARDS APPLY; PROVIDED, THAT THE FOREGOING SHALL NOT BE CONSTRUED OR DEEMED TO LIMIT (I) CONTRACTOR’S WARRANTY OBLIGATIONS UNDER ARTICLE 10; OR (II) OWNER’S RIGHT TO RECEIVE AND CONTRACTOR’S OBLIGATION TO PAY DELAY LIQUIDATED DAMAGES IN ACCORDANCE WITH SECTION 4.3.

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ARTICLE 6

COMPENSATION AND PAYMENT

6.1 Contract Price.

6.1.1 Contract Price. Owner shall pay to Contractor, and Contractor shall accept, the Contract Price in full consideration for performance of the Work. The Contract is a fixed “separated” price contract as defined in 34 Tex. Administrative Code §3.291(a)(13), subject to adjustment only by Change Orders (as provided in Article 8). The Contract Price, as so adjusted, includes: (a) all Taxes for which Contractor is responsible under Article 7, costs, charges, and expenses of whatever nature applicable to the Work; (b) the amounts paid to Contractor pursuant to the EDSA and pursuant to the SWSA; (c) the amounts paid to Contractor under the September 2022 Letter Agreement; (d) the amounts paid to Contractor under the Ramp-Up LNTP and the February 2023 LNTP, as applicable; and (e) Provisional Sums as described in Section 6.1.2. Payments made to Contractor under the EDSA, the SWSA and the September 2022 Letter Agreement, shall be credited against the Contract Price.

6.1.2 Provisional Sums. Notwithstanding anything to the contrary in Section 6.1.1, the Parties acknowledge and agree that the Contract Price includes Provisional Sums for certain portions of the Work in the amounts set forth in Attachment C-3 to Appendix C. Accordingly, the Contract Price may be adjusted with respect to such Provisional Sums in accordance with Section 8.3.1(b).

6.1.3 Reimbursement of Unused Provisional Sums. To the extent that as of the Substantial Completion Date, the actual aggregate amount of the costs incurred by Contractor to perform a portion of the Work for which a Provisional Sum is set forth on Attachment C-3 to Appendix C, is less than the Provisional Sum for such Work set forth on Attachment C-3 to Appendix C, Contractor shall reimburse Owner for such excess amounts of such Provisional Sum.

6.1.4 Option. Notwithstanding anything to the contrary in Section 6.1.1, the Parties acknowledge and agree that Appendix C (a) identifies the Scope Options that Owner may elect to exercise; (b) sets forth the related adjustments to the Contract Price, Key Date Schedule and any other adjustments to the Work or the requirements under this Agreement in connection with such Scope Option if the Scope Option is exercised; and (c) sets forth a date by which Owner must notify Contractor that Owner is exercising the Scope Option. If Owner elects to exercise a Scope Option within the applicable time period set forth in Appendix C, Owner shall notify Contractor in writing and the Parties shall enter into a Change Order to adjust the Contract Price and make the other adjustments as contemplated in Appendix C as applicable with respect to such Scope Option.

6.2 Payments.

6.2.1 Payments Prior to the FNTP Date. Prior to the FNTP Date, Owner shall make payments to Contractor on account of the Contract Price in the amounts and at the times as provided in the Ramp-Up LNTP and the February 2023 LNTP, each if issued by Owner to Contractor; provided that in no event shall Owner’s liability to make payments to Contractor

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pursuant to the Ramp-Up LNTP exceed the Maximum LNTP Payment Amount, as set forth in the Ramp-Up LNTP, and in no event shall Owner’s liability to make payments to Contractor pursuant to the February 2023 LNTP exceed the Maximum LNTP Payment Amount, as set forth in the February 2023 LNTP. Except as expressly modified in the Ramp-Up LNTP or the February 2023 LNTP, as applicable, the provisions of this Article 6 shall apply to all Invoices and payments made pursuant to the Ramp-Up LNTP and the February 2023 LNTP.

6.2.2 Milestone Payments After the FNTP Date. Subject to the other provisions of this Article 6, from and after the FNTP Date, Owner shall make payments to Contractor on account of the Contract Price equal in amount to the applicable Milestone Payment following Contractor’s completion of each Milestone, as further described herein and in Attachment D-1 to Appendix D. Each Milestone Payment shall be due and payable only to the extent it is supported by the completion of the Milestone, it being acknowledged and understood that no Milestone Payment shall be made for any partially completed Milestones (including in the case of Defects). The Parties acknowledge that each Milestone does not represent the cost of the Work included in such Milestone; accordingly, the Milestone Payments may not represent an actual measure of the progress of the Work.

(a) Contractor acknowledges that Attachment D-1 to Appendix D includes a Milestone titled “Administrative Milestone” for each Month of the Baseline CPM Schedule with respect to Contractor’s delivery of reports, statements and the performance of other administrative obligations of Contractor hereunder, as described in Appendix D. If Contractor fails to complete the Administrative Milestone for a Month [***], Owner may withhold from each Invoice an amount equal to the sum of: (i) the amount of the payment to be made upon achievement of the Administrative Milestone; multiplied by (ii) for such Invoice, the number of Months in the aggregate Contractor has failed to achieve the Administrative Milestone and has not cured such Administrative Milestone in accordance with the following sentence. Owner may withhold such amounts until Contractor has achieved all of the Administrative Milestones that are required to be achieved (including delivery of all reports, statements and completion of other administrative obligations of Contractor, as described in Appendix D for all previous Administrative Milestones that were not achieved).

(b) Contractor acknowledges that Attachment D-1 to Appendix D includes Milestones titled “Local Content Milestone” with respect to Contractor’s compliance with its reporting obligations under the Local Content Program. If Contractor fails to comply with the completion criteria as described in Attachment D-1 to Appendix D with respect to a Local Content Milestone, Contractor shall not be entitled to payment of such Local Content Milestone, and Owner may withhold the amount of such Local Content Milestone, until Contractor has cured such failure to comply (delivery of all reports as described in Attachment D-1 to Appendix D for all previous Local Content Milestones that were not achieved).

(c) In connection with any adjustment to the Contract Price hereunder, the Parties shall update Attachment D-1 to Appendix D with respect to any additional Milestones (including incorporating completion criteria for such additional Milestones) and adjust the Payment Schedule. Any adjustments to the Project Schedule that increase the amount of time

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required for Contractor to complete the Work and include an adjustment to the Contract Price, shall be accompanied by an adjustment to the Payment Schedule to incorporate an Administrative Milestone for each additional Month (or part thereof) added to the Project Schedule; provided that the additional Administrative Milestones shall not result in an increase of the Contract Price except to the extent that the Contract Price has otherwise been adjusted in accordance with this Agreement.

6.2.3 Progress Payments. Subject to the other provisions of this Article 6, from and after the FNTP Date, Owner shall make payments to Contractor on account of the Contract Price equal in amount to the applicable Progress Payments based on the progress of the Work, as further described herein and in Attachment D-2 to Appendix D. Progress Payments shall be due and payable to the extent progress of the Work is verified in accordance with Section 6.3.3. If the Parties determine any updates or modifications to the Payment Schedule should be made, the allocation of Progress Payments in such updated Payment Schedule shall be determined utilizing the same methodology as that used in the Payment Schedule set forth in Attachment D-2 to Appendix D as of the Effective Date.

6.2.4 Time and Materials Payments. Subject to the other provisions of this Article 6, with respect to Work performed on a time and materials basis under a Change Order, payments that are not Disputed shall be made monthly based upon the time and materials used for the Work authorized pursuant to such Change Order, as detailed in the applicable Invoice.

6.2.5 Form of Payment. All payments to Contractor shall be made in Dollars by wire transfer of immediately available funds to the bank and account specified in Appendix RR or such other bank and account located in the U.S. that Contractor specifies in a notice to Owner no later than five (5) Business Days before the applicable payment is due under this Agreement.

6.2.6 FNTP Date Payment. Within one (1) Business Day after Owner issues the Full Notice to Proceed, Contractor shall submit an invoice to Owner for payment of the Milestone Payment due upon issuance of the Full Notice to Proceed as set forth in Attachment D-1 to Appendix D. On the date that is identified as the FNTP Date in the Full Notice to Proceed when issued by Owner, Owner and Contractor shall meet at the time and location in Houston as agreed by the Parties, and:

(a) Owner shall deliver to Contractor:

(i) the payment due pursuant to the Invoice issued by Contractor pursuant to this Section 6.2.6;

(ii) [***];

(iii) [***]; and

(b) Contractor shall deliver to Owner:

(i) a Letter of Credit in accordance with Section 17.2.1; and

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(ii) certificates of insurance for the insurance required pursuant to Article 16 and Appendix MM-1 as of the FNTP Date.

Owner acknowledges and agrees that if any Person other than Owner and Common Facilities Owner directly owns an interest in the LNG Facility as of the date on which Owner issues the Full Notice to Proceed, it shall be a condition to Contractor’s obligation to proceed with the Work as of the FNTP Date that Owner shall have delivered the acknowledgements as described in Section 6.2.6(a)(ii) from such Person(s).

6.2.7 Reconciliation of Payment Schedule. Within thirty (30) Days after the FNTP Date, Contractor shall submit to Owner a revised Payment Schedule that adjusts both the Milestones and the progress payments, including the progress payment curve, as necessary to reflect the amounts paid to Contractor under the EDSA and the SWSA, the September 2022 Letter Agreement, the Ramp-Up LNTP, the February 2023 LNTP, as applicable, and the exercise of any Scope Options by Owner.

6.3 Invoices and Supporting Documentation.

6.3.1 Invoices. Within ten (10) Business Days after the end of each Month (which for purposes of the Invoices shall end as of the second to last Friday of each Month), Contractor shall submit to Owner a Monthly Invoice. Each Monthly Invoice shall include all Milestones completed during the prior Month, if any, any amounts owing for Work for which a Progress Payment is to be made that was performed during the prior Month, any amounts due with respect to a Provisional Sum, and any amounts owing for Work performed on a time and materials basis for additional Work performed pursuant to a mutually executed Change Order or a unilateral Change Order under this Agreement during the prior Month, and shall deduct any amounts previously paid with respect to Defective Work discovered after a previous Invoice covering such Work was submitted to Owner. Without limiting the foregoing, Contractor shall not include a request for payment for any known Defective Work on any Invoice. Such Monthly Invoice shall also note: (a) Milestones projected to be completed during the Month in which the Invoice is submitted and the next succeeding Month, if any; (b) amounts projected to be due for Work for which a Progress Payment is to be made during the Month in which the Invoice is being submitted and the next succeeding Month; (c) Customs Duties for which Contractor is entitled to reimbursement pursuant to Section 7.3.2; and (d) if a Change Order requires payment of amounts due under such Change Order on a basis other than pursuant to the completion of Milestones or Progress Payments, amounts projected to be due and owing for Work performed pursuant to such Change Order during the Month in which the Invoice is submitted and the next succeeding Month, if any, separated by amounts due for materials, or labor or services provided. All Invoices, other than the Invoice for final payment for each Stage under this Agreement, shall be in the form of Appendix V-1, shall comply with the requirements of Appendix S, and shall include all documentation supporting Contractor’s request for payment as required under this Agreement. Contractor shall segregate the Monthly Invoice so as to clearly segregate the billing and back-up information related to completed Milestones, Progress Payments and requests for payments under mutually executed Change Orders.

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6.3.2 Milestone Completion Notices. If the Ramp-Up LNTP or the February 2023 LNTP, if any, issued by Owner includes payments based on the completion of Milestones, Contractor shall provide written notices to Owner as the Milestones under the Ramp-Up LNTP and the February 2023 LNTP, as applicable, are completed. From and after the FNTP Date, Contractor shall provide written notices to Owner at least once each Week of the Milestones that were completed in the previous Week (which notices may be included as part of the Weekly Status Report provided to Owner). Owner may inspect the Work to determine whether such Milestones have been completed, but is under no obligation to Contractor to do so. If Owner inspects the Work and disagrees that a Milestone has been completed, Owner shall promptly notify Contractor in writing of the reasons why Owner believes the Milestone has not been completed. Contractor shall notify Owner once Contractor has completed any further Work required to complete such Milestone, and if Owner inspects the Work and still disagrees that the Milestone has been completed, Owner shall promptly notify Contractor in writing. The Parties shall repeat this process on an iterative basis as necessary. If an Invoice includes a request for payment of any Milestone that Owner disagrees has been completed, Owner’s notice to Contractor of Owner’s disagreement that the Milestone has been completed pursuant to this Section 6.3.2, shall constitute Owner’s notice of a Dispute pursuant to Section 6.3.6 and Section 6.4.1. If Contractor disagrees with Owner’s assessment that a Milestone has not been completed, such Dispute shall be resolved pursuant to Article 20.

6.3.3 Progress Payment Verification. From and after the FNTP Date, Contractor shall provide written notices to Owner once each Week verifying the progress of the Work in the previous Week (other than engineering progress which will only be reported on a Monthly basis, and procurement progress which will only be reported on a fortnightly basis), which notices may be included as part of the Weekly Status Report provided to Owner. Contractor shall provide Owner with a Fully Functional copies of the detailed reports of Contractor’s progress measurement details and summaries as described in Appendix S-3, as well as back up documentation for progress achieved on a Monthly basis, for the purpose of verification of achieved progress. Summaries of progress achieved shall be submitted together with Contractor’s Invoice when submitted hereunder. Owner may inspect the Work to determine whether such progress has been achieved, but is under no obligation to do so. If Owner inspects the Work and disagrees with the amount of progress of the Work that Contractor reports has been achieved, Owner shall promptly notify Contractor in writing of the reasons why Owner believes the progress of the Work differs from that reported by Contractor. Contractor shall notify Owner once Contractor has completed any further Work required to achieve the progress of the Work reported by Contractor, and if Owner inspects the Work and still disagrees that the Work has progressed to the level reported by Contractor, Owner shall promptly notify Contractor in writing. The Parties shall repeat this process on an iterative basis. If an Invoice includes a request for a Progress Payment based on progress that Owner disagrees has been achieved, Owner’s notice to Contractor of Owner’s disagreement with the reported progress of the Work pursuant to this Section 6.3.3 shall constitute Owner’s notice of a Dispute pursuant to Section 6.3.6 and Section 6.4.1. If Contractor disagrees with Owner’s assessment of the progress of the Work, such Dispute shall be resolved in accordance with Article 20.

6.3.4 Time and Materials Documentation. During any period in which Contractor is performing any of the Work on a time and materials basis, Contractor shall cause its and the Suppliers’ personnel performing Work on a time and materials basis to submit to Owner for countersignature bi-weekly hour reports showing hours worked by such personnel.

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No hourly charges with respect to such personnel may be included in any Invoice unless supported by such a countersigned bi-weekly hour reports. In addition, Contractor shall provide Owner with additional supporting documentation for any expensed amounts included on Invoices submitted with respect to Work performed on a time and materials basis, including invoices and receipts for amounts incurred by Contractor with respect to such Work.

6.3.5 Interim Lien and Claim Waivers. Each Invoice received by Owner prior to Final Completion shall be accompanied by: (a) a fully executed Interim Lien and Claim Waiver from Contractor in the form of Appendix EE-1 for all Work for which payment is requested; and (b) fully executed Interim Lien and Claim Waivers from each Major Supplier in the form set forth in Appendix EE-2 for all Work for which payment is requested. Interim Lien and Claim Waivers shall not be required from Major Suppliers until they have performed Work, and Major Suppliers shall be required to submit additional Interim Lien and Claim Waivers only if they have performed Work not covered by a previous Interim Lien and Claim Waiver. Submission of all Interim Lien and Claim Waivers covering the period through the end of the applicable Month is a condition precedent to payment of any Invoice. In addition, beginning with the second Invoice submitted by Contractor hereunder, Contractor shall submit (i) a fully executed Interim Unconditional Lien and Claim Waiver from Contractor in the form of Appendix FF-1 for all Work for which payment was received and for which Contractor has not previously provided an Interim Unconditional Lien and Claim Waiver; (ii) fully executed Interim Unconditional Lien and Claim Waivers from each Major Supplier in the form set forth in Appendix FF-2 for all Work for which payment has been received and for which the Major Supplier has not previously provided an Interim Unconditional Lien and Claim Waiver; (iii) fully executed Final Lien and Claim Waivers in the form set forth in Appendix GG-2 from each Major Supplier that performed any part of the Work in the prior Month and that has completed all of the Work to be performed by that Major Supplier for which the Major Supplier has not previously provided a Final Unconditional Lien and Claim Waiver; and (iv) fully executed Final Unconditional Lien and Claim Waivers in the form set forth in Appendix HH-2 from each Major Supplier that has completed all of the Work to be performed by that Major Supplier and has not previously executed and delivered a Final Unconditional Lien and Claim Waiver.

6.3.6 Invoice Review and Payment. Contractor shall furnish such supporting documentation and notices as specified in this Section 6.2.7 in connection with Owner’s review of an Invoice. Without limiting Owner’s rights of review under this Agreement, within ten (10) Business Days after Owner receives an Invoice and all accompanying documentation required under this Section 6.2.7, Owner shall (in consultation with the Lenders Agent and the Independent Engineer, to the extent Owner chooses to consult with such Persons): (a) determine whether the Work covered thereby has been completed as described by Contractor; (b) determine whether the Work performed conforms with the requirements of this Agreement; and (c) determine and notify Contractor concerning any invoiced amount that is in Dispute and the basis for such Dispute. Unless Disputed by Owner in accordance with Section 6.4.1, each Invoice (less any withholdings allowed under this Agreement) shall be due and payable [***] Days after the Invoice is received by Owner.

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6.4 Disputed Payments and No Waiver.

6.4.1 Disputed Payments. If Owner Disputes one (1) or more items in an Invoice, Owner shall pay the portion of the Invoice that is not Disputed by the due date for payment in accordance with Section 6.3.6 and shall notify Contractor in writing of the item or items under Dispute and the reasons therefor and the Dispute shall be resolved pursuant to Article 20. Payment of such Disputed items may be withheld by Owner, without payment of interest, until settlement of the Dispute. Payment on Disputed amounts shall be made as soon as such Dispute is resolved. Failure by Owner to pay any amount in Dispute and identified pursuant to this Section 6.4.1 until resolution of such Dispute in accordance with this Agreement shall neither in any respect alleviate, diminish, modify nor excuse the performance of, Contractor’s obligations to perform hereunder, including Contractor’s obligation to meet the Guaranteed Substantial Completion Dates. Contractor and Owner shall use their commercially reasonable efforts to resolve all disputed amounts reasonably expeditiously and in accordance with the provisions of Article 20.

6.4.2 No Waiver. No payment made under this Agreement shall be construed to be acceptance or approval of that part of the Work to which such payment relates or shall constitute a waiver by Owner of the performance by Contractor of any of its obligations hereunder, and in no event shall any such payment affect the warranty obligations of Contractor as set forth in Section 10.1. Any payment withheld under this Agreement shall be without prejudice to any other rights or remedies available herein to Owner. Contractor’s acceptance of any payment shall not be deemed to constitute a waiver of amounts that are then in Dispute.

6.5 Owner Right to Withhold and Set Off Payment.

6.5.1 Withholding. To the extent permitted by Applicable Law, Owner may withhold payment to Contractor, without payment of interest, of amounts otherwise due Contractor, and deduct or set-off monies due or owing by Contractor to Owner under this Agreement, for any of the following reasons:

(a) a Dispute over any amount in an Invoice (including as to the completion of Milestones or achievement of progress), to the extent of the Disputed amount;

(b) the filing of third-party claims against Owner asserting amounts due to such third parties by Contractor or any Supplier, or the filing of Liens against Owner or the Common Facilities Owner or any of their respective property with respect to the Work; provided that Contractor has refused or failed to defend, indemnify and hold harmless Owner and the Common Facilities Owner against such claims or obtain the release or discharge of such Liens to the extent Contractor is obligated hereunder to do so;

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(d) the assessment of any fines, penalties or similar assessments against Owner as a result of Contractor’s failure to comply with Applicable Laws, to the extent of such fines, penalties or similar assessments;

(e) a failure by Contractor to pay amounts properly due for Equipment, materials and personnel used by Contractor in connection with the Work; provided, that Owner has paid Contractor all undisputed amounts hereunder;

(f) a failure by Contractor to pay any amount owing to Owner under this Agreement on or before the date due in the amount of such payment owed, or other breach by Contractor of any material provision of this Agreement as reasonably necessary for Owner to protect itself from resulting Losses;

(g) amounts previously overpaid by Owner to Contractor, including under the EDSA or the SWSA;

(h) if Contractor fails to deliver the reports, statements or otherwise perform the administrative obligations of Contractor due in connection with an Administrative Milestone in any given Month for which an Administrative Milestone is not included in the Payment Schedule, an amount equal to the most recent Administrative Milestone Payment included in the Payment Schedule, without duplicating amounts withheld under Section 6.2.2(a);

(i) if any Invoice does not include the required supporting documentation, [***], to the extent of the amounts on such Invoice for which the supporting documentation is lacking;

(j) in accordance with Sections 6.2.2(a) and 6.2.2(b); or

(k) to the extent necessary to protect Owner from loss or potential loss against which Owner reasonably deems itself inadequately protected arising out of:

(i) failure by Contractor to provide a release or bond or otherwise discharge any Lien in breach of Section 2.9.3; provided that Contractor has refused or failed to obtain the release or discharge of such Liens to the extent Contractor is obligated to do so in accordance with Section 2.9;

(ii) Contractor’s failure to submit a Recovery Plan (without regard as to whether or not Owner has approved the proposed Recovery Plan, but without limiting Owner’s right to challenge the reasonableness of such plan), or implement or materially comply with an accepted Recovery Plan; or

(l) [***].

If Owner elects to withhold payment from Contractor on account of any of the foregoing causes, Owner shall notify Contractor of such withholding at least ten (10) Days in advance of the due date for payment and state the reasons therefor. If such notice is provided with less than ten (10) Days remaining before the due date for payment, Owner shall pay the

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amount to be withheld but may withhold such amount from amounts due under a subsequent Invoice unless the reason for such withholding is corrected before payment is due with respect to such subsequent Invoice. Contractor shall continue to perform the Work, subject to Owner’s right to terminate or suspend Contractor’s performance under Section 19.3.2, notwithstanding the withholding by Owner of any such amount.

6.5.2 Payment of Withheld Amounts. Subject to Section 6.4.1, if and when the cause or causes for withholding any payment shall be remedied or removed by Contractor and reasonably satisfactory evidence of such remedy or removal has been presented to Owner, the amount withheld (other than with respect to monies due or owing by Contractor to Owner) shall be paid to Contractor at the due date for payment of the next Invoice to become due. If Contractor fails or refuses to remedy or remove any cause for withholding such payment for [***] Days after Owner notified Contractor that it intended to withhold such payment, Owner may remedy or remove the same, or cause the same to be remedied or removed, and may recover from Contractor the costs incurred by Owner to remedy or remove the same, or may deduct the cost thereof from any amounts due or owing to, or that may become due or owing to, Contractor; provided, however, that if Owner withholds amounts due to a Contractor Event of Default, Contractor shall have the same amount of time to attempt to remedy or cure such Contractor Event of Default as Contractor would have with respect to such default pursuant to Section 19.3.1. [***].

6.5.3 Insufficient Amounts. If insufficient amounts are available for full offset by Owner, then Contractor, upon receipt of Owner’s written notice of Contractor’s outstanding obligations hereunder, shall promptly remit to Owner all amounts properly due and owing pursuant to the terms of this Agreement. Should Contractor fail to pay any such amount within [***] Days after Owner’s notice (reserving its right to draw on the Letter of Credit), Owner may at its sole and absolute discretion draw on the Letter of Credit for such amounts, in addition to any other remedies that may be available to it under this Agreement.

6.5.4 No Suspension or Termination. Subject to Applicable Laws, and notwithstanding the provisions of Sections 19.4.2 and 20.5, Contractor shall not have any rights of termination or suspension under Section 19.4.2 as a result of Owner’s exercise or attempted exercise of its rights under this Section 6.5.

6.6 Final Payments. Upon Final Completion, Contractor shall, in addition to any other requirements in this Agreement for achieving Final Completion, including those requirements set forth in Section 1.2 for the definition of Final Completion, submit a fully executed final Invoice (the “Final Invoice”) in the form attached hereto as Appendix V-2, along with: (a) a statement summarizing and reconciling all previous Invoices, payments and Change Orders; (b) an affidavit that all payrolls, Taxes, liens, charges, claims, demands, judgments, security interests, bills for Equipment, and any other indebtedness connected with the Work have been paid; (c) fully executed Final Lien and Claim Waiver from Contractor in the form of Appendix GG-1; and (d) fully executed Final Lien and Claim Waivers in the form set forth in Appendix GG-2 from each Major Supplier that performed any part of the Work in the prior Month. No later than [***] Days after receipt by Owner of the Final Invoice and all requested documentation and achieving Final Completion, Owner shall, subject to its rights to withhold

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payment under this Agreement, including Owner’s right to withhold payment for any unpaid liquidated damages which Contractor owes under the terms of this Agreement, and subject to Contractor concurrently delivering to Owner a Final Unconditional Lien and Claim Waiver in the form of Appendix HH-1 and delivering fully executed Final Unconditional Lien and Claim Waivers in the form set forth in Appendix HH-2 from each Major Supplier from which a Final Unconditional Lien and Claim Waiver has not yet been delivered, pay Contractor the balance of the Contract Price. Acceptance of final payment by Contractor shall constitute a waiver of claims for payment by Contractor except those previously made in writing and identified by Contractor in the Final Invoice which are unsettled at the time of Contractor’s application for final payment. Any Invoice or other request for payment delivered by Contractor with respect to a Stage more than [***] Days after the Final Completion Date, other than for amounts determined by virtue of an audit conducted under Section 2.23.2, amounts owing by Owner pursuant to Article 15, or amounts determined to be owed by Owner in accordance with Article 20 with respect to Disputes arising prior to the Final Invoice, as described therein, shall be invalid, and Owner shall have no obligation or liability to pay such Invoice or request.

6.7 Late Payments. Any late payments due to Owner or Contractor under this Agreement, excluding any payments that are properly withheld pursuant the terms of this Agreement, shall bear interest from the date payment is due at the Late Payment Rate per annum.

6.8 Overpayments. If an error is made in connection with a payment, and such payment is an overpayment, the overpayment shall be reconciled with the next monthly Invoice, or in the case of an overpayment by Owner offset under Section 6.5, or if no further invoices are planned or the amount of such Invoices are not estimated to be of an amount sufficient to properly reconcile the error, then the Party receiving such payment in error shall promptly refund the mistaken amount to the paying Party.

6.9 Currency Conversions. Within ten (10) Days after the FNTP Date with respect to any portions of the Contract Price that are stated in currencies other than Dollars on Appendix C, Contractor shall prepare and submit a proposed Change Order to Owner in accordance with Section 8.3.1(l) to: (a) convert those portions of the Contract Price that are stated in currencies other than Dollars on Appendix C (the “Foreign Currency Amount”), into Dollars, in accordance with Attachment C-2 to Appendix C that are being converted as of such date; and (b) reimburse Contractor for the associated hedging costs incurred by Contractor (without any mark-up), as demonstrated by the hedging agreements that Contractor has entered into with respect to conversion of such currencies and that are provided to Owner in connection with such Change Order. Except for such adjustments to the Contract Price as described in Attachment C-2 to Appendix C, Contractor will not have a right to any further adjustment to the Contract Price, or to any adjustment of the Milestone Payments, Progress Payments, the Payment Schedule, the Key Date Schedule, including the Guaranteed Substantial Completion Dates, the Guaranteed Performance Levels, or any other terms or conditions of this Agreement, as a result of the conversions of the Foreign Currency Amount pursuant to this Section 6.9 and Attachment C-2 to Appendix C.

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6.10 Effect of Payment. No payment, final or otherwise, shall constitute a waiver of any claims by Owner or be considered or deemed to represent that Owner has inspected the Work, nor shall it constitute or be deemed an acceptance, in whole or in part, of any portion of the Work not in accordance with this Agreement.

6.11 Certain Conditions Precedent to Payment. It shall be a condition precedent to Owner’s obligation to make any payment hereunder (a) whether under the Ramp-Up LNTP, under the February 2023 LNTP or after the FNTP Date, that Contractor has provided to Owner, and is maintaining (i) the Contractor Guarantee in accordance with Sections 17.1; and (ii) has procured and is maintaining the insurance policies in accordance with Section 16.1 and Appendix MM-1 (as evidenced by certificates of insurance provided in accordance with Section 16.1.8); and (b) after the FNTP Date, that Contractor has provided to Owner, and is maintaining the Letters of Credit in accordance with Sections 17.2 and 9.10, as and when applicable.

6.12 Fixed Price Nature of Contract. Without limiting either Contractor’s or Owner’s rights pursuant to Article 8, Contractor and Owner acknowledge and agree there are cost risks inherent in the execution of a fixed price contract for construction. Contractor acknowledges that this Agreement constitutes a fixed price (other than the Provisional Sums, [***] as expressed herein), date certain obligation to engineer, design, procure, construct, test and start-up a turnkey project (including the training of the Operating Personnel as described herein). References to the obligations of Contractor under this Agreement as being “turnkey” and performing the Work on a “turnkey basis” means that Contractor is obligated to supply all of the Equipment, labor and design services and to supply and perform all of the Work, in each case as may reasonably be required, necessary, incidental, or appropriate to complete the Work such that the LNG Facility meets the Guaranteed Performance Levels, or the Minimum Performance Standards, where applicable, and the LNG Facility otherwise complies with the applicable terms, conditions and other requirements set forth in this Agreement, all for the Contract Price. Contractor acknowledges that “turnkey” or “turnkey basis” does not limit Owner’s right to review, inspect or comment on any aspect of the Work or Contractor’s performance thereof as permitted under this Agreement. Contractor further acknowledges that it may have miscalculated its and its Suppliers’ costs to perform the Work, and that the performance of the Work in accordance with this Agreement may result in Contractor (or its Suppliers) expending more resources than it or they estimated or budgeted or otherwise intend to expend. Similarly, Owner acknowledges that Contractor may have been conservative in its assumptions regarding the overall cost of the Work, and that the actual cost to Contractor to perform the Work may in fact be significantly less than the Contract Price. The fact that either Party may have so miscalculated the costs to perform the Work hereunder, or that either Party expended extra resources that it did not intend to spend as a result of such miscalculation, shall not form the basis for any claim of relief hereunder, whether such claim arises in contract or tort.

ARTICLE 7

TAXES

7.1 Responsibility for Taxes. The Contract Price includes all Taxes imposed on or payable by Contractor and Subcontractors in connection with the Work (and for purposes of clarity, any Customs Duties imposed on Equipment imported for fabrication of modular components and stored in modular yards that are not part of the FTZ shall be paid by the Contractor and are included in the Contract Price), other than: (a) those Taxes for which Owner

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is responsible as described in Section 7.3; and (b) those Texas Sales and Use Taxes for which Owner will be responsible as described in Section 7.5. Contractor shall: (i) pay and cause the payment when due of all Taxes imposed on or payable by Contractor and its Subcontractors in connection with the Work for which Contractor is responsible pursuant to this Section 7.1; and (ii) make, and shall cause its Subcontractors to make, any and all payroll deductions required by Applicable Laws. Without limiting the foregoing, the Contract Price includes, and Owner shall have no responsibility to pay, any Texas Sales and Use Taxes or property taxes or any other taxes assessed, incurred or levied on any Construction Equipment. The Contract Price shall not be increased with respect to any of the foregoing or with respect to any withholdings that Owner may be required to make in respect of any of the foregoing items. Contractor shall also bear responsibility for any employment Taxes with respect to all individuals performing services under this Agreement on the behalf of Contractor who are not employed by Contractor as employees of Contractor, and cause all Subcontractors to bear responsibility for any employment Taxes with respect to all individuals performing Work for such Subcontractors who are not employed by such Subcontractors as employees of such entities. Notwithstanding the foregoing, Contractor shall not be liable for, and the Contract Price shall not include property Taxes levied on: (i) the real property of Owner; and (ii) Equipment and materials to be incorporated into, affixed to, or installed into the LNG Facility; provided, however, that notwithstanding anything to the contrary in the foregoing, Contractor shall be responsible to pay, and the Contract Price includes, property Taxes on Equipment and materials to be incorporated into, affixed to, or installed into the LNG Facility that are assessed by any jurisdiction outside of Jefferson County, Texas due to Contractor’s delivery, handling, transport or storage of the Equipment (including Capital Spare Parts) that would not have been incurred or levied if Contractor had delivered the Equipment to the Site or the laydown yard in Jefferson County, Texas, as applicable, and stored it therein or thereon, until installation in the Liquefaction Facility; provided, further, that the foregoing shall not limit Contractor’s right to relief in connection with the occurrence of a Force Majeure event. Contractor shall, and shall cause its Subcontractors to, file all returns required with respect to Taxes for which Contractor or such Subcontractors are responsible hereunder by the date required under Applicable Laws.

7.2 Withholding of Taxes. If Owner is required by Applicable Laws to withhold compensation due to Contractor to satisfy any obligation of Contractor for Taxes, Owner shall use commercially reasonable efforts to provide Contractor with at least ten (10) Business Days prior notice and may withhold such amounts from any payment due to Contractor hereunder. Owner shall pay any amounts so withheld to the applicable taxing authority and provide Contractor with any tax receipts or other evidence of payment that Owner obtains from such taxing authorities. Owner shall not withhold such Taxes from Contractor’s compensation if Contractor produces evidence, reasonably satisfactory to Owner, that Contractor is exempt from withholding of such Taxes at least ten (10) Business Days prior to the next payment date.

7.3 Foreign-Trade Zone.

7.3.1 Cooperation. Owner has designated the Site and the off-Site laydown area(s) located in Jefferson County, Texas as identified in Appendix ZZ, as part of the Foreign-Trade Zone for purposes of the Liquefaction Project. Owner shall act as the “FTZ Operator” for the approved FTZ(s) and Contractor will utilize the Owner’s FTZ(s) as a “Zone User”. Contractor shall, to the maximum extent possible under Applicable Laws, and shall cause its

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Suppliers to, use the locations designated as part of the FTZ(s) for admissions of imported Contractor-Furnished Items, except that Contractor shall not be required to import aggregate sourced from Mexico through Owner’s FTZ(s). Contractor shall, and shall cause its Suppliers to, cooperate in good faith with Owner and its tax/customs consultants to achieve applicable Customs Duties and fee savings as it relates to the FTZ designations. Such cooperation may include, among other things, timely providing relevant shipment information to Owner, filing required FTZ documentation with U.S. Customs and Border Protection for in-bound transportation from the port of arrival to the designated FTZ location and admission into the FTZ in lieu of a normal entry for consumption, and providing relevant information to Owner regarding inventory admitted within the FTZ(s) (including movement within and out of the FTZ(s)); provided, however, if Owner’s Tax/customs consultant requests information relating to the actual cost of any item of Equipment, Contractor shall provide such information to Owner’s Tax/customs consultant, subject to such consultant having signed a reasonable and customary non-disclosure agreement with Contractor and on the understanding that such consultant shall not disclose to Owner the actual cost incurred by Contractor or its Subcontractors for any item of Equipment included in the Contract Price. Owner will rely on cooperation from Contractor and its Suppliers to ensure regulatory compliance. Costs associated with integrating the FTZ’s inventory control and recordkeeping system (“ICRS”) software with Contractor’s Enterprise Resource Planning system shall be borne by Contractor. The costs for Contractor and the Suppliers to comply with the FTZ requirements and to support Owner in the administration of the FTZ(s) are included in the Contract Price.

7.3.2 Importer of Record; Payment of Customs Duties. Contractor shall be the importer of record and Owner shall pay Customs Duties when due and reimburse Contractor for any Customs Duties paid by Contractor, except to the extent Contractor fails to comply with its obligations with respect to importing Equipment through the applicable FTZ (once the FTZ is activated and subject to Sections 2.12.2(c) and 2.12.4) and transporting Equipment such that Owner does not lose the FTZ benefits. If the FTZ is not activated or, once activated, the FTZ does not include Contractor’s selected off-Site laydown yard in Jefferson County, Texas, as identified in Appendix ZZ, and Contractor otherwise complies with its requirements under Section 2.12.4, Owner shall pay Customs Duties when due and reimburse Contractor for any Customs Duties paid by Contractor arising due to the failure of the FTZ to be activated prior to importation of Equipment, or once activated, failure of the FTZ to include Contractor’s selected off-Site laydown yard in Jefferson County, Texas, as identified in Appendix ZZ. Contractor shall utilize the FTZ(s) for eligible Equipment, and shall use commercially reasonable efforts to minimize Customs Duties and restrictions or other punitive or retaliatory duties imposed by the U.S. in its sourcing decisions, irrespective of the FTZ(s). Contractor shall, and shall cause its Suppliers to pursue and utilize any available Free Trade Agreement or duty preference program as it relates to Contractor-Furnished Items imported into the U.S. (such as the U.S.-Mexico-Canada Agreement (USMCA), the U.S.-Korean Free Trade Agreement (KORUS), the U.S. Goods Returned program, and the Generalized System of Preferences (GSP)), assuming the imported Contractor-Furnished Item qualifies as originating under the rules of the relevant agreement or duty preference program.

7.4 Exemptions. Contractor and Owner shall use commercially reasonable efforts to cooperate with each other to minimize the liabilities for Taxes of both Parties to the extent legally permissible and to secure Tax credits and incentives and exemptions that are available or that Owner obtains for the Liquefaction Project, supplying resale and exemption certificates, if applicable, and any other information as reasonably requested or required by Governmental

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Authorities or Owner. Contractor certifies that the Contract Price does not include any Taxes for which Owner is responsible under Section 7.3 or any Customs Duties or Texas Sales and Use Taxes that are reimbursable pursuant to Section 7.3.2 or Section 7.5, respectively. If Contractor or any Supplier stores any Equipment off the Site in a manner that causes the imposition of any Taxes that would not otherwise be imposed if the Equipment were delivered to and stored at the Site, or, once the FTZ is activated and subject to Sections 2.12.2(c) and 2.12.4, within the FTZ, or does not utilize the FTZ for importation of Contractor-Furnished Items or otherwise through its acts or omissions causes the imposition of any Taxes on the Equipment that would not otherwise be imposed if Contractor or such Supplier had complied with the requirements of this Agreement, Owner shall not have any liability or responsibility to pay for or reimburse Contractor for such Taxes.

7.5 Texas Sales and Use Tax Matters.

7.5.1 Texas Sales and Use Taxes – Generally. For Texas Sales and Use Tax purposes, this Agreement is intended to be a “separated contract” as such term is defined in 34 Tex. Administrative Code §3.291(a)(13). The Parties acknowledge and agree that any Supply Contract in connection with the Project will be structured as a “separated contract” to the extent reasonably practicable.

7.5.2 Exemption Certificates. Owner shall provide Contractor with a Texas direct pay exemption certificate on or before the FNTP Date, and shall pay applicable Texas Sales and Use Taxes directly to the State of Texas. Contractor shall issue, and shall cause the applicable Suppliers to issue, properly completed resale certificates or other documentation or exemption certificates to all applicable Suppliers, in order to claim, obtain or evidence that the sale of such taxable items is exempt or otherwise not taxable for Texas Sales and Use Tax purposes. As used in this Section 7.5, the term “taxable item” has the meaning assigned to that term in Section 151.010 of the Texas Tax Code. Pursuant to direct pay permit status, Owner shall pay applicable Texas Sales and Use Tax on Equipment directly to the State of Texas. In no event shall Owner have any obligation to reimburse Contractor for Texas Sales and Use Taxes paid, directly or indirectly, by Contractor or any Supplier with respect to any taxable items for which Owner has provided a Texas direct pay exemption certificate, nor shall Owner have any responsibility to pay any Texas Sales and Use Taxes assessed, incurred or levied on any Construction Equipment.

7.5.3 Sales and Use Tax List. Set forth on Appendix C is an allocation of the Contract Price by item or category of items included in the Work that complies with the requirement of 34 Tex. Administrative Code § 3.291(a)(13) to provide separately stated amounts for incorporated materials, and separately stated amounts for all skill and labor that includes fabrication, installation and other labor that is furnished by Contractor. Each Change Order issued hereunder shall include a similar detailed breakdown with respect to the adjustment to the Contract Price reflected in such Change Order. Set forth on Attachment C-1 to Appendix C is the incorporated materials price for the incorporated Equipment listed on Attachment C-1 to Appendix C for Owner’s Texas Sales and Use Tax purposes. To the extent any Change Order includes any new incorporated Equipment, or as necessary to reflect the final installed Equipment (or the quantity thereof), Contractor shall update Attachment C-1 to Appendix C to

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account for any such changes. Notwithstanding anything to the contrary in this Section 7.5.3, Contractor shall provide Owner with a final statement of information within thirty (30) Days after Final Acceptance of Stage II that otherwise complies with the requirements of this Section 7.5.3 regarding the matters set forth on Attachment C-1 to Appendix C. Contractor shall also provide Owner with any additional information regarding the allocations in Appendix C and Attachment C-1 to Appendix C, including modifying the allocations of the separated Contract Price on Appendix C and modifying Attachment C-1 to Appendix C to further itemize equipment descriptions and prices of items listed on Appendix C-1, and such Change Orders, and Texas Sales and Use Tax matters related thereto, reasonably requested by Owner.

7.5.4 Owner’s Audit Right. Pursuant to Section 2.23, Owner shall have the right to have its tax consultant, after the consultant has signed a reasonable and customary non-disclosure agreement with Contractor, audit the relevant Books and Records of Contractor and Subcontractors to confirm: (a) that all Taxes paid by Contractor and its Subcontractors in connection with the Work are properly owed under Applicable Laws; (b) the quantities and descriptions of any Equipment installed in or ordered for the LNG Facility for purposes of Texas Sales and Use Tax or property Tax; and (c) such other information as Owner or Owner’s tax consultant may deem reasonably necessary in connection with the preparation of Owner’s tax returns or other tax documentation in connection with the Liquefaction Project. If Owner’s tax consultant requests information relating to the actual cost of any item of Work, Contractor shall provide such information to Owner’s tax consultant, after the consultant has signed a reasonable and customary non-disclosure agreement with Contractor, on the understanding that such tax consultant shall not disclose to Owner the actual cost incurred by Contractor or its Subcontractors for any item of Equipment included in the Contract Price, or unless the amount of Tax properly payable for an item of Work is subject to audit, litigation, arbitration, subpoena, or summons issued by a Governmental Authority; provided, however, that such tax consultant may report to Owner the amount of Taxes properly payable under Applicable Laws.

7.6 Fixed Asset Price Allocation Schedule. Contractor shall complete a fixed asset price allocation schedule in the form attached hereto as Appendix PP (the “Fixed Asset Schedule”) for each Stage of the Work and shall provide Owner such other information reasonably necessary for Owner to maintain segregated accounts for its Tax records and fixed asset records. The Fixed Asset Schedule, among other information, will provide a breakdown of the Contract Price by individual category (i.e. “soft costs” (i.e. engineering, permitting, etc.) and “hard costs” (materials, labor, equipment, etc.)). The Fixed Asset Schedule shall also include information necessary to assist Owner with any reporting requirements or filings under any Tax Abatements under Section 2.7.10 or other filings with any Governmental Authority. Contractor shall deliver a draft Fixed Asset Schedule for each Stage within thirty (30) Days after the date on which such Stage achieves Ready for Feed Gas Introduction, and shall update such Fixed Asset Schedule periodically thereafter if any material change occurs, until Contractor delivers the final Fixed Asset Schedule for such Stage (which shall be on or before the Substantial Completion Date).

ARTICLE 8

CHANGE ORDERS

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8.1 Changes to the Work. Except for changes to the Work and adjustments to the extent applicable to the Contract Price, the Milestones, the Payment Schedule, the Key Date Schedule, including the Guaranteed Substantial Completion Dates, or the Guaranteed Performance Levels, pursuant to a Change Order signed by Owner, or Owner and Contractor, as applicable, in accordance with this Article 8, none of the rights or obligations of the Parties under this Agreement shall be changed, modified, altered or adjusted by a Change Order or in any other manner except by a written amendment to this Agreement signed by the Parties. Contractor expressly waives any other compensation as a result of a change in the Work except as set forth in Section 8.4.2(l)(iii) or a Change Order in accordance with this Article 8.

8.2 Change Orders Requested by Owner.

8.2.1 Changes in the Work. Owner shall have the right in its sole and absolute discretion to make changes in the Work (including changes which reduce the scope of Contractor’s Work hereunder). All such changes shall be made and documented in accordance with this Section 8.2 and shall be considered, for all purposes of this Agreement, as part of the Work. The adjustments to the Work, the Contract Price, the Milestones, the Payment Schedule, the Key Date Schedule, including the Guaranteed Substantial Completion Dates, or the Guaranteed Performance Levels, as described in this Section 8.2, shall be the sole adjustments to any of the terms and conditions of this Agreement as a result of the applicable Owner-initiated Change Order.

8.2.2 Owner-Initiated Change Order Procedure.

(a) If Owner desires to initiate a Change Order, Owner shall submit to Contractor a notice with a narrative with respect to any change in the Work that Owner desires to make. Contractor shall respond to Owner within fifteen (15) Days with a preliminary estimate (a “Preliminary Change Order Estimate”), setting forth the estimated impact, if any, which Owner’s proposed change to the Work would have on the Contract Price, the Milestones, the Payment Schedule, the Key Date Schedule, including the Guaranteed Substantial Completion Dates, or the Guaranteed Performance Levels, together with a sufficiently detailed narrative to justify the estimated impact Contractor proposes such change would have on such terms, including signed quotations from Suppliers(including CIMTAS but excluding other Affiliates of Contractor), as applicable, including a description of when the Parties would need to execute a final Change Order so as to minimize as much as possible the effect any such Change Order would have on the Key Date Schedule. Such response from Contractor shall also include Contractor’s notice of its estimated costs to prepare a proposed final Change Order if such costs are estimated to exceed the CO Cost Threshold. After receipt of the Preliminary Change Order Estimate, if Owner desires to proceed to a full and final Change Order, Owner shall notify Contractor. If Contractor is instructed to prepare a full and final Change Order, Contractor shall do so (which shall contain all the information required under this Section 8.2.2) within fifteen Days after Owner’s notice; provided, however, that if it is not possible for Contractor to provide all of the information under this Section 8.2.2 within the fifteen (15) Day period described in this Section 8.2.2, Contractor shall provide Owner with as much information as possible, together with a written explanation of the reason that additional time is required. With respect to any

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information not provided within such fifteen (15) Day period, Contractor shall exercise reasonable diligence to provide such information as soon as possible, but in no event later than thirty (30) Days (unless the Parties otherwise agree in writing) following Contractor’s receipt of Owner’s notice that Contractor shall prepare a full and final Change Order from a Preliminary Change Order Estimate.

(b) Contractor’s Preliminary Change Order Estimate and any final proposed Change Order (i) shall only include adjustments to the Project Schedule, including the Guaranteed Substantial Completion Dates in accordance with Section 8.4.1(a); and (ii) shall only include adjustments to the Contract Price, the Milestones and the Payment Schedule in accordance with Section 8.4.1(b); provided that Contractor shall build-up its costs using the rates set forth in Appendix KK. Contractor shall only propose changes to the Guaranteed Performance Levels in accordance with Section 8.4.1(c); provided, however, that if an alternate change to the Work can be made which would not necessitate any adjustment to the Guaranteed Performance Levels, Contractor shall include in any such proposed change in the Work an option (which option shall identify the incremental cost and schedule impact in order to maintain such Guaranteed Performance Levels) to permit Owner to accept a change in the Work which would not require an adjustment to the Guaranteed Performance Levels.

(c) Owner shall respond to Contractor’s revised Change Order within fifteen (15) Business Days after receipt of all information to be furnished by Contractor, indicating Owner’s agreement or disagreement with Contractor’s proposed revisions to the Contract Price, the Milestones, the Payment Schedule, the Key Date Schedule, including the Guaranteed Substantial Completion Dates, or the Guaranteed Performance Levels, in such Change Order.

(d) If Contractor’s actual costs to prepare a Change Order in response to a request from Owner pursuant to this Section 8.2.2 exceed the CO Cost Threshold and Contractor notified Owner in accordance with Section 8.2.2(a) that its estimated costs would exceed such amount, Owner shall reimburse Contractor for such costs (without mark-up, overhead, fees or profit on such costs), subject to Owner’s receipt of reasonable supporting documentation of such costs from Contractor.

8.2.3 Agreed Owner-Initiated Change Orders. If the Parties reach agreement on the proposed Change Order, the Parties shall execute such Change Order, and such Change Order shall become binding on the Parties, as part of this Agreement. Each agreed change in the Work, the Contract Price, the Milestones, the Payment Schedule, the Key Date Schedule, including the Guaranteed Substantial Completion Dates, and the Guaranteed Performance Levels, shall be reflected in such Change Order as executed by the Parties.

8.2.4 Scope Option. Without limiting the generality of this Section 8.2, if Owner desires to elect to exercise a Scope Option, Owner shall, on or before the date by which Owner must exercise the Scope Option as described in Appendix C with respect to such Scope Option, submit to Contractor a Change Order in the form of Appendix F-1 with respect to such Scope Option, setting forth, as applicable, the adjustments to the Contract Price, the Milestones and the Payment Schedule, and the Baseline CPM Schedule and Key Date Schedule, as

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described in Appendix C. Such Change Order, which shall be signed by Owner when submitted to Contractor, shall be signed by Contractor upon receipt.

8.2.5 COVID-19 Cessation. If as of the FNTP Date, the means and methods and counter-measures set forth in Part III of Appendix YY (including any Additional COVID-19 Counter-Measures) that pursuant to Appendix YY (as it may be updated from time to time pursuant to Section 8.4.2(k)) should, as of such date, be in effect for the performance of the Work, that (a) with respect to COVID-19 Type A Counter-Measures, are no longer deemed required under Applicable Law; (b) with respect to any COVID-19 Type B Counter-Measures, are no longer recommended pursuant to COVID-19 Guidelines; (c) [***]; (d) in the case of a COVID-19 Type A Counter-Measure Extension, such extended means, methods and counter-measures are no longer required to be in place under Applicable Laws; (e) in the case of a COVID-19 Type B Counter-Measure Extension, such extended means, methods and counter-measures are no longer recommended pursuant to COVID-19 Guidelines; (f) [***]; and (g) in each case are not identified in Part II of Appendix YY, [***]: (i) reflect the estimated decrease to Contractor’s costs (including those of its Affiliates other than CIMTAS) saved by Contractor not having to employ such means and methods and counter-measures (or Additional COVID-19 Counter-Measures) for the remainder of the period during which Contractor assumed it would employ such methods as set forth in Part III of Appendix YY (as it may be updated from time to time pursuant to Section 8.4.2(k)); and (ii) [***]. [***].

8.3 Change Orders Requested by Contractor.

8.3.1 Permitted Change Order Requests. Contractor shall only have the right to a Change Order in connection with the occurrence of the following events, but only to the extent described in Section 8.4, and in all cases subject to the requirements of Section 8.5, and, in the case of Sections 8.3.1(e) through (and including) 8.3.1(j), 8.3.1(m), 8.3.1(n), 8.3.1(o), 8.3.1(p), 8.3.1(q), 8.3.1(r) and 8.3.1(x) (the “Claim Submission Events”), subject to the provisions of Sections 18.2 and 18.1.3:

(a) the purchase of operating spare parts for a Stage in accordance with Section 2.14.2, as requested by Owner;

(b) with respect to Provisional Sums where:

(i) the purchase of Capital Spare Parts in accordance with Section 2.14.3 to the extent the aggregate purchase price and delivery costs, taken as a whole for all of the Capital Spare Parts, differs from the Provisional Sum included in the Contract Price for the Capital Spare Parts as set forth in Attachment C-3 to Appendix C;

(ii) to the extent that the aggregate costs incurred by Contractor to close-out action items that were identified during Contractor’s HAZOP review that require input from Vendors not received as of the Effective Date, differs from the Provisional Sum included in the Contract Price for such Work as set forth in Attachment C-3 to Appendix C;

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(iii) the aggregate fees incurred by Contractor to dispose of materials stripped from the Site (such as during clearing and grubbing) at Contractor’s selected landfill in Port Arthur, Texas prior to establishment of the on-Site disposal area and, thereafter, once the on-Site disposal area has reached full capacity, to the extent the aggregate amount of such disposal fees differs from the Provisional Sum included in the Contract Price for such Work as set forth in Attachment C-3 to Appendix C; provided, that the foregoing shall include only the fees paid to the selected landfill and not any other costs such as costs of stripping or transport of such material;

(iv) to the extent that the aggregate cost incurred by Contractor (excluding Suppliers other than Contractor Affiliates) for [***] used in the performance of the Work, but only up to the quantity set forth in Attachment C-3 to Appendix C, differs from the Provisional Sum included in the Contract Price as set forth in Attachment C-3 to Appendix C;

(v) to the extent that pursuant to Attachment C-5 to Appendix C, the Parties agree to a [***] for [***], the aggregate cost incurred by Contractor under such diesel fuel surcharge, differs from the Provisional Sum included in the Contract Price as set forth in Attachment C-3 to Appendix C;

(vi) to the extent that the aggregate cost incurred by Contractor for [***] used in the construction of the [***], but only up to the quantity set forth in Attachment C-3 to Appendix C, differs from the Provisional Sum included in the Contract Price as set forth in Attachment C-3 to Appendix C; or

(vii) to the extent that the aggregate costs properly charged to Contractor under the Subcontract with [***] for performance of the [***], but excluding costs to perform [***], differs from the Provisional Sum included in the Contract Price for such Work as set forth in Attachment C-3 to Appendix C;

(c) a reduction in the scope of the Work in the case where Owner agrees to perform any of the Work or any of the Work is removed from Contractor’s scope in accordance with Section 2.21.2;

(d) acceleration of the Work in accordance with Section 4.4.4;

(e) Excusable Events, subject to the terms of Article 18;

(f) Force Majeure, subject to the terms of Article 18;

(g) physical loss or damage to or destruction of the Work in accordance with Section 11.3.1(c) and subject to Section 8.4.2(f);

(h) in accordance with Section 18.4;

(i) in connection with Contractor’s suspension of the Work pursuant to Section 19.4.2(a);

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(j) in connection with an evacuation of the Site in accordance with Section 18.3;

(k) Owner’s exercise of a Scope Option pursuant to Section 6.1.4;

(l) in accordance with Section 6.9 in connection with the conversion of the Foreign Currency Amount;

(m) Contractor’s suspension of the Rehabilitation Work in accordance with Section 11.3.1(c)(iii) or 11.3.1(d) due to Owner’s failure to reimburse, pay or fund Contractor the Rehabilitation Costs in accordance with Section 11.3.1(c);

(n) Owner’s modification of the Owner HSSE Program prior to Substantial Completion of a Stage;

(o) delays to the Work due to compliance with the FEIS with respect to [***] (including delays in the Work in the affected areas), and the imposition by FERC or other relevant Government Authority of additional mitigation measures beyond those mitigation measures required for Contractor to comply with the environmental conditions set forth in the FEIS, as a result of the occurrence of an event, which the mitigation measures required under the FEIS are intended to prevent or avoid; provided, in each case, that Contractor has complied with the requirements of the FEIS and that the imposition of such additional mitigation measures are not the result of an act or omission of any member of the Contractor Group;

(p) delays or changes in the Work caused by a modification to Contractor’s means and methods of performing the Work, which modification is due to Owner’s failure to obtain [***];

(q) the occurrence of a COVID-19 Event other than a COVID-19 PCSC Event;

(r) the occurrence of a COVID-19 PCSC Event, in accordance with the procedures of Section 8.4.2(l);

(s) as and in the manner required pursuant to Section 4.2.2;

(t) [***];

(u) [***];

(v) upon Owner’s issuance of the Full Notice to Proceed after February 8, 2023, but prior to May 8, 2023, in accordance with Section 4.1.4(a);

(w) in accordance with Section 4.2.1;

(x) the occurrence of a Russian and Ukraine Conflict Event that satisfies the requirements of Section 18.5; or

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(y) subject to the Parties having reached agreement on how to proceed with this Agreement due to the occurrence of the circumstances described in Section 4.1.4(b), in accordance with Section 4.1.4(b).

8.4 Change Order Remedies.

8.4.1 General Requirements. The general requirements as stated in this Section 8.4.1 shall apply in determining all adjustments to the Contract Price, the Milestones, the Payment Schedule, the Key Date Schedule, including the Guaranteed Substantial Completion Dates, or the Guaranteed Performance Levels, to be made in connection with any Change Order. To the extent the specific adjustments referenced in the description of the remedies available under Section 8.4.2 conflict with any of the provisions of this Section 8.4, the more limited adjustments shall apply.

(a) Adjustments to the Key Date Schedule, including the applicable Guaranteed Substantial Completion Dates, shall, subject to Section 18.1.3, be made only if and to the extent Contractor demonstrates that Contractor will be delayed in the performance of Critical Path Items due to the applicable event such that, based on the CPM Schedule and using critical path analysis, Contractor will fail to achieve Substantial Completion of a Stage by the then applicable Target Substantial Completion Date of such Stage, and the Guaranteed Substantial Completion Date shall then only be adjusted on a day-for-day basis as such demonstrated delay to the Target Substantial Completion Date. When the planned progress curves are impacted by a Change Order, Contractor shall include updated progress curves with the CPM Schedule submitted with such Change Order.

(b) All adjustments to the Contract Price through a Change Order shall (i) be prepared on a “separated contract” fixed price basis, separating the proposed adjustments into amounts for materials, and amounts for labor and services; (ii) reflect the estimated effect (increase or decrease) of the change to Contractor’s costs (including those of its Affiliates other than CIMTAS) caused by such Change Order event; (iii) reflect the estimated effect of the change to Contractor’s costs in the case of Supply Contracts (including CIMTAS but excluding other Affiliates) which shall be equal to the actual costs charged or to be charged by the Supplier (including CIMTAS but excluding other Affiliates), plus in the case of each subclause (ii) and (iii), an amount equal to [***] of such estimated increase or decrease of such costs, which amount shall represent Contractor’s associated overhead (including general and administrative costs), and profit, margin and fees; (iv) include a reasonable amount of contingency appropriate for the scope and risk of the Change Order, where applicable, in any event not including any Change Orders with respect to [***] other than with respect to the estimated costs identified in the Change Order that have not yet been incurred; and (v) comply with the requirements of Section 6.2.2(c). For purposes of clarity, the rates set forth in Appendix KK shall only be used in the build-up of Contractor’s costs for adjustments to the Contract Price with respect to Change Orders issued pursuant to [***]. The calculation of any adjustment to the Contract Price shall include and identify all elements of cost using the following guidelines: labor to include category, unit rate, total rate and hours, travel and other related expenses; and materials to include category, unit rate, total rate and quantity. Contractor shall not be entitled to payment for

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preparation of Change Orders pursuant to Section 8.3. In connection with any Contract Price adjustment, the Change Order will incorporate changes to the Payment Schedule, including both Milestones and the payment curve, as applicable.

(c) Changes to the Guaranteed Performance Levels shall be made if and only to the extent that Contractor is able to reasonably demonstrate, using the original methodology and calculations, including design margin percentages, that were used by Contractor to determine the Guaranteed Performance Levels, that the change in the Work to which a proposed Change Order relates would impact the expected performance of a Stage such that the Guaranteed Performance Levels cannot be achieved. For the avoidance of doubt, no change, modification or amendment shall be made to the Guaranteed Performance Levels, or any of the provisions of Appendix G, in connection with any Change Order requested by Contractor other than in connection with a Change in Law.

(d) No Claim or demand or request for a Change Order shall be made, or deemed to be made, hereunder unless and until Contractor prepares a fully complete proposed draft of the Change Order, including all amounts that Contractor intends to include in such Claim. Notwithstanding anything to the contrary in this Agreement, Owner shall have no obligation or responsibility to respond to or take any further action with respect to “indicative” or “preliminary” or similar incomplete requests for a Change Order made by Contractor hereunder.

(e) [***].

(f) Nothing in this Agreement shall be deemed to permit Contractor to receive a duplication of relief (whether by increase to the Contract Price or extensions of any of the Key Date Items, or both) by reason of the occurrence of an event, failure or circumstance qualifying under more than one of the subclauses set forth in Section 8.3.1.

8.4.2 Specified Remedies. In connection with the Change Order events described in this Section 8.4.2, the remedies set forth in Section 8.4.1 shall be limited as described below:

(a) In the case of the occurrence of an Excusable Event, and subject to the provisions of Section 18.1 and Section 18.2, Contractor shall only have a right to a Change Order under Section 8.3.1(e) for an adjustment to the Key Date Schedule, the Contract Price (with corresponding adjustments to the Milestones and the Payment Schedule), and to the Guaranteed Performance Levels with respect to impacts caused by Change in Law if and only to the extent permitted under Section 18.1.2.

(b) In the case of the occurrence of an event of Force Majeure, and subject to the provisions of Section 18.1 and Section 18.2, Contractor shall only have a right to a Change Order under Section 8.3.1(f) for adjustments to the Key Date Schedule and the Contract Price (with corresponding adjustments to the Milestones and the Payment Schedules) if and only to the extent permitted under Section 18.1.2.

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(c) In the case of Section 8.3.1(a), Contractor shall only have a right to a Change Order to adjust the Contract Price (with corresponding adjustments to the Milestones and the Payment Schedules) for the actual purchase price and delivery costs of the operating spare parts in accordance with Section 2.14.2.

(d) In the case of a Change Order pursuant to Section 8.3.1(b), the Parties shall not apply the [***] adder described in Section 8.4.1(b)(iii), but instead shall apply an adder equal to [***] to the amount that exceeds the Provisional Sum.

(e) In the case of a Change Order due to an acceleration of the Work pursuant to Section 8.3.1(d), the adjustment to the Contract Price (with corresponding adjustments to the Milestones and the Payment Schedules) with respect to any acceleration of the Work as contemplated in Section 4.4.4 will be an amount limited to the actual costs attributable to such acceleration that Contractor reasonably demonstrates will be incurred over and above Contractor’s costs that would be incurred without such acceleration (in the case of any personnel costs, such costs shall be limited to any incremental shift differential, costs to expedite, or overtime payments to laborers, craft labor or field supervisors and other employees of Contractor dedicated to the Work (including additional indirect staff) on a full-time basis).

(f) In the case of a Change Order pursuant to Section 8.3.1(g) due to physical loss or damage to or destruction of the Work: (i) an adjustment to the Contract Price (with corresponding adjustments to the Milestones and the Payment Schedules) shall only be made with respect to the costs which Contractor is entitled to recover under Section 11.3.1(c); and (ii) extensions to the Key Date Schedule, including the Guaranteed Substantial Completion Dates, shall be limited to the extent to which the physical loss, damage or destruction and any resulting delay in the performance of the Work was not due to acts or omissions of Contractor or any other member of the Contractor Group, and then in accordance with Section 8.4.1(a).

(g) In the case of a Change Order requested pursuant to Section 8.3.1(h), any adjustment to the Contract Price shall only be made in accordance with Section 18.4, and adjustments to the Key Date Schedule shall, subject to Contractor having satisfied the requirements of Section 18.4, otherwise be made in accordance with Section 8.4.1(a).

(h) In the case of Owner’s suspension of the Work pursuant to Section 19.2 or Contractor’s suspension of the Work pursuant to Section 19.4.2(a), the adjustment to the Contract Price will be equal to the reasonable costs of such suspension, including demobilization and remobilization costs, if necessary, plus an amount equal to [***] of such costs, which amount shall represent Contractor’s associated overhead (including general and administrative costs), and profit, margin and fees, but in no event shall Contractor be entitled to receive any amount for contingency, risk or anticipatory profit.

(i) In the case of a Change Order requested pursuant to Section 8.3.1(j), adjustments to the Contract Price and Key Date Schedule shall be made in accordance with Section 18.3.

(j) [***].

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(k) In the case of the occurrence of a COVID-19 Event other than a COVID-19 PCSC Event, and subject to the provisions of Section 18.1 and Section 18.2, [***] if and only to the extent permitted under Section 18.1.2; provided, however, that: (i) Contractor submits the Claim for such COVID-19 Applicable Law Event in accordance with Section 18.2; (ii) the Change Order which adopts the applicable Type A Counter-Measure required as a result of the COVID-19 Applicable Law Event shall implement such COVID-19 Type A Counter-Measures for a period of time only equal to the lesser of: (A) [***] subject a COVID-19 Type A Counter-Measure Extension); and (B) [***] is no longer required, recommended or continued pursuant to Section 8.2.5; and (iii) the Parties shall update Part III of Appendix YY as part of such Change Order to include the applicable COVID-19 Type A Counter-Measures adopted and the period of time in which the same are adopted.

(l) In the case of the occurrence of a COVID-19 PCSC Event, the following procedures shall apply with respect to any Change Order as a result of the occurrence of such COVID-19 PCSC Event.

(i) If pursuant to the provisions of Section 2.30(c) either the Owner Representative and Contractor Representative, or each of the Project Sponsors, agree that the COVID-19 PCSC Event has occurred and also agree on the adoption of the COVID-19 Recommended Additional Counter-Measures recommended by the PCSC with respect to such COVID-19 PCSC Event, then clause (ii) below shall apply.

(ii) Subject to the provisions of Section 18.1 and Section 18.2, [***] if and only to the extent permitted under Section 18.1.2; provided, however, that: (A) Contractor submits the Claim for such COVID-19 PCSC Event in accordance with Section 18.2; (B) the Change Order which adopts the applicable Type B Counter-Measure [***], required as a result of the COVID-19 PCSC Event shall implement such COVID-19 Type B Counter-Measure [***], for a period of time only equal to the lesser of: (1) [***] after the occurrence of such COVID-19 PCSC Event, unless the Parties agree to a longer duration (such three month period subject to a COVID-19 Type B Counter-Measure Extension [***]); and (2) any earlier date on which the applicable COVID-19 Type B Counter-Measure [***], as applicable, is no longer required, recommended or continued pursuant to Section 8.2.5; and (C) the Parties shall update Part III of Appendix YY as part of such Change Order to include the applicable COVID-19 Type B Counter-Measures [***], adopted and the period of time in which the same are adopted.

(iii) [***].

(iv) [***].

(v) [***].

(vi) [***].

(m) [***].

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(n) In the case of Section 8.3.1(t), the Contract Price shall be adjusted in accordance with the procedures set forth in Attachment C-4 to Appendix C based on the fluctuations in certain agreed upon commodities indices.

(o) In the case of Section 8.3.1(u), the adjustment to the Contract Price (with corresponding adjustments to the Milestones and the Payment Schedule) shall follow the procedures set forth in Attachment C-5 to Appendix C, and any adjustments to the Key Date Schedule, including the Guaranteed Substantial Completion Dates, if applicable, shall be based on [***] in accordance with the procedures set forth in Attachment C-5 to Appendix C, and shall be made in accordance with Section 8.4.1(a).

(p) In the case of a Change Order requested pursuant to Section 8.3.1(x), Contractor shall only have a right to a Change Order for adjustments to the Key Date Schedule and the Contract Price (with corresponding adjustments to the Milestones and the Payment Schedules) if and only to the extent permitted under Section 18.5.

8.5 Change Request Logs; Contractor-Requested Change Order Procedures.

8.5.1 Change Request Log. Subject to Section 8.8, Contractor shall maintain a log of purported Owner instructions or comments that Contractor reasonably considers represent a change to the scope of Work made by Owner, which, in Contractor’s view, should result in the issuance of a Change Order by Owner pursuant to Section 8.2. Such log shall contain sufficient detail, including the date on which such instruction was given, for the Parties to identify the instruction or comment at issue. The Parties shall review such log during the Monthly progress review meetings as described in Appendix S. Neither the addition of items by Contractor to this log, including Change Orders requested by Contractor that may be listed in the log, nor the review of such log with Owner during the Monthly progress review meetings, shall constitute a Change Order or a formal request to Owner for a Change Order, and Owner’s failure to comment or dispute items on such log shall not be deemed an admission by Owner that such log is accurate or otherwise agreed upon by the Parties. Requests for Change Orders to be issued by Owner must be made in accordance with Section 8.2. If after review of the log by the Parties, Contractor believes that Owner’s instructions or comments nonetheless constitute a change in the Work, Contractor shall notify Owner in writing, and if Owner disagrees and does not issue a Change Order request under Section 8.2 or a unilateral Change Order under Section 8.6 with respect to such Work, either Party may submit such disagreement to dispute resolution proceedings in accordance with Section 20.1.

8.5.2 Change Order Proposal. Upon the occurrence of an event as described in Section 8.3, Contractor shall notify Owner in writing and issue to Owner, at Contractor’s expense, a proposed Change Order in the form attached hereto as Appendix F-1, setting forth the effect, if any, which the change has had or would have on the Contract Price, the Milestones, the Payment Schedule, the Key Date Schedule, including the Guaranteed Substantial Completion Dates, or the Guaranteed Performance Levels, as applicable, and accompanied by a detailed written explanation of the proposed change and Contractor’s reasons for proposing the change,

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all documentation necessary to demonstrate the effects of the change on such terms, and all other information reasonably required by Owner to verify such proposed Change Order. In all cases, Contractor shall submit all Claims for relief hereunder for Claim Submission Events by the applicable Claim Submission Deadline.

8.5.3 Agreed Change Orders. If the Parties reach agreement on Contractor’s proposed Change Order, Owner shall issue such Change Order, which shall be in the form of Appendix F-1, and such Change Order shall become binding on the Parties as part of this Agreement upon execution thereof by the Parties.

8.5.4 Owner’s Review of Change Orders; Disputed Change Orders.

(a) Without limiting Owner’s rights under Section 2.23 or Section 18.2.3, Owner shall not be obligated under this Agreement to review, comment on, seek additional information with respect to, accept, or deny a proposed Change Order request made by Contractor under Section 8.3 unless and until Contractor submits a proposed final Change Order request for Owner’s review which fully and finally sets forth (as contemplated by Section 8.9) all Claims based on or arising out of the subject matter of such Change Order. Owner shall not be obligated to review, comment on, approve or reject any Change Order request made by Contractor which either reserves Contractor’s rights to supplement its Change Order request, or otherwise purports to be “preliminary” (or words of similar import), and any such Change Order request shall have no force or effect under this Agreement except with respect to Contractor’s obligation to submit updates to Owner with respect to potential Claims pursuant to Sections 18.2.3 and 18.2.5.

(b) Once Contractor submits to Owner a proposed final Change Order request for Owner’s review which fully and finally sets forth (as contemplated by Section 8.9) all Claims for relief hereunder of Contractor and all Suppliers (as set forth above), Owner shall be allowed (the “Owner Change Order Review Period”): (i) for all [***], [***] Business Days after Owner’s receipt of Contractor’s proposed full and final Change Order; (ii) with respect to all Change Order requests seeking relief for a Claim Submission Event (other than those set forth in subclause (i) or (iii)), a number of Days to review, comment on, seek additional information with respect to, accept, or deny such proposed Change Order request equal to the number Days between the date that Contractor provided the initial notice under Section 18.2.1 of such Excusable Event, or event of Force Majeure or COVID-19 Event for which Contractor is seeking relief and the date that Contractor submitted such proposed final Change Order for Owner review (inclusive); and (iii) with respect to all other Change Order requests prepared by Contractor pursuant to Section 8.3 not identified in subclause (i) or (ii) above, [***] Business Days after Owner’s receipt of Contractor’s proposed full and final Change Order.

(c) Owner shall not be deemed to have rejected or otherwise improperly delayed acceptance or rejection of any Change Order request to which Contractor is otherwise entitled under this Section 8.3 by reason of Owner’s utilizing the entire Owner Change Order Review Period to review, comment on, seek additional information with respect to, accept or deny such proposed Change Order, and Contractor acknowledges that Owner shall be under no obligation to review or respond to any preliminary Claims if the Claim Submission Deadline is extended to more than [***] Days to allow Contractor additional time to prepare a Claim.

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Contractor hereby waives any remedies at law or at equity (including under such remedies as “constructive acceleration”) by reason of Owner’s exercise of its rights under this Section 8.5.4, including Owner’s enforcement during the Owner Change Order Review Period of Contractor’s obligations hereunder to comply with the Key Date Schedule.

(d) If the Parties do not reach agreement on all aspects of a Contractor-requested Change Order within fifteen (15) Business Days after the applicable Owner Change Order Review Period, then, without limiting Owner’s rights under Section 8.6, either Party may refer the Dispute for resolution under Article 20. Any disagreement with respect to a Contractor-requested Change Order must be submitted for resolution in accordance with Section 20.1 to be raised for discussion by the Parties pursuant to Section 20.2 within [***] Days of the end of the applicable Owner Change Order Review Period. Contractor’s failure to submit such Dispute Notice in accordance with Section 20.1 within such [***] Day period shall be a waiver of Contractor’s right to make a claim for relief (whether the claim for such relief is related to adjustments to the Contract Price, the Key Date Schedule or otherwise) under this Agreement based on the event, circumstance or occurrence underlying the Contractor-requested Change Order. Contractor shall continue to diligently perform the Work (as required absent the proposed Change Order or, if applicable, as required in a unilateral Change Order issued by Owner pursuant to Section 8.6) pending resolution of the Dispute.

8.6 Unilateral Change Orders. If Contractor and Owner are unable to agree on the matters described in a proposed Change Order, or if they are unable to agree on whether Contractor is entitled to a Change Order, regardless of whether such Change Order is requested by Contractor or by Owner, or if Owner desires that a proposed change in the Work commence without having reached agreement on a proposed Change Order, Owner may, by issuance of a unilateral Change Order in the form attached hereto as Appendix F-2 as submitted by Owner, require Contractor to commence and perform the Work as specified in the unilateral Change Order on a time and materials basis at the rates set forth on Appendix KK, plus an amount equal to [***] of Contractor’s costs, which amount shall represent Contractor’s associated overhead (including general and administrative costs), contingency and profit; provided, that Contractor will only be entitled to payment under this Section 8.6 to the extent that Contractor reasonably demonstrates (subject to Section 8.11 and otherwise with reasonably adequate supporting documentation), that Contractor’s costs to perform the Work are materially increased by such unilateral Change Order; provided, further, that such unilateral Change Order does not constitute a cardinal change in the Work. Owner shall assign a “Pending Item Claim Number” to the Work in question and shall issue Contractor a separate notice to proceed with respect to such unilateral Change Order. Contractor shall proceed to perform the Work identified therein. If Owner and Contractor ultimately agree either on the effect of such disputed change in the Work, or agree as to whether Contractor was entitled to such Change Order (in the case of a dispute over whether Contractor is entitled to a Change Order hereunder), such agreement shall be recorded by execution by the Parties of a Change Order in the form attached hereto as Appendix F-1, which shall supersede the unilateral Change Order previously issued and relating to such changed Work. If the Parties do not agree on the effect of a unilateral Change Order within [***] Business Days after Owner’s issuance of the unilateral Change Order, then either Party may refer the Dispute for resolution under Article 20. Pending resolution of the Dispute, Contractor shall

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perform the Work as specified in such unilateral Change Order as issued by Owner and Owner shall continue to pay Contractor in accordance with the terms of this Agreement, the unilateral Change Order and any previously agreed Change Orders. Contractor shall commence the performance of the changed Work as set forth in such unilateral Change Order upon issuance thereof by Owner (or within such other time specified in such unilateral Change Order) and shall diligently perform the changed Work required in such unilateral Change Order. Notwithstanding anything to the contrary in the foregoing: (a) Contractor may, in Contractor’s sole and absolute discretion, reject an unilateral change to the extent such change directs Contractor to classify, handle, remediate, transport, store, or dispose of any Pre-Existing Hazardous Materials or any Hazardous Materials other than Hazardous Materials for which Contractor is responsible under this Agreement; and (b) [***].

8.7 Subsequent Invoices. Without prejudice to Sections 8.2 or 8.3, after signature or other determination of a Change Order by the Parties, or pursuant to Article 20, subsequent Invoices shall reflect any increase or decrease in the Contract Price pursuant to such Change Order.

8.8 NO OBLIGATION OR PAYMENT WITHOUT EXECUTED CHANGE ORDER. [***] NOTWITHSTANDING ANY ORAL INSTRUCTION, OR ANY WRITTEN INSTRUCTION THAT IS NOT IN ACCORDANCE WITH THIS ARTICLE 8, IN NO EVENT SHALL CONTRACTOR BE ENTITLED TO UNDERTAKE OR BE OBLIGATED TO UNDERTAKE ANY CHANGE TO THE WORK, UNTIL CONTRACTOR HAS RECEIVED A CHANGE ORDER EXECUTED BY OWNER PURSUANT TO SECTION 8.6, OR EXECUTED BY OWNER AND CONTRACTOR PURSUANT TO SECTIONS 8.2.3 OR 8.5.3, AS APPLICABLE, OR AS MAY BE ORDERED PURSUANT TO ARTICLE 20. IN THE ABSENCE OF SUCH A CHANGE ORDER, IF CONTRACTOR UNDERTAKES ANY CHANGES IN THE WORK, THEN SUCH CHANGES SHALL BE AT CONTRACTOR’S SOLE RISK AND EXPENSE AND SHALL BE REVERSED UPON THE WRITTEN ORDER OF OWNER AT CONTRACTOR’S RISK AND EXPENSE, AND CONTRACTOR SHALL NOT BE ENTITLED TO ANY COMPENSATION HEREUNDER OR ADJUSTMENT TO THE SCOPE OF WORK, CONTRACT PRICE, MILESTONES, PAYMENT SCHEDULE OR KEY DATE SCHEDULE, INCLUDING THE GUARANTEED SUBSTANTIAL COMPLETION DATES, OR ANY OTHER TERMS OR CONDITIONS OF THIS AGREEMENT, FOR UNDERTAKING SUCH CHANGES OR REVERSAL.

8.9 Executed Change Order Form Final. Each executed Change Order shall constitute a final settlement of, and waiver by, Contractor of the right to assert: (a) [***]; or (b) any further Claim in any way addressed by the items set forth in such Change Order, including any increase in compensation based upon any theory such as loss of productivity, lost efficiency, constructive acceleration, cardinal change, [***].

8.10 No Suspension. [***], Contractor shall not suspend the Work pending resolution of any proposed Change Order unless directed by Owner in writing in accordance with Section 19.2.

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8.11 Supplier Rates. With respect to all Change Orders (either issued by Owner or claimed by Contractor), Contractor shall supply signed quotations from the relevant Suppliers (including CIMTAS but excluding other Affiliates of Contractor) with respect to any costs on a proposed Change Order that are related to such Supplier, together with reasonable supporting documentation to justify the amount claimed with respect to such Supplier. In calculating the value of any Change Order for which the rates of Appendix KK are to be applied, with respect to such Supplier, to the extent Appendix KK does not contain the various rates and pricing information from the applicable Supplier, in calculating the value of any Change Order with respect to such Supplier, Contractor shall use such Supplier’s actual class rate or pricing for such employee or item of Equipment.

8.12 SOLE AND EXCLUSIVE REMEDY. CONTRACTOR EXPRESSLY WAIVES ANY ADDITIONAL COMPENSATION FOR ANY AND ALL CHANGE ORDERS EXECUTED HEREUNDER, INCLUDING ANY OTHER CHANGE IN THE CONTRACT PRICE, THE MILESTONES, THE PAYMENT SCHEDULE, THE KEY DATE SCHEDULE, INCLUDING THE GUARANTEED SUBSTANTIAL COMPLETION DATES, OR THE GUARANTEED PERFORMANCE LEVELS. THE TOTAL CHANGE TO THE CONTRACT PRICE OF ANY CHANGE ORDER SHALL BE THAT INDICATED IN THE EXECUTED CHANGE ORDER AND CONTRACTOR WAIVES ANY CLAIM FOR ANY ADDITIONAL INCREASE TO THE CONTRACT PRICE ARISING OUT OF ANY AND ALL EXECUTED CHANGE ORDERS BASED ON ANY THEORY SUCH AS LOSS OF PRODUCTIVITY, CONSTRUCTIVE ACCELERATION, EFFICIENCY, [***].

ARTICLE 9

TESTING AND COMPLETION

9.1 Pre-Commissioning Plan; Completion Database.

9.1.1 Pre-Commissioning Plan. No later than six (6) Months prior to the date on which Contractor is scheduled to commence pre-commissioning of the first System of a Stage, Contractor shall provide to Owner for its review and comment a pre-commissioning plan for such Stage, with priorities assigned for pre-commissioning activities to be conducted on each System, and sequential details of pre-commissioning activities to be conducted. The pre-commissioning plan shall include pre-commissioning procedures for each System, and checklists of pre-commissioning requirements, and otherwise comply with the requirements of Appendix A. If Owner provides any comments to the pre-commissioning plan, Contractor shall consider such comments in good faith and resolve the comments with Owner before finalizing the pre-commissioning plan. Contractor shall comply with the requirements for pre-commissioning activities set forth in the plan, and shall comply with the pre-commissioning procedures and otherwise follow the pre-commissioning plan as finalized pursuant to this Section 9.1.

9.1.2 Systems Designation. Contractor shall designate Systems on mark-ups of the P&IDs (the “Scoped P&IDs”) for use during pre-commissioning and commissioning activities. The initial Scoped P&IDs were issued to Owner prior to the Effective Date. Any updates to the Scoped P&IDs that occur during performance of the Work shall be issued to

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Owner via transmittal. No later than fourteen (14) Months after the FNTP Date, Contractor shall designate the Systems required for RFFGI and Ready for Start-Up, and provide such designation to Owner for review and approval.

9.1.3 Completions Database. Contractor shall maintain a contemporaneous completions database for the duration of the Work that tracks completion of the Work by System, and as otherwise agreed by Contractor and Owner (the “Completions Database”). The Completions Database shall track the status of the Work, including Systems and Punch List Items. Owner’s Representative and Owner’s Systems completion lead shall have read-only electronic access to the completions data at all times once, and where, the Completions Database is in use by Contractor (with no data room restrictions), which shall include the capability to access those portions related to preservation activities and maintenance, turnover completion package tracking, and Punch List tracking and reporting, and the ability to generate and print reports from the Completions Database, with access with respect to each System to commence as pre-commissioning of such System commences. Contractor shall provide Owner with a Weekly completions report broken out by System, sub-System and discipline. Contractor shall generate a Punch List Report, on a weekly basis, for Systems that are ready for commissioning. If requested by Owner, Owner shall be permitted to attend any System completion meetings which are held by Contractor.

9.2 Mechanical Completion of Systems. Contractor shall walk down each System before mechanical completion of such System in accordance with the Commissioning Execution Plan set forth in Appendix W, and Owner may accompany Contractor on such walk downs; provided, however, that Contractor shall not be required to delay any such walkdown in the event that Owner or any member of Owner’s operation and maintenance team is not present at the notified time and location. Contractor’s construction and commissioning and start-up teams will determine whether a System has achieved mechanical completion.

9.3 Commissioning Activities.

9.3.1 Commissioning Manager. The individual who will act as Contractor’s commissioning manager shall be specifically named and identified on Contractor’s organization chart. Such individual shall be dedicated full time to the performance of the Work by no later than the date that Contractor is scheduled to commence reviews of the “Issued for Construction” P&ID Drawings in accordance with the CPM Schedule.

9.3.2 Conditions to Commencement of Commissioning. Contractor shall not commence commissioning the Systems required to achieve Ready for Feed Gas Introduction or Ready for Start-Up (each as agreed by the Parties in accordance with Section 9.1.2) unless: (a) all Punch List A Items with respect to each such Systems have been completed in accordance with Section 9.9.2(a) or re-classified as a Punch List B Item or otherwise as the Parties agree to allow commissioning of such Systems to commence; (b) commissioning procedures for such Systems have been finalized in accordance with Section 9.3.3; and (c) all Permits required prior to commencing commissioning of such System have been obtained in accordance with Applicable Laws.

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9.3.3 Commissioning and Start-Up Plan; Operating and Maintenance Procedures.

(a) No later than six (6) Months prior to the date on which Contractor is scheduled to commence commissioning and start-up of the first System to be commissioned, Contractor shall provide to Owner for its review and comment a detailed commissioning and start-up plan with priorities assigned for commissioning activities to be conducted on each System, and sequential details of commissioning and start-up activities to be conducted, including the LNG Tanks. The commissioning and start-up plan shall include commissioning and start-up procedures for the applicable System or groups of Systems, identify pre-start-up safety reviews by System or groups of Systems, checklists of commissioning and start-up requirements, and shall otherwise comply with the requirements of Appendix A. If Owner provides any comments to the commissioning and start-up plan, Contractor shall respond to such comments in good faith and resolve the comments with Owner before finalizing the commissioning and start-up plan. Contractor shall not commence commissioning of a System until the commissioning procedures for such System are agreed by the Parties. Contractor shall comply with the requirements for commissioning and start-up activities set forth in the plan, and shall comply with the commissioning and start-up procedures and otherwise follow the commissioning and start-up plan as finalized pursuant to this Section 9.3.3(a).

(b) Contractor shall also prepare and deliver, together with the commissioning and start-up plan, operating and maintenance procedures for the Equipment and facilities within each Stage, for review and comment by Owner. If Owner provides any comments to the operating and maintenance procedures, Contractor shall respond to such comments in good faith and resolve such comments with Owner before finalizing the operating and maintenance procedures. Once the operating and maintenance procedures are finalized, Contractor shall comply with such procedures in connection with the operation and maintenance of each Stage until such Stage achieves Substantial Completion and care, custody and control of such Stage is turned over to Owner.

9.3.4 Integrated Commissioning Team. The “Integrated Commissioning Team” will consist of members of Contractor’s commissioning and start-up team, Owner’s Operating Personnel and Owner’s commissioning manager (or his or her designee). The Operating Personnel and Owner’s commissioning manager (or his or her designee) will be allowed to participate with Contractor personnel in commissioning and start-up activities.

9.4 Ready for Feed Gas Introduction and Ready for Start-Up.

9.4.1 Notice and Requirements for Ready for Feed Gas Introduction of a Stage.

(a) No later than twenty (20) Months after the FNTP Date, Contractor shall provide to Owner for its review and comment detailed Ready for Feed Gas Introduction requirements, in the form of checklists for each Stage (by Systems as agreed by the Parties in accordance with Section 9.1.2). Once Contractor has incorporated all of Owner’s comments into the RFFGI checklists, such RFFGI checklists shall form a part of the requirements for achieving Ready for Feed Gas Introduction. Contractor shall comply with all requirements for achieving Ready for Feed Gas Introduction set forth in this Agreement, including those requirements set

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forth in the definition of the term Ready for Feed Gas Introduction, and the RFFGI checklists agreed by Owner and Contractor pursuant to this Section 9.4.1.

(b) Once the Integrated Completioning Team verifies that RFFGI has occurred, Contractor shall notify Owner of the same.

(c) When Contractor believes it has achieved Ready for Feed Gas Introduction for a Stage, Contractor shall execute and deliver to Owner a RFFGI Certificate for such Stage, together with required documentation with sufficient detail to enable Owner to determine whether Ready for Feed Gas Introduction for such Stage has occurred.

(d) As soon as practicable, and in any event within three (3) Business Days following its receipt of a Ready for Feed Gas Introduction for a Stage, Owner shall consider the report submitted by Contractor and either:

(i) countersign and deliver to Contractor the RFFGI Certificate for the relevant Stage; or

(ii) notify Contractor in writing that Ready for Feed Gas Introduction of such Stage has not been achieved, stating in detail the reasons therefor.

(iii) If Ready for Feed Gas Introduction of such Stage has not been achieved, Contractor shall promptly take such corrective action or perform such additional Work as to achieve Ready for Feed Gas Introduction of such Stage, and shall issue to Owner another RFFGI Certificate for the relevant Stage, in which case the Parties shall walkdown the applicable part of the Stage and the Work that has been corrected in accordance with this Section

9.4.1. Neither Owner’s execution of the Ready for Start-Up Certificate, nor any action taken by Contractor pursuant to this Section 9.4.1(d), shall diminish Contractor’s obligations pursuant to Article 10.

(e) Owner’s execution of the RFFGI Certificate shall not constitute notice that FERC approval for the introduction of hydrocarbons to that Stage has been received.

9.4.2 Notice and Requirements for Ready for Start-Up of a Stage.

(a) No later than twenty (20) Months after the FNTP Date, Contractor shall provide to Owner for its review and comment detailed Ready for Start-Up requirements, in the form of checklists for each Stage (by Systems as agreed by the Parties in accordance with Section 9.1.2). Once Contractor has incorporated all of Owner’s comments into the RFSU checklists, such RFSU checklists shall form a part of the requirements for achieving Ready for Start-Up. Contractor shall comply with all requirements for achieving Ready for Start-Up set forth in this Agreement, including those requirements set forth in the definition of the term Ready for Start-Up, and the RFSU checklists agreed by Owner and Contractor pursuant to this Section 9.4.2.

(b) Upon completion of the pre-start-up safety review as described in the Commissioning Execution Plan set forth in Appendix W and satisfaction of the other requirements for Ready for Start-Up of a Stage, Contractor shall execute and deliver to Owner a Ready for Start-Up Certificate for such Stage, together with required documentation with

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sufficient detail to enable Owner to determine whether the requirements for Ready for Start-Up for such Stage have been met.

(c) As soon as practicable following its receipt of a Ready for Start-Up Certificate delivered pursuant to Section 9.4.2(b), and in any event within three (3) Business Days following receipt of such certificate, Owner shall consider the report submitted by Contractor and either:

(i) countersign and deliver to Contractor the Ready for Start-Up Certificate; or

(ii) notify Contractor in writing that Ready for Start-Up of the relevant Stage has not been achieved, stating in detail the reasons therefor.

(d) If Ready for Start-Up of the Stage has not been achieved, Contractor shall promptly take such corrective action or perform such additional Work as to achieve Ready for Start-Up for the Stage, and shall issue to Owner another Ready for Start-Up Certificate for such Stage, in which case the Parties shall walkdown the applicable part of the Stage and the Work that has been corrected in accordance with this Section 9.4.2. Neither Owner’s execution of the Ready for Start-Up Certificate, nor any matter reported by Owner pursuant to Section 9.4.2, nor any action taken by Contractor pursuant to this Section 9.4.2(d), shall diminish Contractor’s obligations pursuant to Article 10.

9.4.3 Start-Up; Notice of Initial Production Date. Following Owner’s acceptance of the Ready for Start-Up Certificate for the applicable Stage, Contractor shall thereafter follow the start-up procedures and conduct the start-up and cool-down activities with respect to such Stage in accordance with the commissioning and start-up plan accepted by Owner pursuant to Section 9.3.3, and shall commence production of LNG. Within five (5) Business Days after the occurrence of the Initial Production Date for the LNG Train that is a part of the applicable Stage, Contractor shall provide to Owner a notice stating that the Initial Production Date for that LNG Train has occurred and identifying the Initial Production Date.

9.5 Notices of Initial Production Dates and Feed Gas Requirements.

9.5.1 Notices of Initial Production Date for Stage I.

(a) Subject to the issuance of the Full Notice to Proceed, Contractor expects the Initial Production Date for Stage I to occur during a [***] period beginning on the date that is [***] Months after the FNTP Date (the “Train 1 First Production Window”).

(b) No later than [***] Days in advance of the first Day of the Train 1 First Production Window, Contractor shall give Owner a written notice specifying a [***] Day period falling within the Train 1 First Production Window in which it expects the Initial Production Date for Stage I to occur (the “Train 1 Second Production Window”); provided, that if Contractor fails to give such notice within such [***] Day period, the Train 1 Second

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Production Window shall be the last [***] Day period within the Train 1 First Production Window.

(c) No later than [***] Days in advance of the first Day of the Train 1 Second Production Window, Contractor shall give Owner a written notice specifying a [***] Day period falling within the Train 1 Second Production Window in which it expects the Initial Production Date for Stage I to occur (the “Train 1 Third Production Window”); provided, that if Contractor fails to give notice within such [***] Day period, the Train 1 Third Production Window shall be the last [***] Day period within the Train 1 Second Production Window.

(d) No later than [***] Days in advance of the first Day of the Train 1 Third Production Window, Contractor shall notify Owner of a window of one (1) week during which the Initial Production for Stage I is expected to occur, which shall fall within the Train 1 Third Production Window; provided, that if Contractor fails to give notice by such date, the Initial Production Date for Stage I shall be the last Day in the Train 1 Third Production Window.

(e) Contractor shall promptly notify Owner if for any reason the proposed Initial Production Date for Stage I is expected to occur after the last Day of the current window, with such notice to include a reasonably detailed explanation of the reason for such delay and the date on which Contractor expects the Initial Production Date to occur.

9.5.2 Notice of Initial Production Date for Stage II. On the Day immediately following the Day on which the Initial Production Date of Stage I occurs, Contractor shall notify Owner of the date on which the Initial Production Date for Stage II is expected to occur, which date shall be no earlier than [***] Days and no later than [***] Days after the Initial Production Date of Stage I. Contractor shall promptly notify Owner if for any reason the proposed Initial Production Date for Stage II is expected to occur after such date.

9.5.3 Notice of Requirements for Fuel Gas and Feed Gas for each Stage.

(a) Within [***] Months after the FNTP Date, Contractor shall provide Owner with a good faith estimate of (i) Fuel Gas required for each Month during the commissioning and start-up of the Project; and (ii) Feed Gas required for each Month during the start-up and testing of the Project.

(b) Not later than the first (1st) Business Day of the Month occurring three (3) Months prior to the Month in which Contractor first needs Fuel Gas for commissioning the Project, Contractor shall give written notice to Owner of the estimated quantity of commissioning Fuel Gas required for that first Month in which Fuel Gas is needed and for each following Month for commissioning and system start-up prior to commencement of delivery of Feed Gas. Not later than the first (1st) Business Day of the Month occurring three (3) Months prior to the Month in which Contractor first needs Feed Gas for start-up of the Project, Contractor shall give written notice to Owner of the estimated quantity of Feed Gas required for that first Month in which Feed Gas is needed and for each following Month prior to Substantial Completion.

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(c) In the event that Contractor at any time becomes aware or has reason to believe that Contractor’s need for Fuel Gas or Feed Gas will be delayed beyond the periods specified by Contractor pursuant to Section 9.5.3(a) or Section 9.5.3(b), or that the quantities required by Contractor have changed from that identified in Contractor’s prior notices, Contractor shall as promptly as practicable give Owner written notice of that delay or change in quantities and of the date on which Contractor then expects to require Fuel Gas or Feed Gas, as applicable, and the estimated quantities.

(d) Not later than the first (1st) Business Day of the Month occurring two (2) Months prior to the Month in which Contractor first needs Feed Gas for commissioning and start-up of the Stage, Contractor shall give written notice to Owner of the total quantity of Feed Gas required for commissioning, start-up, operation and testing, as applicable, for each twenty-four (24) hour period between the hours of 9:00 am (Central Time) of one (1) Day to 9:00 am (Central Time) of the next Day (the “Daily Quantity”) for that first Month in which Feed Gas is needed and shall provide revised figures for the total quantity of Feed Gas required for commissioning, start-up, operation and testing of the Stage, as applicable, each following Month prior to Substantial Completion of the Stage.

(e) Not later than ten (10) Business Days prior to the first (1st) Day of the Month in which Contractor first needs Feed Gas for commissioning and start-up of a Stage, and not later than ten (10) Business Days prior to the first (1st) Day of each following Month during the period prior to Substantial Completion of the Stage, Contractor shall give written notice to Owner of the anticipated Daily Quantities of Feed Gas for the next three (3) Months.

(f) During each Month prior to Substantial Completion of a Stage in which Contractor requires delivery of Feed Gas for commissioning, start-up, operation or Performance Tests of a Stage, Contractor shall give daily written notices to Owner by 8:00 am (Central Time) of the Daily Quantity of Feed Gas required by Contractor, which notices shall be given on the form of notice provided by Owner, which form shall be provided to Contractor no later than [***] Days before Owner is scheduled to commence delivery of Feed Gas to Contractor as set forth in the Key Date Schedule. If, following the first (1st) Business Day of each Month after the Month in which Contractor first needs Feed Gas for commissioning and start-up of a Stage, Contractor notifies Owner in writing that Contractor’s need for Daily Quantities of Feed Gas has changed materially from the previously noticed Daily Quantities, then Owner shall use commercially reasonable efforts to reschedule the delivery of such Feed Gas so as to accommodate the revised Daily Quantities notified by Contractor.

(g) In the event that Contractor at any time becomes aware or has reason to believe that Contractor will require materially less or more Feed Gas for a Day than the previously noticed Daily Quantity of Feed Gas, Contractor shall as promptly as possible give Owner written notice of such fact and of the revised Daily Quantity for Feed Gas. Contractor shall make commercially reasonable efforts to change its nomination of Feed Gas by notice to Owner upon at least thirty-six (36) hours’ notice prior to the Day for which the nomination will be changed; provided, that Contractor shall provide as much notice of changes in its nomination of Daily Quantities as reasonably possible.

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(h) In the event that Contractor requests delivery of Feed Gas for a Stage pursuant to Section 9.5.3(f) that Owner reasonably determines is excessive due to the Stage not being able to start-up or operate in a safe manner or utilize the quantity requested on the requested delivery date, Owner may notify Contractor that Owner will not deliver the requested Daily Quantity of Feed Gas until Contractor reasonably demonstrates to Owner that the Stage is capable of safe operation and would reasonably be expected to use the Daily Quantity requested. Owner shall promptly notify Contractor following Owner’s receipt of Contractor’s request for delivery of a Daily Quantity of Feed Gas if Owner will not deliver all or any part of the requested Daily Quantity pursuant to this Section 9.5.3(h). Owner’s failure to deliver all or part of the Daily Quantity of Feed Gas pursuant to this Section 9.5.3(h) shall not be deemed or construed to be an Owner-Caused Delay or Excusable Event, nor shall it otherwise serve as the basis of a proposed Change Order; unless and until Contractor reasonably demonstrates that the Stage is capable of safe operation and Contractor is reasonably expected to use the Daily Quantity requested.

9.6 LNG Production From and After Start-Up.

9.6.1 LNG Production Schedule. Not later than [***] Days prior to the start of the Train 1 Second Production Window and not later than [***] Days prior to the scheduled Initial Production Date for Stage II, Contractor shall deliver to Owner notice (the “LNG Production Schedule”) of the amounts of LNG it reasonably projects will be produced between the Initial Production Date and projected Substantial Completion of such Stage, assuming maximum useable rate deliveries of Natural Gas could be delivered to the LNG Train, and including: (a) an estimated forty-eight (48) hour Loading window for each proposed Cargo, which window shall begin at 6:00 a.m. Central Time on the first Day of the proposed window and end forty-eight (48) hours later (each, a “Loading Window”); and (b) the quantities of LNG that is estimated to be available for each Cargo. Contractor shall use commercially reasonable efforts to cause each Cargo prior to the Substantial Completion Date of the Stage to be equal to the maximum quantity of LNG that may safely be Loaded onto and transported by an LNG Tanker that has a maximum gross cargo containment capacity of no less than [***] and no larger than [***] (a “Full Cargo”). Contractor shall keep Owner informed of the expected LNG Production Schedule for each Stage, including providing Owner with the production profile during execution of the Work beginning on the Initial Production Date for such Stage and continuing until the Substantial Completion Date for such Stage.

9.6.2 LNG Tanker Coordination. Contractor and Owner shall each provide the other Party on an on-going basis with any information available to Contractor or Owner, respectively, regarding the expected and actual production of LNG for each Stage prior to the Substantial Completion Date of such Stage, the proposed Cargos, the proposed Loading Windows, the proposed LNG Tankers that will be made available for Loading, and any other relevant information that could reasonably be expected to affect the LNG Production Schedule. From time to time after the delivery of the initial LNG Production Schedule for Stage pursuant to Section 9.6.1, Contractor shall deliver to Owner an update to the LNG Production Schedule, incorporating among other things any additional information provided by Owner regarding Feed Gas deliveries and the cargo capacity of the LNG Tankers that will be provided for Loading of

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each Proposed Cargo. Without limiting the generality of the foregoing, Owner shall notify Contractor of the gross cargo containment capacity of each LNG Tanker (and quantities required for cool down (if any)) that Owner expects will be available to load the proposed Cargo specified in the initial LNG Production Schedule for a Stage provided by Contractor pursuant to Section 9.6.1 as promptly as practicable once such information is available to Owner, and shall thereafter notify Contractor of any changes to the gross cargo containment capacity of the LNG Tankers that will be provided to Load any proposed Cargo as promptly as practicable once Owner receives any notice of a change in the LNG Tankers that will be provided. Owner shall use commercially reasonable efforts to obtain the necessary cargo capacity so that Contractor can continue to perform commissioning and start-up and produce LNG. Contractor shall as necessary from time to time based on the cargo capacity of the LNG Tankers that Owner expects will be available to Load during the proposed Loading Window, modify the LNG Production Schedule and the proposed Cargo sizes reflected in the LNG Production Schedule such that Contractor’s proposed schedule is based on the cargo capacity of such LNG Tankers.

9.6.3 Confirmation of Loading Windows. No less than [***] Days prior to the proposed Loading Window for each proposed Cargo included in the most recent LNG Production Schedule for a Stage that has been provided by Contractor, Contractor shall confirm and, if necessary, update such scheduled Loading Window for such Cargo. No less than ten (10) Days prior to the proposed Loading Window for each proposed Cargo included in the most recent LNG Production Schedule for a Stage that has been provided by Contractor, Contractor shall confirm the quantity of LNG in the Cargo and the final Loading Window (the “Final Loading Window”) for such Cargo. The Final Loading Window for (a) the Cargo to be loaded into the Initial Tanker; and (b) the Cargo or Cargoes to be loaded in connection with a Ship Loading Rate Performance Test, will each be incorporated into the Key Date Schedule and will define the Key Date Items with respect to Owner’s obligations to deliver an LNG Tanker under Section 3.9, and such dates shall thereafter be deemed to be part of the Key Date Schedule for such purposes and shall be adjusted only as permitted pursuant to this Agreement. Owner shall use commercially reasonable efforts to schedule LNG Tankers to meet the Final Loading Windows for Cargos other than as described in the foregoing sentence, but the failure of an LNG Tanker to arrive in time to load Cargos during such other Final Loading Windows shall not serve as the basis for a Change Order to adjust either the Contract Price or the Key Date Schedule.

9.6.4 Adjustments to LNG Production Schedule. The Parties shall cooperate and work together to accommodate adjustments to LNG Production Schedule that may occur from time to time. Contractor shall use commercially reasonable efforts to ensure that Cargoes are available for delivery during the proposed and the Final Loading Windows, and if Owner requests an alteration of any Loading Window, Contractor shall use commercially reasonable efforts to accommodate such requested adjustment. If Contractor desires to move the applicable Loading Window with respect to a Cargo to an earlier date and notifies Owner of such revised Loading Window in writing, Owner shall promptly consult with its customers and shall notify Contractor if Owner will be able to provide an LNG Tanker for Loading at an earlier date than the scheduled Loading Window (but in no event will the scheduled Loading Window be moved forward to an earlier date without Owner’s prior written consent). If Contractor at any time is aware or has reason to believe that its ability to Load a Cargo during a scheduled Loading

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Window will be delayed beyond the end of such Loading Window period, Contractor shall give Owner written notice of the delay as promptly as practicable and of the date on which Contractor then expects Contractor will be ready to Load. In the event of a delay in the applicable Loading Window, Owner’s obligations to deliver an LNG Tanker will be extended to the later scheduled Loading Window (but in no event will a scheduled Loading Window be moved forward to an earlier date without Owner’s prior written consent) as notified by Contractor. Notwithstanding anything to the contrary in the foregoing, in no event may Contractor accelerate or delay a Final Loading Window without Owner’s prior written consent.

9.6.5 Failure to Load an LNG Tanker. If during the period prior to Substantial Completion of a Stage, Owner is unable to Load the first LNG Tanker scheduled for loading (the “Initial Tanker”) during the Final Loading Window as scheduled pursuant to Section 9.6.3 for reasons arising out of or related to the acts or omissions of Contractor or a Supplier and such reasons are not the basis for a Change Order under Article 8, and Owner has an LNG Tanker scheduled to receive the Loading of LNG and pays any demurrage, cancellation or other charges to the LNG Tanker owner or charterer or customer of the LNG Facility, then to the extent such demurrage, cancellation or other charges are due to such acts or omissions of Contractor or a Supplier, Contractor shall be responsible for the lesser of: (a) [***] for each Day or part of a Day of delay in Loading such LNG after the expiration of such Final Loading Window; or (b) an amount equal to the sum of any demurrage, cancellation and other charges with respect to the LNG Tanker scheduled for such Loading Window that are incurred by Owner in connection with such delay in or failure to Load; provided that Contractor’s liability for the failure to load such LNG Tanker as scheduled shall not exceed a maximum of [***] in the aggregate.

9.6.6 Contractor Obligation to Produce LNG. From and after the Initial Production Date for a Stage until Owner takes care, custody and control of such Stage in accordance with Section 11.2.2 or Section 11.2.3, so long as Owner provides Feed Gas for the applicable Stage, Contractor shall, unless directed otherwise by Owner, use commercially reasonable efforts to operate such Stage so as to continually produce LNG in accordance with GECP to until the LNG Tanks are full, except to the extent that such production would impact Contractor’s ability to perform the Work in accordance with this Agreement.

9.6.7 Natural Gas and LNG for Cooling and Gasification.

(a) In addition to its obligation to produce LNG and supply LNG for Loading as provided in this Section 9.6, Contractor shall utilize LNG produced from the LNG Facility for purposes of gasification and cool down of LNG Tankers.

(b) Owner shall bring in a LNG Tanker to deliver LNG for use in cooling down Stage I, subject to Contractor having notified Owner at least thirty (30) Days in advance as to when it will require LNG for cooling down Stage I and the volume of LNG Contractor anticipates will be required. Owner shall use commercially reasonable efforts to obtain such LNG at the time as requested by Contractor. Contractor shall be responsible for unloading any LNG Tanker that delivers LNG for cool down.

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9.7 Performance Testing.

9.7.1 Performance Test Procedures. No later than two hundred forty (240) Days prior to the Guaranteed Substantial Completion Date of Stage I, Contractor shall propose to Owner for its review and acceptance detailed final test procedures for the conduct of Performance Tests, and the functional tests as described in Appendix G, with respect to each Stage, including for Stage I, detailed final test procedures with respect to the LNG Tanks and the other Common Facilities; provided that Contractor shall endeavor to provide such test procedures no later than two hundred forty (240) Days prior to the Target Substantial Completion Date if earlier than the Guaranteed Substantial Completion Date. Contractor’s proposed test procedures shall incorporate all of the requirements and comply with the conditions of testing described in Appendix G. Once Owner has accepted final test procedures for the conduct of the Performance Tests and the functional tests described in Appendix G for such Stage (the “Performance Test Procedures”), the Performance Test Procedures shall form a part of the requirement for the conduct of the Performance Tests. Thereafter, either Party may propose changes to a Performance Test Procedure at any time up to sixty (60) Days prior to commencement of the initial functional test as described in Appendix G or the initial Performance Test, as applicable, and each Party agrees to cooperate in good faith in evaluating such change. No change shall be effective, however, without written acceptance of Owner and Contractor.

9.7.2 Notice of Readiness for Performance Testing. Without limitation of the foregoing or any other scheduling requirements contained in this Agreement, Contractor shall give Owner ninety (90) Days’ prior written notice of a thirty (30) Day period in which it expects to conduct the Performance Tests with respect to a Stage (and the LNG Tank with respect to such Stage) and shall provide notice to Owner of the scheduled date for any such Performance Test, which date shall fall within the thirty (30) Day period previously notified, at least thirty (30) Days prior to such date. Any Ship Loading Rate Performance Test shall be performed using an LNG Tanker scheduled in accordance with Section 9.6.

9.7.3 Owner Access; Performance Test Reports.

(a) Owner, Lenders’ Agent, the Independent Engineer and equity participants in the LNG Facility may attend each of the Performance Tests. Other Invitees of Owner (including, where invited by Owner, customers) may attend each of the Performance Tests, subject to Contractor’s consent, which consent shall not be unreasonably withheld or delayed.

(b) Contractor shall analyze the data obtained during all Performance Tests, and ensure that such data reflects the performance standards required hereunder. A complete copy of all raw performance data and a list of all testing instrumentation utilized shall be provided to Owner at the completion of testing. Following completion of each Performance Test, Contractor shall provide to Owner a Performance Test report and analysis for the Performance Tests conducted for such Stage. At a minimum, each Performance Test report shall include: (i) the raw data; (ii) the instrumentation utilized for the applicable Performance Tests; (iii) a description of the Performance Test Procedures and Contractor’s compliance with same;

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(iv) calculations and information, and a full explanation concerning same, for adjustments to the Performance Conditions; and (v) any other supporting information used to demonstrate that the Work has met the Minimum Performance Standards, Guaranteed Performance Levels, and other requirements of this Agreement for the applicable Stage, including the LNG Tank and other Common Facilities with respect to Stage I.

9.7.4 Contractor Right and Obligation to Repeat Performance Tests Prior to Guaranteed Substantial Completion Date.

(a) Until Substantial Completion of a Stage has occurred, Contractor may discontinue, or repeat the Performance Tests for such Stage as Contractor deems appropriate, subject to Contractor’s compliance with its obligations under this Agreement.

(b) If, prior to Substantial Completion of a Stage: (i) a Performance Test with respect to that Stage has been completed; (ii) Contractor or any Supplier makes any modification to that Stage; and (iii) such modification could reasonably be expected to have a material effect on the outcome of that Performance Test if it had been made before the completion of that Performance Test, then such Performance Test shall be re-run, as a condition to achieving Substantial Completion of the applicable Stage.

(c) Contractor shall bear the costs of performing the Performance Tests other than with respect to Owner’s provision of Feed Gas and LNG Tankers as required. Contractor shall give Owner three (3) Days advance notice of each Performance Test following the initial Performance Test. Contractor’s ability to repeat a Performance Test requiring LNG Tankers will be subject to the availability of LNG Tankers in accordance with Section 9.6.

9.8 Substantial Completion.

9.8.1 Substantial Completion Certificate. When Contractor believes that a Stage has achieved Substantial Completion, Contractor shall execute and deliver to Owner a Substantial Completion Certificate for such Stage, together with a report of the Work completed with sufficient detail to enable Owner to determine whether the Substantial Completion for such Stage has been achieved. The Substantial Completion Certificate for each Stage shall be accompanied by all other supporting documentation to establish that the requirements for Substantial Completion of such Stage have been met.

9.8.2 Owner Acceptance or Rejection. As soon as practicable following its receipt of a Substantial Completion Certificate for a Stage delivered pursuant to Section 9.8.1 or 9.8.3, Owner and Contractor shall walkdown the applicable Stage and all of the applicable Work and Owner shall promptly notify Contractor of any Defect of which it is aware that, if not remedied, would prevent Owner from countersigning the Substantial Completion Certificate for such Stage. As soon as practicable, and in any event within ten (10) Business Days following its receipt of a Substantial Completion Certificate for such Stage, Owner shall consider the report submitted by Contractor and either:

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(a) countersign and deliver to Contractor the Substantial Completion Certificate for such Stage; provided, that Contractor shall have paid Owner any Delay Liquidated Damages that have accrued with respect to such Stage, including any Delay Liquidated Damages that have accrued since the date of Owner’s last invoice for Delay Liquidated Damages, if any, submitted to Contractor pursuant to Section 4.3.2(c), and until such payment is made, Owner shall have no obligation hereunder to countersign the Substantial Completion Certificate; or

(b) notify Contractor in writing that Substantial Completion for such Stage has not been achieved, stating in detail the reasons therefor.

No Delay Liquidated Damages shall accrue with respect to a Stage during the period in which Owner reviews the Substantial Completion Certificate for such Stage; provided that if Substantial Completion for such Stage has not occurred, Delay Liquidated Damages shall continue to accrue during such period. Notwithstanding anything to the contrary in the foregoing, if Owner fails to respond to Contractor’s submission of a Substantial Completion Certificate for a Stage within ten (10) Business Days, Delay Liquidated Damages shall not accrue if Owner agrees that Substantial Completion has occurred, and if Owner rejects the Substantial Completion Certificate in accordance with Section 9.8.2(b), Delay Liquidated Damages shall not accrue during the period beginning on the last Day of such ten (10) Business Day period and ending on the Day on which Owner responds to Contractor’s submission in accordance with Section 9.8.2(a) or 9.8.2(b). Notwithstanding the date on which Owner countersigns the Substantial Completion Certificate, once Owner countersigns the Substantial Completion Certificate, Substantial Completion shall be deemed to have occurred on the date set forth in the Substantial Completion Certificate that is countersigned by Owner.

9.8.3 Corrective Action. If Substantial Completion for a Stage has not been achieved, Contractor shall promptly take such corrective action or perform such additional Work as will achieve Substantial Completion for such Stage, including all Work required to achieve the applicable Guaranteed Performance Levels (or the Minimum Performance Standards if Contractor achieves Substantial Completion for such Stage by achieving the Minimum Performance Standards), and shall issue to Owner another Substantial Completion Certificate for such Stage pursuant to Section 9.8.1. Neither Owner’s execution of the Substantial Completion Certificate for such Stage nor any matter reported by Owner pursuant to Section 9.8.2 and action taken by Contractor pursuant to this Section 9.8.3 shall diminish Contractor’s obligations pursuant to Article 10.

9.8.4 Failure to Agree upon Achievement of Substantial Completion. In the event that Owner and Contractor do not agree upon whether Substantial Completion of a Stage has been achieved, the Dispute shall be resolved in accordance with Article 20.

9.8.5 Common Facilities. Owner acceptance of Substantial Completion of the Common Facilities included as part of Stage I Substantial Completion shall not relieve Contractor of its obligation as part of the Work for the Common Facilities to support the design and performance requirements of Stage II in order for Stage II Substantial Completion to be achieved.

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9.9 Punch List.

9.9.1 Development of Punch Lists; Punch List Item Categories. Prior to Ready for Feed Gas Introduction, Ready for Start-Up and Substantial Completion of each Stage, Contractor and Owner shall walkdown such Stage and Contractor shall generate a Punch List updated with the Punch List Items remaining to be completed for such Stage. Each Punch List Item will be categorized as either “Punch List A Items”, “Punch List B Items” or “Punch List C Items” as described below, and Contractor shall provide a copy of such Punch List to Owner. Any additional items of Work remaining to be completed that are noted during the walkdown by Owner or Contractor shall be included in the Punch List. Contractor shall update the Punch List during performance of the Work to reflect Punch List Items that have been completed, added or re-classified (with Owner’s concurrence). No less than ten (10) Business Days prior to Substantial Completion of a Stage, Contractor shall issue an updated Punch List to Owner for Owner’s review and acceptance, together with an estimate of the cost and time necessary to complete or correct each Punch List Item. Only Defects or deficiencies or other incomplete Work which satisfy the criteria of a Punch List C Item shall be eligible for inclusion on the Punch List as of the Substantial Completion Date. If any Punch List Items are discovered by Owner or Contractor after such initial walkdown but prior to Substantial Completion of the applicable Stage, such Punch List Item shall be categorized as either a “Punch List A Item”, “Punch List B Item” or, “Punch List C Item”, as applicable, and added to the Punch List. The failure to include any items on any iteration of the Punch List shall not alter the responsibility of Contractor to complete all of the Work in accordance with the terms and provisions of this Agreement.

(a) “Punch List A Items” are items of Work that jeopardize the safe commissioning, start-up or operation of such System, the Stage or the LNG Facility.

(b) “Punch List B Items” are items of Work that are incomplete or Defective, do not meet any of the criteria of Punch List A Items, and that do not meet the criteria to be categorized as a Punch List C Item.

(i) it does not impede the safe operation of the LNG Facility in accordance with GECP, or impede marine operations (other than with respect to the Pioneer Docks);

(ii) it does not affect the operability, reliability, safety or mechanical, electrical or structural integrity of the LNG Facility;

(iii) it can be corrected safely with the LNG Facility operating at design capacity; and

(iv) it does not materially increase the cost of operating the LNG Facility.

9.9.2 Conditions to Commissioning, Start-Up, Testing and Completion.

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(a) In no event shall Contractor commence commissioning of the Systems required to achieve Ready for Feed Gas Introduction or Ready for Start-Up (each as agreed by the Parties in accordance with Section 9.1.2) until all of the Punch List A Items with respect to those Systems have been completed, or have been re-classified as the Parties agree to allow Contractor to safely commence commissioning of such Systems.

(b) If any Punch List A Item is discovered by the Integrated Commissioning Team (or otherwise by Contactor) during commissioning or start-up of a System, Contractor must close such Punch List A Item before commencing or completing the start-up of such System.

(c) In no event shall Contractor introduce Feed Gas into a Stage for processing into LNG until Ready for Start-Up of such Stage has been achieved.

(d) In no event shall Contractor commence Performance Tests other than functional tests with respect to a Stage until such Stage has achieved Ready for Start-Up and satisfies the requirements to commence such Performance Tests under Appendix G.

9.9.3 Access; Completion of Punch List C Items. Owner shall provide Contractor with access to each Stage after Substantial Completion that is reasonably sufficient to enable Contractor to complete all Punch List C Items, so long as such access does not unreasonably interfere with operation of such Stage or any other Stage that has achieved Substantial Completion and subject to Contractor complying with Owner’s HSSE Program. All Punch List C Items shall be completed as a condition to Final Acceptance of such Stage. Contractor shall promptly initiate measures to complete or correct, as appropriate, the Punch List C Items on the Punch List within the estimated time necessary to complete or correct that Punch List Item provided by Contractor. On a bi-Weekly basis after Substantial Completion of a Stage, Contractor shall revise and update the Punch List to include the dates that items listed on such Punch List are completed by Contractor and accepted by Owner. Notwithstanding any of the foregoing, a Punch List C Item shall not be considered complete until Owner has inspected the Punch List C Item and acknowledged, by notation on the updated Punch List, that the Work related to that Punch List C Item is complete.

9.9.4 Owner Completion. At any time after the scheduled date for Final Acceptance of such Stage, Owner may elect by written notice to complete the remaining Punch List Items that have not been completed as of the date of Owner’s notice. Upon such election, Owner may withhold and use amounts otherwise due to Contractor hereunder to pay for Owner’s reasonably documented costs incurred to complete such remaining Punch List Items, or if such costs exceed amounts remaining to be paid to Contractor hereunder, Contractor shall pay Owner its reasonably documented costs within thirty (30) Days after receipt of an invoice from Owner reasonably documenting the costs incurred by Owner to complete such Punch List Items.

9.10 Achievement of Guaranteed Performance Levels.

9.10.1 Achievement of Substantial Completion. If at any time prior to Substantial Completion of a Stage, a Stage: (a) meets the Emission Guarantees; (b) either meets

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the Noise Guarantee or Contractor is able to demonstrate through modeling, using the Noise Model, that such Stage satisfies the Noise Guarantee; (c) meets the Guaranteed Performance Levels to which a Minimum Performance Standard does not apply; and (d) for any Guaranteed Performance Levels which are not satisfied, the Minimum Performance Standards for a Stage are met during the Performance Tests for such Stage, then Contractor shall have the option to: (i) perform remedial Work to correct the deficiencies in performance and re-perform the failed Performance Test; or (ii) if all other conditions to Substantial Completion for such Stage have been met or waived by Owner, achieve Substantial Completion for such Stage by increasing the Letter of Credit provided by Contractor pursuant to Section 17.2, or providing Owner with a separate Letter of Credit that meets the requirements of Section 17.2.1, in an amount equal to all Performance Liquidated Damages due with respect to the Guaranteed Performance Levels that have not been met; provided, that if the Guaranteed Substantial Completion Date has occurred, then: (A) Delay Liquidated Damages will accrue until Substantial Completion is achieved; and (B) if all other conditions to Substantial Completion for such Stage have been met or waived by Owner, Owner may at any time require Contractor to post such Letter of Credit under subclause (ii) and achieve Substantial Completion for such Stage, in which case Contractor shall provide a Substantial Completion Certificate for such Stage to Owner.

9.10.2 Contractor Obligation to Attempt to Achieve Guaranteed Performance Levels. If a Stage: (a) meets the Emission Guarantees; (b) either (i) meets the Noise Guarantee; or (ii) fails to meet the Noise Guarantee but Contractor’s Noise Model demonstrates that such Stage satisfies the Noise Guarantee; (c) meets the Guaranteed Performance Levels ,or meets the Minimum Performance Standards for those Guaranteed Performance Levels that have not been achieved, during the Performance Tests; and (d) such Stage has satisfied the other requirements to achieve Substantial Completion, then, at Contractor’s or Owner’s option, which may be exercised by either such Party by providing notice to the other Party any time until ten (10) Days after the date on which Owner countersigns a Substantial Completion Certificate for such Stage, Contractor shall attempt for a period of up to [***] Days commencing on the date that the applicable Party exercises its option under this Section 9.10.2 (the “Guaranteed Performance Levels Correction Period”), to correct the Work so that the LNG Facility achieves all of the Guaranteed Performance Levels for the applicable Stage and otherwise achieves any conditions to Substantial Completion that were waived by Owner for such Stage; provided, however, if such Stage fails to meet any of the Guaranteed Performance Levels by only [***], then Contractor shall have the option in its sole discretion to pay the Performance Liquidated Damages due with respect to the Guaranteed Performance Levels for which Contractor achieved all but [***] of the Guaranteed Performance Levels in lieu of undertaking any efforts to correct the Work (but must undertake corrective efforts with respect to the Guaranteed Performance Levels which have failed to meet the respective Guaranteed Performance Level by more than [***]). Within ten (10) Days after either receipt of a notice from Owner or Contractor’s notice electing to undertake to cure the performance deficiencies, and prior to commencing any curative Work during the Guaranteed Performance Levels Correction Period, Contractor shall submit a plan describing the Work that Contractor will undertake to correct, repair or remedy any of the Work necessary to achieve the relevant Guaranteed Performance Levels, the access required and when such Work will be performed (a “GPL Correction Plan”), for review and acceptance by Owner with respect to timing when such Work will be performed and the access required to perform such

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Work, not to be unreasonably withheld, conditioned or delayed by Owner. The GPL Correction Plan shall be amended in accordance with Section 9.10.3 as may be necessary with respect to Work necessary to satisfy the Noise Guarantee. Any such GPL Correction Plan shall minimize any interference that performance of the curative Work shall or may have on the relevant Stage or any other Stage that has achieved Substantial Completion. Contractor shall thereafter complete all such Work in accordance with the GPL Correction Plan that has been accepted by Owner. Contractor shall bear all costs to correct the Work pursuant to this Section 9.10.2; provided, however, that if Owner elects to require Contractor to correct the Work, Contractor shall not be required to incur costs to perform curative Work that exceed the amount of [***].

9.10.3 Contractor’s Demonstration of Satisfaction of the Noise Guarantee. With respect to the Noise Guarantee for each Stage, if the Performance Test conducted prior to Substantial Completion does not demonstrate that the Noise Guarantee has been satisfied, but the Noise Model demonstrates that such Stage satisfies the Noise Guarantee, then during the Guaranteed Performance Levels Corrections Period, Contractor shall promptly prepare and deliver to Owner for submission to FERC the necessary information, including the Noise Model, to demonstrate to FERC that the applicable Stage satisfies the Noise Guarantee. If FERC does not agree that such Stage satisfies the Noise Guarantee, Contractor shall amend its GPL Correction Plan, using the same procedures as described in Section 9.10.2, to include the Work that Contractor will undertake to correct, repair or remedy any of the Work necessary to cause the Stage to satisfy the Noise Guarantee. Without limiting Contractor’s rights hereunder in the event of a Change in Law, Contractor’s costs to perform curative Work to satisfy the Noise Guarantee shall not be subject to the limitation on Contractor’s costs as described in Section 9.10.2.

9.10.4 Contractor Access. During any Guaranteed Performance Levels Correction Period, Owner shall provide Contractor with access to the LNG Facility sufficient to perform its curative Work under this Agreement in accordance with the plan as accepted by Owner pursuant to Section 9.10.1 or 9.10.2, so long as such access does not unreasonably interfere with operation of the relevant Stage or any other Stage that has achieved Substantial Completion, and in connection therewith Owner may place reasonable limitations on Contractor’s access to the Work such that performance of the Work will minimize disruption to Owner’s operations and loss of revenue resulting from performance of such Work. In any event, Owner shall notify Contractor of the periods in which Owner is scheduled to operate a Stage to produce LNG as necessary for imminent Loading of a LNG Tanker and during Cargo Loading, and Contractor acknowledges that Contractor shall not have access to the Work during such periods. If during performance of the curative Work Contractor determines that any activities that were not contemplated in the plan as accepted by Owner pursuant to Section 9.10.2 have become necessary, Contractor shall provide the prior written notice required under Section 2.11.2 to Owner if performance of the curative Work will interfere with operation of that Stage or prior Stages, in which case Owner may place reasonable limitations on Contractor’s access to the Work such that performance of the Work will minimize disruption to Owner’s operations and loss of revenue resulting from performance of such Work. If Contractor is not granted access to the LNG Facility in order to perform the curative Work in accordance with the plan as accepted by Owner pursuant to Section 9.10.1 or 9.10.2, the Guaranteed Performance Levels Correction

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Period shall be extended as necessary to provide Contractor with the required access in accordance with such plan.

9.10.5 Conduct of Performance Tests. During any Guaranteed Performance Levels Correction Period, Contractor shall provide notice to Owner when Contractor believes the relevant Stage is prepared for Performance Tests to be conducted to demonstrate such Stage meets the applicable Guaranteed Performance Levels, and Owner shall conduct such Performance Tests in accordance with the Performance Test Procedures; provided, that Contractor shall supply all test technicians and instrumentation and any other personnel, other than the Operating Personnel, necessary to perform the Performance Tests. If a Performance Test with respect to a Stage is commenced but is not completed, the Performance Test must be Successfully Run after such attempt and before Contractor shall have met its obligations under the applicable GPL Correction Plan. If based on such Performance Test, a Stage fails to meet any of the Minimum Performance Standards, or the Performance Test is not otherwise Successfully Run, Contractor shall within forty eight (48) hours submit a GPL Correction Plan for Owner’s review and acceptance in accordance with Section 9.10.2, for the correction or repair or remedy of any of the Work as necessary to correct such performance deficiencies as soon as possible. Contractor shall continue to perform curative work in accordance with this Section 9.10.5 until the Stage achieves the applicable Minimum Performance Standards and the applicable Performance Test is otherwise Successfully Run, notwithstanding the expiration of the Guaranteed Performance Levels Correction Period.

9.10.6 Calculation of Performance Liquidated Damages. If Contractor corrects the performance of the Stage and based on subsequent Performance Tests meets the relevant Guaranteed Performance Levels or improves the performance of the Stage with respect to the Guaranteed Performance Levels to which the Minimum Performance Standards apply, the Performance Liquidated Damages payable pursuant to this Agreement shall be recalculated by Contractor and submitted to Owner. If Owner disagrees with Contractor’s calculation of the Performance Liquidated Damages that are due, Owner shall notify Contractor, and Contractor and Owner shall attempt to resolve any such disagreements. Contractor shall pay Owner the undisputed Performance Liquidated Damages within thirty (30) Days after Contractor first submits its calculations to Owner, and shall pay Owner any disputed Performance Liquidated Damages that are determined to be due and owing to Owner upon resolution of the related Dispute in accordance with Article 20. If and to the extent the amount by which the Stage fails to meet any of the Guaranteed Performance Levels to which the Minimum Performance Standards apply has increased and additional Performance Liquidated Damages are due with respect to such Guaranteed Performance Levels, Contractor shall pay such additional Performance Liquidated Damages to Owner. If the performance of the Stage decreases such that the Stage fails to meet the Minimum Performance Standards or fails to meet any of the Guaranteed Performance Levels to which the Minimum Performance Standards do not apply following the performance of Contractor’s curative Work, then Contractor shall continue to perform curative work to cause the Stage to achieve at least the Minimum Performance Standards where applicable and achieve any Guaranteed Performance Levels to which the Minimum Performance Standards do not apply, notwithstanding the expiration of the Guaranteed Performance Levels Correction Period. Once Contractor demonstrates the Stage meets the

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Guaranteed Performance Levels, or the Minimum Performance Standards, as applicable, the Parties shall re-calculate, approve and pay the Performance Liquidated Damages as contemplated in this Section 9.10.6, notwithstanding the expiration of the Guaranteed Performance Levels Correction Period. Owner shall release the Letter of Credit provided by Contractor with respect to Performance Liquidated Damages for such Stage pursuant to Section 9.10.1 (or Contractor may reduce the Letter of Credit provided by Contractor pursuant to Section 17.2 if Contractor elected to increase such Letter of Credit in accordance with Section 9.10.1), upon receipt of payment in full of all Performance Liquidated Damages that are due hereunder with respect to such Stage.

9.11 Final Acceptance.

9.11.1 Final Acceptance Certificate. When Contractor believes that a Stage has achieved Final Acceptance, Contractor shall execute and deliver to Owner a Final Acceptance Certificate for such Stage, together with a report of the Work completed with sufficient detail to enable Owner to determine whether Final Acceptance of such Stage has been achieved. The Final Acceptance Certificate for each Stage shall be accompanied by all other supporting documentation as may be required to establish that the requirements for Final Acceptance of such Stage have been met.

9.11.2 Owner Acceptance or Rejection. As soon as practicable following its receipt of a Final Acceptance Certificate delivered pursuant to Section 9.11.1 or 9.11.3, Owner shall inspect the applicable Stage and all of the applicable Work and promptly notify Contractor of any matter of which it is aware that, if not remedied, would prevent Owner from countersigning the Final Acceptance Certificate for such Stage. As soon as practicable, and in any event within ten (10) Business Days following its receipt of a Final Acceptance Certificate for such Stage, Owner shall consider the report submitted by Contractor and either:

(a) countersign and deliver to Contractor the Final Acceptance Certificate for such Stage; or

(b) notify Contractor in writing that Final Acceptance for such Stage has not been achieved, stating in detail the reasons therefor.

9.11.3 Corrective Action. If Final Acceptance for a Stage has not been achieved, Contractor shall promptly take such corrective action or perform such additional Work as will achieve Final Acceptance for such Stage and shall issue to Owner another Final Acceptance Certificate for such Stage pursuant to Section 9.11.1. Neither Owner’s execution of the Final Acceptance Certificate nor any matter reported by Owner pursuant to Section 9.11.2 and action taken by Contractor pursuant to this Section 9.11.3 shall diminish Contractor’s obligations pursuant to Article 10.

9.11.4 Achievement of Final Acceptance. Contractor shall achieve Final Acceptance of each Stage within [***] Days after the Substantial Completion Date for such Stage; provided, however, that such [***] Day period shall be reasonably extended to the extent that Contractor is not provided access to such Stage in accordance with Appendix M during such

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period to the extent necessary to perform the Work required to satisfy the conditions to Final Acceptance.

9.11.5 Failure to Agree upon Achievement of Final Acceptance. In the event that Owner and Contractor do not agree upon whether Final Acceptance for a Stage has been achieved, the Dispute shall be resolved in accordance with Article 20.

9.12 Final Completion.

9.12.1 Final Completion Certificate. When Contractor believes that it has met all of the requirements for Final Completion, Contractor shall execute and deliver to Owner a Final Completion Certificate, together with a report of the Work completed with sufficient detail to enable Owner to determine whether Final Completion has been achieved. The Final Completion Certificate shall be accompanied by all other supporting documentation as may be required to establish that the requirements for Final Completion have been met.

9.12.2 Owner Acceptance or Rejection. As soon as practicable following its receipt of a Final Completion Certificate delivered pursuant to Section 9.12.1 or 9.12.3, Owner shall promptly notify Contractor of any matter of which it is aware that, if not remedied, would prevent Owner from countersigning the Final Completion Certificate. As soon as practicable, and in any event within ten (10) Business Days following its receipt of a Final Completion Certificate, Owner shall consider the report submitted by Contractor and either:

(a) countersign and deliver to Contractor the Final Completion Certificate; or

(b) notify Contractor in writing that Final Completion has not been achieved, stating in detail the reasons therefor.

9.12.3 Corrective Action. If Final Completion has not been achieved, Contractor shall promptly take such corrective action or perform such additional Work as will achieve Final Completion and shall issue to Owner another Final Completion Certificate pursuant to Section 9.12.1. Neither Owner’s execution of the Final Completion Certificate nor any matter reported by Owner pursuant to Section 9.12.2 and action taken by Contractor pursuant to this Section 9.12.3 shall diminish Contractor’s obligations pursuant to Article 10.

9.12.4 Failure to Agree upon Achievement of Final Completion. In the event that Owner and Contractor do not agree upon whether Final Completion has been achieved, the Dispute shall be resolved in accordance with Article 20.

ARTICLE 10

WARRANTIES AND CORRECTION OF WORK

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10.1 Contractor’s Warranties.

10.1.1 Warranty Coverage. Contractor warrants to Owner as follows:

(a) Contractor shall perform the Work using its skills and attention, in accordance with GECP associated with constructing Comparable Facilities, as such standards are applicable to the circumstances of the LNG Facility and the Liquefaction Project.

(b) All Equipment procured or furnished by Contractor hereunder shall be new, of good quality, suitable for use in a liquefaction facility in accordance with GECP and shall comply with the Specifications.

(c) The Work, including all Equipment, and each component thereof, shall comply with the requirements of this Agreement, the Scope of Work, Basis of Design, the Deliverables and Applicable Laws.

(d) Subject to Owner having paid undisputed amounts due hereunder, Owner and the Common Facilities Owner, as applicable, shall receive good and marketable title to and ownership of the Work, and each component of the Work shall be free and clear of any and all Liens when title thereto passes to Owner, except those of the Lender, but in no event including any Liens of Contractor or any Supplier.

(e) All Equipment and any component thereof shall be composed and made of only proven technology, of a type in commercial operation as of the Effective Date, with conditions substantially similar to those contained herein.

If requested by Owner, Contractor shall provide Owner with reasonably satisfactory evidence that any items of Equipment meet the warranties set forth in this Section 10.1.1.

The warranties set forth in this Article 10 are in addition to and constitute separate obligations from Contractor’s obligation to achieve the Guaranteed Performance Levels set forth in this Agreement. Provided that Contractor has achieved the Minimum Performance Standards pursuant to Successful Runs of the Performance Tests for each Stage, the failure by Contractor to achieve the Guaranteed Performance Levels (other than those to which Minimum Performance Standards do not apply) shall not be deemed to be a Defect.

10.1.2 Warranty Exclusions. The Warranty excludes remedies, and Contractor shall have no liability to Owner, for damages or defects to the extent caused by: (a) Owner’s failure to maintain or repair any Equipment in accordance with the recommendations set forth in the O&M Manuals, including the use of spare parts in the repair or maintenance of Equipment that are not in accordance with the specifications set forth in the O&M Manuals, but only after Substantial Completion of the applicable Stage containing such Equipment; (b) operation of any Equipment or any component thereof by Owner outside of the operating parameters or other material requirement of the O&M Manuals, but only after Substantial Completion of the applicable Stage containing such Equipment; (c) normal wear and tear; provided, that actions by

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Operating Personnel furnished by Owner under Section 3.6 but acting under the direction of Contractor shall be considered actions of Contractor, not Owner; or (d) repairs or alterations of Defective Work during or after the Warranty Period not performed by Contractor (except for work performed by Owner pursuant to Section 10.3.5); or (e) damage caused by a Force Majeure event that occurs after Substantial Completion of the applicable Stage.

10.1.3 Warranty Period. The warranty period with respect to each Stage will commence on the Substantial Completion Date and continue for a period of [***] months from the Substantial Completion Date of such Stage (each such period referred to herein individually as a “Warranty Period”). Notwithstanding anything to the contrary in this Section 10.1.3, the Warranty Period with respect to items of the Common Facilities shall commence on the date of Substantial Completion of Stage II unless such item of Common Facilities installed as part of Stage I can be both fully utilized and fully tested at Substantial Completion of Stage I, and the Warranty Period for any part or component of the Work which is corrected, repaired or replaced pursuant to this Section 10.3.1 shall be renewed for a period of [***] months from the date of completion of such correction, repair or replacement; provided, further, that the Warranty Period for any part or component of the Work that is out of service because of a Defect affecting another part or component shall be extended by a period equal to the period during which such Work cannot be used by reason of the Defect. Notwithstanding the preceding, but subject to Section 10.4, the Warranty Period for any part or component of the Work (including warranty Work) shall in no event extend beyond [***] months from the date of commencement of the Warranty Period upon the Substantial Completion of the applicable Stage, except with respect to the Extended Warranty Items.

10.1.4 Assignment of Warranties. The warranties made in this Agreement shall be for the benefit of Owner and its successors and assigns and the respective successors and assigns of any of them, and any warranties obtained by Contractor from its Suppliers (including CIMTAS but excluding other Affiliates of Contractor) that remain after the expiry of the Warranty Period, as extended pursuant to Section 10.1.3, shall be assigned to Owner (or its successors or assigns).

10.2 Supplier Warranties.

10.2.1 Generally. Contractor shall be fully responsible and liable to Owner for its warranty and Corrective Work obligations and liability under this Agreement for all Work, regardless of whether any Supplier warranties meet the requirements of this Agreement. Contractor shall use commercially reasonable efforts to obtain similar Warranties to those provided by Contractor hereunder from its Suppliers (including CIMTAS but excluding other Affiliates of Contractor) as appropriate for the Work provided by such Supplier, but except with respect to the Extended Warranty Items (subject to Section 10.2.2) and the Licensors, for which Contractor shall obtain the warranties as described herein, Contractor shall not be required to obtain any specific warranties from Suppliers. Contractor shall promptly assign any Supplier warranties remaining in effect at the end of the Warranty Period under Section 10.1.3 to Owner by duly executed instruments, including from CIMTAS but excluding warranties from other Affiliates of Contractor. All warranties provided by any Supplier (including CIMTAS but

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excluding other Affiliates of Contractor) shall be in such form as to permit direct assignment of any remaining warranty without the consent of Supplier.

10.2.2 Extended Supplier Warranties. Notwithstanding anything to the contrary in Section 10.2.1, Contractor shall obtain warranties from the relevant Vendors with respect to the Extended Warranty Items that extend for a period of no less than [***] months from the introduction of feed gas to the applicable Equipment. The “Extended Warranty Items” are the following: fill/adsorbent for the dryer bed and the mercury removal unit, respectively, each as described in Appendix B. Such warranties shall be assigned by Contractor to Owner at the end of the Warranty Period (and Owner shall accept such assignment), and if Contractor does not assign such warranties to Owner, Contractor shall owe such Warranty obligations to Owner.

10.3 Warranty Repair Procedures.

10.3.1 Corrections during Warranty Period. If, during the Warranty Period for any Stage, any Work for such Stage is found to be Defective, Contractor shall, at its sole cost and expense, promptly and on an expedited basis correct such Defective Work, whether by repair, replacement or otherwise, including any and all obligations in connection with such repair, replacement or otherwise, such as in and out costs, storage, labor, Taxes, transportation and expediting costs and any other costs necessary to fully correct the Defective Work (collectively, the “Corrective Work”). The cost of disassembling, dismantling or making safe and reassembling finished Work for the purpose of Corrective Work shall be borne by Contractor. Contractor shall use reasonable efforts to avoid or mitigate the loss of refrigerants and other consumables during the performance of the Corrective Work. Nothing herein shall be deemed to expand Contractor’s obligations under Section 11.3.2 for physical loss, damage to or destruction of the Work as a result of such Defective Work. Within forty-eight (48) hours, for matters affecting the operation of a Stage, or ten (10) Business Days, for all other matters, after receipt by Contractor of a Notice from Owner identifying and describing with reasonable specificity that portion of Work that fails to meet an applicable warranty and requesting Contractor to correct the failure, Contractor shall submit a plan to Owner specifying how Contractor proposes to remedy such failure and Contractor and Owner shall mutually agree when Contractor shall remedy such failure. No such remediation or repair shall be considered complete until Owner has reviewed and agreed that such remedial work has been completed and the Defect has been corrected.

10.3.2 Access to the LNG Facility; Spare Parts. Owner shall provide Contractor with access to the LNG Facility portions of the LNG Facility, and will de-energize and de-pressurize the applicable Equipment and otherwise take such other action with respect to such Equipment and the relevant portions of the LNG Facility, as necessary for Contractor to safely access such Equipment and perform its Corrective Work, subject to the security or safety requirements of Owner; provided that Contractor’s activities do not unreasonably interfere with the construction or operation of the LNG Facility. If Owner does not provide Contractor with access to perform the Corrective Work in accordance with the schedule agreed to by the Parties in accordance with Section 10.3.1, the period allowed for Contractor to perform such Corrective Work shall be extended for the length of the delay. Contractor shall not utilize spare parts owned by Owner in the course of performing the Corrective Work without Owner’s prior written consent. In the event Contractor utilizes spare parts owned by Owner in the course of

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performing the Corrective Work, Contractor shall supply Owner free of charge with spare parts equivalent in quality and quantity to all such spare parts used by Contractor (which shall be new except as otherwise agreed by Owner), from the original manufacturer of the spare parts used, or otherwise as soon as possible following the utilization of such spare parts, or shall reimburse Owner for the complete replacement costs incurred by Owner to replace such spare parts.

10.3.3 Warranty Manager. Contractor shall furnish and retain at least one (1) Warranty Manager at the LNG Facility on a full-time (forty (40) hours per Week) basis for the duration of the Warranty Period to assist in coordinating resolution of any Warranty claims. Contractor shall provide a replacement Warranty Manager during any periods of vacation or extended illness of the appointed Warranty Manager. Any Person designated by Contractor to serve as the Warranty Manager shall be subject to Owner’s review and shall be reasonably acceptable to Owner.

10.3.4 Standards for Corrective Work. All Corrective Work shall be performed to the same standards as the original Work is required to be meet under Section 10.1.1. Any change to parts or Equipment that would be inconsistent with the requirements of this Agreement may be made only with the express written consent of Owner. Upon completion of the applicable Corrective Work, Contractor shall perform applicable functional tests on the corrected Work to demonstrate such Work is performing in accordance with the requirements of Section 10.1.1.

10.3.5 Owner’s Right to Perform Warranty Work. If Contractor fails to submit a plan for completion of the Corrective Work or fails to commence the Corrective Work as agreed with Owner in accordance with Section 10.3.1, or does not complete such Corrective Work in accordance with the plan for completion (or revised and agreed upon plan (as to when Contractor shall remedy such failure) for completion as necessitated by the circumstances), then Owner, by written notice to Contractor, may (in addition to any other remedies that it has under this Agreement) perform such Corrective Work or cause such Corrective Work to be performed, and Contractor shall be liable to Owner for all reasonable costs and expenses arising out of or relating to such Corrective Work and shall pay Owner within thirty (30) Days after receipt of Owner’s invoice an amount equal to such costs and expenses; provided, however, that if the Defective Work presents an imminent threat to safety, health or the environment, or the structural integrity of an item or component of a Stage or the LNG Facility, Owner may proceed to perform or cause such Corrective Work to be performed, and in connection therewith Owner may contact the applicable Supplier that furnished the Defective Work with contemporaneous written notice to Contractor, and Contractor shall nonetheless be liable to Owner for all reasonable costs and expenses arising out of or relating to such Corrective Work. Notwithstanding anything to the contrary in this Section 10.3.5, if an Other Contractor of Owner performs Corrective Work pursuant to this Section 10.3.5 prior to the expiration of the applicable Warranty Period: (a) such Other Contractor shall perform such Corrective Work in accordance with the Specifications applicable to such Corrective Work (unless such Specifications are Defective); and (b) if the Other Contractor provides a warranty for such Corrective Work, Owner shall assign such warranty to Contractor for the duration of the applicable Warranty Period (on the understanding that Contractor shall assign any remaining warranty provided by such Other

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Contractor back to Owner in accordance with Section 10.2 upon the expiration of the applicable Warranty Period), and Contractor shall not be liable to Owner for the cost of the Other Contractor’s warranty applicable to such Corrective Work to the extent such warranty exceeds Contractor’s warranty obligations under this Article 10.

10.3.6 Other Warranty Work Performed by Owner. Without limiting the Parties’ rights and obligations under Section 10.3.5, if the Parties agree that Owner will perform certain Corrective Work, then (a) Owner will perform such Corrective Work in accordance with the instructions and procedures with which Contractor would comply if Contractor had performed such Corrective Work (provided that Contractor has, promptly after such agreement by the Parties, provided such instructions and procedures to Owner); (b) Owner will provide to Contractor an estimate of Owner’s costs (including actual out of pocket costs and internal costs) to perform such Corrective Work; and (c) Contractor shall reimburse Owner for all reasonable costs and expenses arising out of or relating to such Corrective Work and shall pay Owner within thirty (30) Days after receipt of Owner’s invoice an amount equal to such costs and expenses.

10.4 Structural Works Defects. Notwithstanding the terms of Section 10.1.3, to the maximum extent permitted by Applicable Laws, the Warranty Period under this Article 10 with respect to Structural Works Defects in the Work for a Stage will continue for a period of [***] Months from the Substantial Completion Date of Stage II.

10.5 Root Cause. If during the Warranty Period any part or component of the Equipment is changed, repaired or replaced once due to failure to comply with or meet the warranties set forth in Section 10.1, and such Equipment, or similar parts or components or the same or similar Equipment furnished by Contractor hereunder, is Defective again during the applicable Warranty Period (as extended), Contractor shall as promptly as practicable after such Defect or Defective Equipment is identified, undertake a technical root cause analysis of such failures and provide Owner with a copy of such analysis. If there is a root cause that is correctable, and it is reasonably determined that the similar parts or components or the same or similar Equipment furnished by Contractor hereunder contain the same Defect as the Equipment giving rise to the root cause analysis, Contractor shall determine what changes, repairs or replacements are necessary to avoid further failures of such Equipment, or similar parts or components or the same or similar Equipment furnished by Contractor hereunder, Contractor shall make such necessary changes, repairs or replacements to address the root cause with respect to all such Equipment, and similar parts or components or the same or similar Equipment furnished by Contractor hereunder, as part of its warranty obligations hereunder. If there is no root cause or the root cause cannot be identified, Owner and Contractor shall agree on a resolution and Contractor shall repair or replace the Equipment or take such other action as Owner and Contractor have agreed. Without limiting the foregoing, in each case, during the Warranty Period, Contractor shall repeat such process on an iterative basis until such Defects and the underlying cause thereof are corrected, and until such Equipment has not failed again during the immediately succeeding [***] Day period (or such shorter period remaining before expiration of the Warranty Period). Contractor shall complete any root cause analysis commenced during a Warranty Period and shall provide such root cause analysis to Owner whether or not such analysis was completed before the end of the applicable Warranty Period.

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10.6 EXCLUSIVE WARRANTY; EXCLUSIVE REMEDY. THE WARRANTIES IN THIS AGREEMENT, AND OTHER OBLIGATIONS AND RESPONSIBILITIES OF CONTRACTOR AS SET FORTH IN THIS ARTICLE 10 ARE CONTRACTOR’S SOLE WARRANTY OBLIGATIONS. CONTRACTOR MAKES NO OTHER WARRANTIES OR GUARANTEES, EXPRESS OR IMPLIED, WITH RESPECT TO THE WORK, INCLUDING IMPLIED WARRANTIES, OR WARRANTIES OF MERCHANTABILITY, ORDINARY USE, FITNESS OR SUITABILITY FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED AND WAIVED. FROM AND AFTER SUBSTANTIAL COMPLETION OF A STAGE, WITHOUT LIMITING CONTRACTOR’S OBLIGATIONS UNDER THIS AGREEMENT WITH RESPECT TO ACHIEVING THE NOISE AND EMISSIONS GUARANTEES AS DESCRIBED IN APPENDIX G AND THE GUARANTEED PERFORMANCE LEVELS, CONTRACTOR’S PERFORMANCE OF ITS OBLIGATIONS UNDER THIS ARTICLE 10, INCLUDING IN THE CASE OF OWNER’S PERFORMANCE OF ANY WARRANTY WORK HEREUNDER, SHALL BE OWNER’S SOLE REMEDY WITH RESPECT TO DEFECTIVE WORK, EXCEPT AND TO THE EXTENT THAT CONTRACTOR FAILS TO PERFORM ITS OBLIGATIONS AND SUCH FAILURE IS A CONTRACTOR EVENT OF DEFAULT PURSUANT TO SECTION 19.3.1.

ARTICLE 11

TITLE TRANSFER; CUSTODY; RISK OF LOSS

11.1 Transfer of Title.

11.1.1 Title to Equipment and Work Product. Title to: (a) all or any component or portion of the Equipment that forms a part of or is included in the Common Facilities shall pass to the Common Facilities Owner; and (b) all or any component or portion of any other Equipment shall pass to Owner; in each case upon the earlier of: (i) delivery of such Equipment to the Site; (ii) incorporation of such Equipment into the LNG Facility; (iii) the Substantial Completion Date of the Stage in which such Equipment is included; (iv) the effective date of termination or cancellation of this Agreement; or (v) after payment for such Equipment has been made, upon Owner’s written request. Title to Work Product with respect to all parts of the LNG Facility other than the Common Facilities shall transfer to Owner, and with respect to the Common Facilities shall transfer to the Common Facilities Owner, as described in Section 12.1. Transfer of title to any of the Work shall be without prejudice to Owner’s right to reject Defective Work, or any other right of Owner or the Common Facilities Owner under this Agreement. This transfer of title does not relieve Contractor in any way of its obligations or liabilities under this Agreement.

11.1.2 Protection. Contractor shall take or cause to be taken all steps necessary under Applicable Laws to protect Owner’s and the Common Facilities Owner’s title and to protect Owner and the Common Facilities Owner against claims by third parties, including Suppliers, with respect to Owner’s and the Common Facilities Owner’s interest in the LNG Facility and all Equipment until title passes to Owner or the Common Facilities Owner, as applicable, pursuant to Section 11.1.1. If Contractor stores any Equipment off the Site, Contractor shall notify Owner where such Equipment is located if in storage for more than five

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(5) Days, including in such notice a detailed description of such Equipment, including any serial or identification numbers and such other information as may be necessary for Owner to make such security filings as Owner determines is necessary or desirable to protect Owner’s interest or to protect Owner against claims by third parties; provided, however, that Owner shall make any such filings as Owner determines in its sole and absolute discretion and that Owner’s filing or failing to make such filing shall not relieve Contractor of its responsibilities under this Section 11.1.2.

11.2 Care, Custody and Control.

11.2.1 Contractor. Notwithstanding the passage to title of Equipment or other parts of the Work to Owner or the Common Facilities Owner, as applicable, Contractor shall have care, custody, and control of the Equipment and the other Work related to each Stage from the date on which any part of the Work is commenced, until the date that care, custody and control of such Stage transfers to Owner in accordance with Section 11.2.2 or Section 11.2.3, as applicable.

11.2.2 Owner Occupancy; Transfer to Owner. Owner may occupy buildings such as the administration and warehouse buildings as certificates of occupancy and such other Permits that are required for such buildings to be occupied in accordance with Applicable Laws are obtained. During such occupancy prior to Substantial Completion of the Stage in which such buildings are included, Owner shall coordinate with Contractor and shall not unreasonably interfere with any on-going Work that Contractor must perform with respect to such buildings prior to Substantial Completion. Notwithstanding Owner’s occupancy of any such buildings, care, custody and control of each Stage, including all Equipment, buildings and facilities that form a part of that Stage and the area of the LNG Facility related to such Stage, shall pass from Contractor to Owner on the earlier of termination of this Agreement or the Day immediately following the Day on which Owner countersigns the Substantial Completion Certificate with respect to such Stage.

11.2.3 [***].

11.2.4 Termination. If this Agreement is terminated for any reason, Contractor shall transition care, custody and control of the Site to Owner in an orderly manner, consistent with the requirements of Article 19.

11.3 Risk of Loss.

11.3.1 Prior to Substantial Completion.

(a) Notwithstanding passage of title as provided in Section 11.1 of this Agreement or the fact that Contractor may have care, custody and control of the Site and the Equipment, prior to the Substantial Completion of each Stage, [***] shall, to the fullest extent allowed under Applicable Laws, bear the risk of physical loss, damage to or destruction of the Work, such Stage and each component thereof (including physical loss, damage to or destruction of Equipment) related to such Stage; provided that [***] shall be liable for such physical loss,

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damage to or destruction to the extent such loss, damage or destruction is due to the negligence or fault of a [***] member, not to exceed the lesser of (i) the amount of the applicable deductible under the BAR or the marine cargo policy, as applicable; or (ii) [***] for each occurrence. [***]. Notwithstanding anything to the contrary in the foregoing, as between Owner and Contractor, [***] shall not bear the risk of loss under this Section 11.3.1(a) for, and [***] shall be responsible for: [***].

(b) Contractor shall, subject to this Section 11.3.1, repair, reconstruct or replace lost, damaged or destroyed Work, including the Equipment, related to a Stage, and including the removal of any debris (collectively, “Rehabilitation Work”), and use commercially reasonable efforts to complete such Rehabilitation Work as necessary to minimize any impact on the Guaranteed Substantial Completion Dates to the extent reasonably possible, except to the extent instructed by Owner to not repair or restore the physical loss, damage to or destruction of the Work, such Stage or each component thereof (including physical loss, damage to or destruction of Equipment) for which [***] has the risk of loss pursuant to Section 11.3.1(a). [***].

(d) [***].

(e) This Section 11.3.1 shall not be interpreted to relieve Contractor of any of its other obligations or liabilities under this Agreement, including its obligations with respect to Defective Work and Corrective Work, and nothing in this Section 11.3.1 shall be deemed or construed to give Contractor a right to recover costs related to Delay Liquidated Damages that Contractor may incur hereunder due to any such loss or damage as contemplated in Section 11.3.1(a). An extension to the Key Date Schedule, including the Guaranteed Substantial Completion Dates, as a result of damage or destruction to the Work shall be granted only to the extent provided in Section 8.4.1. Contractor expressly waives any compensation as a result of any damage or destruction to the Work other than as described in this Section 11.3.1 to the exclusion of other theories of recovery such as cumulative impact or loss of productivity.

11.3.2 After Substantial Completion. Owner shall bear the risk of physical loss, damage to or destruction of a Stage or a component thereof after the Substantial Completion Date of such Stage, or the earlier termination of this Agreement; provided, that: (a) Contractor shall be liable for and reimburse Owner for the amount of any deductibles under Owner’s or Common Facilities Owner’s applicable insurance policies, not to exceed up to [***] per occurrence, with respect to any physical loss or damage or destruction the extent due to the negligence or fault of a Contractor Group member that occurs after Substantial Completion of the applicable Stage, or the earlier termination of this Agreement; and (b) under no circumstances shall this Section 11.3.2 be interpreted to relieve Contractor of its other obligations or liabilities under this Agreement, including Contractor’s obligations to remedy Defective Work under Article 10. OWNER AND THE COMMON FACILITIES OWNER HEREBY RELEASE CONTRACTOR FROM ALL COSTS AND LIABILITY FOR PHYSICAL LOSS, DAMAGE TO OR DESTRUCTION OF A STAGE OR A COMPONENT THEREOF AFTER THE SUBSTANTIAL COMPLETION DATE OF SUCH STAGE, OR THE

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EARLIER TERMINATION OF THIS AGREEMENT, IN EXCESS OF CONTRACTOR’S LIABILITY AS SPECIFICALLY STATED IN THIS SECTION 11.3.2.

ARTICLE 12

OWNERSHIP OF DOCUMENTATION AND INTELLECTUAL PROPERTY

12.1 Ownership of Work Product by Owner.

12.1.1 Work Product. Owner and Contractor acknowledge that during the course of, and as a result of, the performance of the Work, Contractor, its Affiliates, or its Suppliers will create or prepare or have created or prepared for the Liquefaction Project certain data, analyses, reports, plans, operating and maintenance procedures and manuals, Drawings, Specifications, calculations, or other technical tangible manifestations of Contractor’s efforts (whether written or electronic), including a full and complete set of Drawings and technical documentation with respect to each Stage and the other Deliverables in accordance with the requirements of Appendix A, Attachment A-1 to Appendix A and Appendix U (hereinafter individually or collectively referred to as “Work Product”). Work Product prepared by Contractor, its Affiliates, or its Suppliers shall be “works made for hire,” and subject to this Section 12.1.1 and Section 12.1.2, and to any Licensor’s rights under Section 12.6, all rights, title and interest to the Work Product, including any and all copyrights in the Work Product, shall be owned by Owner irrespective of any copyright notices or confidentiality legends to the contrary which may have been placed in or on such Work Product by Contractor, its Affiliates, Suppliers or any other Person. If, for any reason, any part of or all of the Work Product is not considered a work made for hire for Owner or if ownership of all right, title and interest in the Work Product shall not otherwise vest in Owner, then Contractor agrees that such ownership and copyrights in the Work Product, whether or not such Work Product is fully or partially complete, shall be automatically assigned from Contractor to Owner without further consideration, and Owner shall thereafter own all right, title and interest in the Work Product, including all copyright interests.

12.1.2 Third Party Work Product. If Contractor, using commercially reasonable efforts, is unable to procure the ownership of Work Product prepared by Suppliers who are not Affiliates of Contractor (it being understood that any Supplier that is an Affiliate of Contractor shall comply with the requirements of Sections 12.1.1 and 12.2) for Owner as set forth in Section 12.1.1, or all of the rights to use or disclose such Work Product or the Third Party Proprietary Work Product embedded therein in accordance with Section 12.2, then, at a minimum, Contractor shall procure from such Supplier an irrevocable, perpetual and royalty-free license (including the right to assign its right without consent to any purchaser of an interest in the LNG Facility) granting to Owner the right to use, disclose and copy such Work Product and the Third Party Proprietary Work Product embedded therein for any purpose relating to the LNG Facility or the Liquefaction Project as described in Sections 12.2.2(a) and 12.2.2(b), or modify such Work Product for any purpose related to the scope of work performed by such Supplier. Upon Owner’s request, Contractor shall provide Owner a list of the Suppliers to which this Section 12.1.2 applies and a copy of applicable provisions of the applicable Supply Contracts containing such restrictions.

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12.1.3 Certain Exceptions. Notwithstanding anything to the contrary herein, Contractor shall not be required to obtain rights to Work Product as set forth in this Section 12.1 from Vendors providing bulk commodities or generic “off-the-shelf” Equipment.

12.1.4 Exclusions from Work Product. For the avoidance of doubt, any proprietary Intellectual Property rights owned by any Licensor or its Affiliates shall not constitute Work Product under this Agreement.

12.1.5 Contractor Rights to Work Product. Notwithstanding anything to the contrary in this Section 12.1: (a) Contractor may, subject to compliance with its confidentiality obligations under Section 14.1, retain one (1) record set of the Work Product, and Contractor’s Suppliers that furnish any part of the Equipment may retain copies of any Work Product generated by such Supplier, subject to compliance with confidentiality obligations in accordance with Section 14.1; and (b) Contractor may use the Work Product as internal reference material in its general construction and engineering business; provided, that Contractor has delivered the Work Product to Owner in accordance with Section 12.2; provided, further, that Contractor shall not disclose any Work Product relating to the performance or operation of the LNG Facility to any third party without Owner’s express prior written consent.

12.2 Delivery and Use of Work Product.

12.2.1 Delivery. Upon Substantial Completion of such Stage or the earlier termination or cancellation of this Agreement, Contractor shall deliver to Owner a full and complete set of all Work Product prepared or created with respect to each Stage in accordance with the requirements of Appendix U.

12.2.2 Use. Owner shall have the right to use all of the Work Product:

(a) in connection with the design, construction, licensing, commissioning, start-up, testing, operation, maintenance, modification or decommissioning of the LNG Facility;

(b) in connection with the proceedings of any Governmental Authorities with respect to the LNG Facility;

(c) as internal reference material by Owner or its Affiliates (including any individuals other than Competitors engaged by Owner as part of its staff augmentation plans, subject to such Persons entering into a confidentiality agreement with Owner with substantially similar terms to those stated in Section 14.2) in connection with the LNG Facility (including any expansion thereof) or any other project; and

shall have the right to use the engineering Deliverables for any purpose of Owner or its Affiliates as determined by Owner, including the expansion of the LNG Facility or any other project; provided, however, Owner shall not grant a Competitor a license to use the engineering Deliverables on any other project in which neither Owner nor an Affiliate of Owner has an ownership interest.

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12.2.3 Limitations on Disclosure. Notwithstanding Owner’s right to use the Work Product as described in the foregoing, Owner shall not disclose [***].

12.2.4 Release. Owner hereby releases Contractor from all liability arising out of Losses (including its indemnity obligations under Section 15.3) relating in any way to or arising out of the use by or on behalf of Owner, Common Facilities Owner or any other Affiliate of Owner or Common Facilities Owner of the Work Product: (a) for any purpose other than in connection with the design, construction, licensing, commissioning, start-up, testing, operation, maintenance, modification or decommissioning of the LNG Facility; and (b) in connection with the modification of the LNG Facility performed by Persons other than Contractor; provided, however, that the foregoing shall not apply to Contractor’s warranty obligations, which shall be governed by and determined in accordance with Article 10.

12.3 Contractor Intellectual Property. Notwithstanding Section 12.1, as between Owner and Contractor, Contractor shall retain ownership of all proprietary Intellectual Property owned by Contractor or its Affiliates as of the Effective Date, or developed or improved by Contractor or its Affiliates in connection with Work or the Liquefaction Project or otherwise, including the Piping Special Supports (hereinafter referred to as “Contractor Intellectual Property”), regardless of whether such Contractor Intellectual Property is included in the Work Product, and nothing in Section 12.1 and this Section 12.3 shall result in a transfer of ownership of any Contractor Intellectual Property or the proprietary Intellectual Property owned and developed by Contractor’s Suppliers for any project other than the LNG Facility and the Liquefaction Project (“Third Party Proprietary Work Product”). With respect to Contractor Intellectual Property embedded in the Work Product or the LNG Facility, and subject to Section 12.6.1, any Third Party Proprietary Work Product relating to the Work or the LNG Facility, Contractor hereby grants Owner, and Contractor shall cause the applicable Suppliers to grant Owner, an irrevocable, perpetual and royalty-free license (including the right to assign its rights without consent to any purchaser of an interest in all or part of the LNG Facility) to use, disclose, modify and copy such Contractor Intellectual Property and Third Party Proprietary Work Product for any permitted purpose as described in Section 12.2. Without limiting Contractor’s obligations with respect to the Contractor Intellectual Property, all Supply Contracts (excluding Supply Contracts with Affiliates but including CIMTAS) shall contain provisions consistent with Section 12.1 and this Section 12.3 except as provided in Section 12.1.2, Section 12.1.3 and Section 12.6.1.

12.4 Owner Intellectual Property. All written materials, plans, drafts, Drawings, Specifications, computer files or other documents (if any) prepared or furnished by Owner, its Affiliates or Other Contractors (“Owner Intellectual Property”) shall at all times remain the property of Owner (or such Affiliates or Other Contractors), and Contractor shall not make use of any Owner Intellectual Property for any other project or for any other purpose than as set forth herein. All Owner Intellectual Property, including all copies thereof, shall be returned to Owner upon the earlier of Final Completion of Stage II or the termination of this Agreement, except that Contractor may, subject to its confidentiality obligations as set forth in Article 14, retain one (1) record set of such documents.

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12.5 Limited License to Contractor. With respect to Owner’s Intellectual Property relating to the Work or the LNG Facility, until the earlier of Substantial Completion of Stage II or the cancellation or termination of this Agreement, Owner hereby grants Contractor a royalty-free license to use, disclose, modify and copy Owner’s Intellectual Property for any purpose relating to the LNG Facility or the Liquefaction Project, and allow Suppliers to do the same to the extent necessary for such Suppliers to perform the Work, in all cases subject to Contractor’s compliance with its confidentiality obligations as set forth in Article 14. Owner also hereby grants Contractor a royalty-free license to use the Intellectual Property embedded in the Work Product (to the extent such Intellectual Property is not Contractor Intellectual Property, Third Party Proprietary Work Product or Intellectual Property rights of a Licensor) in its general construction and engineering business subject to Contractor’s compliant with its confidentiality obligations under Article 14.

12.6 Technology.

12.6.1 Intellectual Property of Licensors. All Intellectual Property rights in data or information derived in whole or in part from Technical Licensor Information, including Intellectual Property rights in Work Product prepared or developed by Contractor or the Licensor under or in connection with this Agreement where such Work Product is derived in whole or in part from the Technical Licensor Information, shall vest directly in the relevant Licensor that provides such information, data or Work Product. Notwithstanding the foregoing, the respective Licenses shall be the exclusive documents governing Intellectual Property rights as between Contractor and the relevant Licensor. The Licenses shall be the exclusive documents governing the licensing to Owner of Intellectual Property rights for the practice of the Technology.

12.6.2 Incorporation of Technology. Contractor shall familiarize itself with and incorporate the Technology in its construction of the LNG Facility in accordance with each applicable Licensor’s guidelines. Pursuant to and in accordance with the Licenses, each Licensor has licensed or sublicensed, or shall license or sublicense, Owner to use its Technology in connection with the LNG Facility and Contractor has secured or will secure said licenses or sublicences from the Licensor as necessary. Subject to Section 15.3, Contractor agrees that notwithstanding, but without prejudice to Owner’s rights under, each License, Contractor shall be responsible for:

(a) the incorporation of the Technology into the construction of the LNG Facility;

(b) the construction, commissioning, start-up, testing and completion of the LNG Facility incorporating the Technology;

(c) the provision of all work, services, information and documents to be supplied by each Licensor to Contractor in connection with the Work;

(d) the rectification of any Defect in the LNG Facility resulting from the Technology in accordance with Section 10.3;

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(e) liaising with each Licensor and acting as a single point of responsibility for Owner in respect of the construction, commissioning, start-up, testing and completion of the LNG Facility (incorporating the Technology) in accordance with this Agreement, and Contractor affirms that it has the skills and experience necessary to review the Technology for sufficiency with the different aspects of the Work and shall be responsible to Owner for any and all damages arising from the acts, defaults and omissions of each Licensor, in connection with Sections 12.6.2(a) to 12.6.2(d) above, inclusive, as fully as if they were the acts, defaults or omissions of Contractor, its agents, employees or workmen.

12.6.3 License or Sub-License. To the extent necessary to allow Owner to use and sell LNG during any period prior to Substantial Completion of a Stage, Contractor shall as part of the Work obtain and grant to Owner a non-exclusive, royalty-free, irrevocable license (or sublicense) and right to use and sell products obtained by the use or operation of Equipment furnished by a Licensor and practice of the process furnished by a Licensor.

ARTICLE 13

REPRESENTATIONS AND WARRANTIES

13.1 Representations and Warranties of Contractor. Contractor covenants, represents, and warrants to Owner that:

13.1.1 Organization, Standing and Qualification. Contractor is a corporation, duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has full power and authority to execute, deliver and perform its obligations hereunder and to engage in the business it presently conducts and contemplates conducting. Contractor is and during the term of this Agreement shall be duly licensed or qualified to do business and in good standing under the laws of the State of Texas and in each other jurisdiction wherein the nature of the business transacted by it makes such licensing or qualification necessary and where the failure to be licensed or qualified would have a material adverse effect on its ability to perform its obligations hereunder.

13.1.2 Enforceable Agreement. This Agreement has been duly authorized, executed, and delivered by or on behalf of Contractor and is, upon execution and delivery, the legal, valid, and binding obligation of Contractor, enforceable against Contractor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and by general equitable principles.

13.1.3 No Conflict. The execution, delivery and performance by Contractor of this Agreement: (a) will not conflict with or cause any default under: (i) its organizational documents; (ii) any indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales contract, loan or credit arrangement or other agreement or instrument to which Contractor is a party or by which it or its properties may be bound or affected; or (iii) any Applicable Laws; and (b) shall not subject the Liquefaction Project or the LNG Facility or any component part thereof, or the Site or any portion thereof, to any Lien other than as contemplated or permitted by this Agreement.

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13.1.4 Government Approvals. The Contractor Permits either have been obtained by Contractor and are in full force and effect on the date hereof or shall be obtained by Contractor and shall be in full force and effect on or prior to the date on which they are required, under this Agreement and Applicable Laws, to be in full force and effect, so as to permit Contractor to commence and prosecute the Work to completion in accordance with the Project Execution Plan and the Project Schedule. Other than with respect to the Contractor Permits, none of the execution, delivery or performance by Contractor of this Agreement requires the consent or approval of, or the giving of notice to or registration with, or the taking of any other action in respect of, any Governmental Authority.

13.1.5 No Suits, Proceedings. There are no actions, suits, proceedings, patent or license infringements, or investigations pending or, to Contractor’s knowledge, threatened against it at law or in equity before any court (U.S. or otherwise) or before any Governmental Authority (whether or not covered by insurance) that individually or in the aggregate could result in any material adverse effect on the business, properties, or assets or the condition, financial or otherwise, of Contractor or in any impairment of its ability to perform its obligations under this Agreement. Contractor has no knowledge of any violation or default with respect to any order, writ, injunction, or decree of any court or any Governmental Authority that may result in any such materially adverse effect or such impairment.

13.1.6 Patents. Contractor owns or has the right to use all Intellectual Property rights, other than Owner Intellectual Property, necessary to perform the Work without conflict with the rights of others.

13.1.7 No Hiring. To the fullest extent permitted by Applicable Laws, Contractor shall not, and shall not permit any of its Affiliates to, at any time during the performance of the Work and until the later of (a) thirty (30) Days after the Final Acceptance Date of Stage II; (b) six (6) Months after the date on which the last of any Disputes, if any, are finally resolved; and (c) one year after the termination of this Agreement for any reason, directly or indirectly, solicit for employment or hire any of those employees, members of management or individuals serving in a supervisory capacity for Owner or the Common Facilities Owner or any of their respective members or Affiliates who have or are currently working on, supervising or managing the Work, or served or are serving on corporate governance bodies of Owner or the Common Facilities Owner or their respective members or Affiliates; provided, however, that merely placing a general solicitation, advertisement or recruitment that is not directed specifically to any such employees or individuals shall not be a breach or violation of Contractor’s obligations under this Section 13.1.7.

13.1.8 Financial Condition. Contractor is financially solvent, able to pay its debts as they mature, and possessed of sufficient working capital to complete its obligations under this Agreement.

13.1.9 Licenses. Contractor represents and warrants that it has a valid contractor’s license in the appropriate category or specialty issued by the Texas Department of Licensing and Regulation, and that such license shall remain in full force and affect at all times during the performance of the Work. Contractor further represents and warrants that valid

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engineering licenses have been issued by the Texas Board of Professional Engineers both to it as a firm and to the professionals designated to supervise the Work for which such licenses are required, and that such licenses shall remain in full force and affect at all times during the performance of the Work. All Persons who perform any portion of the Work have and shall at all times during the performance of the Work have all business and professional certifications required by Applicable Laws to perform such Work.

13.1.10 No Suspension or Debarment Actions. Contractor is not now, nor has Contractor ever been, suspended, debarred or proposed for suspension or debarment from bidding on any work offered by a Governmental Authority. No such suspension or debarment actions have been commenced or threatened against Contractor or any of its Affiliates or their respective officers, directors, shareholders, managers, agents, consultants or employees. There is no valid basis for the suspension or debarment of Contractor or such other Persons from bidding on contracts or subcontracts for or with any Governmental Authority. No cure notice or show cause notice has been issued by any Governmental Authority with respect to Contractor or such other Persons and remains outstanding.

13.2 Representations and Warranties of Owner and Common Facilities Owner. Owner and Common Facilities Owner each severally and not jointly covenants, represents, and warrants to Contractor that:

13.2.1 Organization, Standing and Qualification. Owner and Common Facilities Owner are each a limited liability company, duly formed, validly existing and in good standing under the laws of the State of Delaware, and each has full power and authority to execute, deliver and perform its obligations hereunder and to engage in the business such Party presently conducts and contemplates conducting. Each of Owner and Common Facilities Owner is and shall be duly licensed or qualified to do business and in good standing in each jurisdiction wherein the nature of the business transacted by it makes such licensing or qualification necessary and where the failure to be licensed or qualified would have a material adverse effect on its ability to perform its obligations hereunder. Owner and Common Facilities Owner are the sole owners of the LNG Facility and own in fee the real property on which the LNG Facility is located.

13.2.2 Enforceable Agreement. This Agreement has been duly authorized, executed, and delivered by or on behalf of Owner and Common Facilities Owner and is, upon execution and delivery, the legal, valid, and binding obligation of Owner and Common Facilities Owner, enforceable against Owner and Common Facilities Owner in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and by general equitable principles.

13.2.3 No Conflict. The execution, delivery and performance by Owner and Common Facilities Owner of this Agreement will not conflict with or cause any default under: (a) such Person’s organizational documents; (b) any indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales contract, loan or credit arrangement or other agreement or instrument to which such Person is a party or by which it or its properties may be bound or affected; or (c) any Applicable Laws.

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13.2.4 Governmental Approvals. No authorization, approval, exemption, or consent by any Governmental Authority is required in connection with the execution, delivery, and performance of this Agreement by Owner or Common Facilities Owner.

13.2.5 No Suits, Proceedings. There are no material actions, suits, proceedings, or investigations pending or, to Owner’s or Common Facilities Owner’s respective knowledge, threatened against it at law or in equity before any court (U.S. or otherwise) or before any Governmental Authority (whether or not covered by insurance) that individually or in the aggregate could result in any materially adverse effect on the business, properties, or assets or the condition, financial or otherwise, of Owner or Common Facilities Owner, as applicable, or in any impairment of its ability to perform such Party’s obligations under this Agreement. Neither Owner or Common Facilities Owner has knowledge of any violation or default with respect to any order, writ, injunction, or any decree of any court or any Governmental Authority that may result in any such materially adverse effect or such impairment.

ARTICLE 14

CONFIDENTIALITY

14.1 Contractor’s Obligations.

14.1.1 With respect to Owner Confidential Information. Contractor hereby agrees that Contractor and its Affiliates and their respective employees, officers, directors and agents shall not (without in each instance obtaining Owner’s prior written consent) disclose, make commercial or other use of, or give or sell to any Person, any of the following information, whether disclosed prior to or after the Effective Date: (a) any Work Product, Owner-Furnished Information and other information of Owner Group members or Other Contractors, other than to Suppliers as necessary for such Supplier to perform any Work and subject to the restrictions set forth herein; or (b) any other information which is conspicuously marked and identified in writing as confidential and relates to the business, products, services, research or development, actual or potential clients or customers, financing of the LNG Facility, designs, methods, discoveries, trade secrets, research, development or finances of Owner or any Owner Affiliate, or relating to similar information of a third party who has entrusted such information to Owner or any Owner Affiliate (hereinafter individually or collectively, “Owner Confidential Information”); provided, however, nothing herein shall prohibit Contractor from using the Work Product, and Contractor shall be permitted to re-use the Work Product, in its general construction and engineering business, subject to Contractor first removing: (i) all references to Owner and the LNG Facility; (ii) any Owner-Furnished Information and other information of Owner Group members; and (iii) any information relating to the performance or operation of the LNG Facility. Prior to disclosing any Owner Confidential Information as permitted in subclause (i) of this Section 14.1.1 to any Supplier (excluding Affiliates of Contractor, but including CIMTAS), Contractor shall bind such Supplier to the confidentiality obligations contained in this Section 14.1. Contractor and Contractor Group shall not disclose to or discuss with a third party any affairs of any Owner Group member without specific authorization of Owner. The Parties agree that Contractor may disclose Owner Confidential Information without the consent of Owner to:

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(a) Contractor’s Affiliates and directors, officers, employees, consultants, accountants, auditors, insurance brokers and underwriters, and legal counsel of it and its Affiliates who need to know such Confidential Information for the performance of the Work and who have been informed of the confidential nature of the Confidential Information and, with respect to any such Persons that are not Affiliates of Contractor or directors, officers or employees of Contractor or its Affiliates, who have agreed to be bound by the confidentiality obligations as stated in this Section 14.1;

(b) any Governmental Authority when required by any Applicable Laws binding on Contractor; provided, that: (i) Contractor shall provide advance notice of such disclosure requirement to Owner; and (ii) such disclosure shall be subject where applicable to Section 14.5;

(c) any stock exchange on which the shares of Contractor or any of its Affiliates are listed or are in the process of being listed, where rules of the stock exchange require the disclosure be made; provided, that Contractor shall provide advance notice of such disclosure requirement to Owner and shall cooperate with Owner so that Owner may seek a protective order or other appropriate remedy; and

(d) any mediation or arbitration tribunal or court in a proceeding pursuant to Article 20,

provided, that Contractor shall be liable to Owner Group for any Claims and expenses (including court costs, attorneys’ fees and disbursements, and other litigation costs) suffered or incurred by Owner Group arising out of any breach of Contractor’s confidentiality obligations pursuant to this Section 14.1 by any Person to whom Owner Confidential Information was directly or indirectly disclosed by Contractor, pursuant to this Section 14.1, excluding any such disclosure by any Person to whom Owner Confidential Information has been disclosed in accordance with Section 14.1.1(b).

14.1.2 Other Agreements. The confidentiality obligations contained herein shall be in addition to, and not in lieu of, the confidentiality obligations contained in any other agreement governing the Owner Confidential Information, including the License(s). Contractor shall and shall cause all Contractor Group members to comply with the confidentiality restrictions contained in such other agreements where Owner has either: (a) provided or caused to be provided to Contractor a copy of such agreement; or (b) informed Contractor of the specific confidentiality obligations under such agreement. Contractor shall and shall cause all Suppliers to sign confidentiality agreements with such Other Contractors as Owner may reasonably request. Where Contractor has signed a separate License with a Licensor with respect to its Technology, the terms of that License shall apply as between Contractor and such Licensor as to the disclosure of such Technology and other Licensor information.

14.2 Owner’s Obligations. For the sake of clarity, the terms and conditions in this Agreement shall not supersede in any manner the terms and conditions in any agreement between Owner and any Licensor or with or between any Affiliates thereof. The confidentiality provisions contained in the Licenses shall exclusively govern the disclosure by Owner of the

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Technology and the matters covered by such confidentiality provisions. Except as otherwise expressly provided in this Section 14.2, Owner shall have no obligation of confidentiality with respect to any information disclosed to Owner by or on behalf of Contractor Group in connection with the performance of this Agreement. Owner shall maintain such Contractor Confidential Information strictly confidential and shall not disclose such Contractor Confidential Information, subject to the other terms of this Article 14.

14.2.1 Permitted Disclosure. The Parties agree that Owner may disclose Contractor Confidential Information without the consent of Contractor to the following Persons that are not Competitors:

(a) any member of the Owner Group and their respective accountants, auditors, insurance brokers and underwriters, and legal counsel who need to know such Confidential Information in connection with the Liquefaction Project, or to its Affiliates in connection with any other project in accordance with Section 12.2.2(c), and who have been informed of the confidential nature of the Confidential Information and, with respect to any such Persons that are not Affiliates of Owner or directors, officers or employees of Owner or its Affiliates, who have agreed to be bound in writing to confidentiality obligations substantially similar to those stated in this Section 14.2 or are otherwise subject to confidentiality obligations as a matter of law or professional practice;

(b) any Person when required by any Applicable Laws binding on Owner or a member of the Owner Group; provided, that: (i) the Person who is subject to such disclosure requirement shall provide advance notice of such disclosure requirement to Contractor; and (ii) such disclosure shall be subject where applicable to Section 14.5;

(c) any Person pursuant to the rules of any stock exchange on which the equity interests of Owner or any of its Affiliates are listed or are in the process of being listed, which rules require the disclosure be made; provided, that Owner shall provide advance notice of such disclosure requirement to Contractor and shall cooperate with Contractor so that Contractor may seek a protective order or other appropriate remedy;

(d) any Person: (i) that is an actual or prospective Lender and their respective agents, consultants and advisors; (ii) in connection with an offering memorandum, prospectus or similar sales document for a capital markets offering; and (iii) that is any rating agency, in each case for purposes of acquiring financing or other borrowed funds, subject in each case to the extent reasonably practicable (and reflecting standard policy and customary market practice of rating agencies and Lenders to execution of confidentiality agreements) to such Persons first agreeing in writing to hold such information or documents confidential under terms substantially similar to those stated in this Section 14.2 and Section 14.6, or are otherwise subject to confidentiality obligations as a matter of law or professional practice;

(e) bona fide transferees or prospective transferees of all or a portion of Owner’s, Parent’s or any member of Parent’s direct or indirect interests in the LNG Facility or this Agreement, or of a direct or indirect interest in Owner; provided, that such Persons first agree in writing to hold such information or documents confidential under terms substantially

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similar to those stated in this Section 14.2 and Section 14.6, and where applicable, comply with the requirements of Section 14.2.3;

(f) customers or potential customers of Owner; provided, that Owner first binds such Persons in writing to confidentiality obligations with substantially similar protections to those contained in this Article 14;

(g) potential equity investors in any future expansion of the Liquefaction Project, subject to such Persons first agreeing in writing to hold such information or documents confidential under terms substantially similar to those stated in this Section 14.2 and Section 14.6, and subject to Section 14.2.3;

(h) Other Contractors and other actual or prospective contractors and subcontractors engaged or proposed to be engaged by Owner or its Affiliates or any other member of the Owner Group, or by any Other Contractors, contractors or subcontractors in connection with the construction, operation, maintenance, repair or decommissioning of the LNG Facility, the Liquefaction Project, the Equipment or other operations at the LNG Facility, to the extent such disclosure is reasonably necessary to secure contracts with such Persons or for such Persons to fulfill their duties; provided, that Owner first binds such Persons in writing to confidentiality obligations with substantially similar protections to those contained in this Article 14 and in the case of Other Contractors or prospective contractors and subcontractors, Contractor’s pricing and financial information shall not be disclosed; and

(i) any mediation or arbitration tribunal or court in any proceeding involving Contractor or any Supplier, including any proceeding with respect to a Dispute pursuant to Article 20;

provided, that Owner shall be liable to Contractor for any Claims and expenses (including court costs, attorneys’ fees and disbursements, and other litigation costs) suffered or incurred by Contractor arising out of any breach of the provisions of this Section 14.2 by any Person (other than Contractor, other Contractor Group members or Persons to whom Contractor or Contractor Group members have disclosed such information) to whom Contractor Confidential Information has been directly or indirectly disclosed by Owner, pursuant to this Section 14.2, excluding any such disclosure by any Person to whom Contractor Confidential Information has been disclosed in accordance with Section 14.2.1(b). If any of the Persons described above in this Section 14.2.1 is a Competitor, Owner shall not disclose Contractor Confidential Information to such Competitor without Contractor’s prior written consent.

14.2.2 No Limitation on Work Product. Notwithstanding the foregoing, but subject to Section 12.2.3 regarding disclosure to Competitors, [***].

14.2.3 Potential Equity Investors. Notwithstanding anything to the contrary in Section 14.2.1, Owner and the Common Facilities Owner shall not disclose Contractor Confidential Information to any potential equity investor except in accordance with the following:

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(a) if the potential equity investor is not an “accredited investor” (as defined in the Securities Act of 1933, as amended), prior to disclosure of Contractor Confidential Information to such potential equity investor, such potential equity investor shall have executed a mutually agreeable reasonable confidentiality agreement [***];

(b) if the potential equity investor is an “accredited investor” (as defined in the Securities Act of 1933, as amended), then Owner and the Common Facilities Owner may disclose Contractor Confidential Information to such potential equity investor without that potential equity investor executing a confidentiality agreement and release directly with Contractor; [***]; and

14.3 Exceptions. Notwithstanding Sections 14.1 and 14.2, Confidential Information shall not include: (a) information which at the time of disclosure or acquisition is in the public domain, or which after disclosure or acquisition becomes part of the public domain without violation of this Article 14; (b) information which at the time of disclosure or acquisition was already in the possession of the Receiving Party or its employees or agents and was not previously acquired from the Disclosing Party or any of its employees or agents directly or indirectly, other than directly or indirectly disclosed or acquired through any other agreements between the Parties related to the LNG Facility or the Liquefaction Project; (c) information which the Receiving Party can show was acquired by such Person from a third party without any confidentiality commitment, if, to the best of Receiving Party’s or its employees’ or agent’s knowledge, such third party did not acquire it, directly or indirectly, from the Disclosing Party or any of its employees or agents under an obligation of confidentiality; or (d) information independently developed by the Receiving Party without benefit of the Confidential Information, but specifically excluding the Work Product.

14.4 Remedies. Without prejudice to the rights and remedies otherwise available to any Party, each Party agrees that money damages would not be an adequate remedy for any breach of Section 14.1 or Section 14.2 and that each Party shall be entitled to specific performance and other equitable relief by way of injunction if another Party or any of its Affiliates or any other Person to whom such Party directly or indirectly disclosed Owner Confidential Information or Contractor Confidential Information, as applicable, breaches or threatens to breach either such Section. Each Party further agrees to waive any requirement of the posting of a bond in connection with any such equitable relief. Each Party agrees to reimburse the other Party for all costs and expenses, including reasonable attorney’s fees and disbursements, incurred by such Party in enforcing the terms of this Article 14. The remedies in this Section 14.4 shall not be deemed exclusive remedies for a breach of Section 14.1 or Section 14.2 but shall be in addition to all other remedies available at law or in equity to the non-breaching Party.

14.5 Legal Demand for Information. If a Party or any of its Affiliates or the representatives of such Party or any of its Affiliates, receives a request, through a subpoena or order issued by a court or by any Governmental Authority, to disclose all or any part of the

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Owner Confidential Information or Contractor Confidential Information, as applicable, received by it, such Party shall:

14.5.1 notify the Person from whom such data or information was received promptly of the existence, terms, and circumstances surrounding such request;

14.5.2 cooperate where possible with such Person on the advisability of taking legally available steps to resist or narrow such request; and

14.5.3 if disclosure of such data or information is required to prevent the Person compelled to make disclosure from being held in contempt or subject to other penalty, furnish only such portion of the data or information as, in the opinion of such Person’s counsel, it is legally compelled to disclose, and exercise commercially reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to the disclosed data and information.

14.6 Term. The confidentiality obligations of the Parties under this Article 14 shall continue until the date that is: (a) five (5) years after the Substantial Completion Date of Stage II; or (b) if this Agreement is terminated prior to the Substantial Completion Date of Stage II, five (5) years after the date of termination of this Agreement.

ARTICLE 15

INDEMNIFICATION

15.1 Contractor Indemnity and Release.

15.1.1 Contractor Group Employees. Contractor shall, to the maximum extent allowed by Applicable Laws, release, and as a separate obligation, protect, defend, indemnify and hold harmless the Owner Indemnified Parties from and against any and all Losses arising from the bodily injury, illness or death of any Contractor Group member, due to, arising out or resulting from the performance of the Work or Contractor’s obligations under this Agreement EVEN IF CAUSED OR ALLEGED TO BE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), FAULT, STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF DUTY (STATUTORY OR OTHERWISE), THE BREACH OR VIOLATION OF ANY APPLICABLE LAWS, OR THE BREACH OF CONTRACT, OF OWNER OR ANY OTHER OWNER INDEMNIFIED PARTY.

15.1.2 Contractor Indemnities. Contractor shall, to the maximum extent allowed by Applicable Laws, protect, defend, indemnify and hold harmless the Owner Indemnified Parties from and against any and all Losses arising from:

(a) bodily injury, illness, or death of any Person other than a Contractor Group member or an Owner Indemnified Party, to the extent caused by the negligence or fault of a member of the Contractor Group;

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(b) loss of, damage or destruction of any property that is owned or leased by any Person other any member of Contractor Group or an Owner Indemnified Party to the extent caused by the negligence or fault of a member of the Contractor Group;

(c) citations, notice of violations or complaints, assessments, fines, penalties or other sanctions (including costs incurred by Contractor or Owner to perform remedial action to address the violation of, or to make the Work conform with, Applicable Law; provided, that in the case of costs incurred by Owner, Owner has provided Contractor with notice of such costs and an opportunity to perform the remedial action to the extent allowed under Applicable Law) that may be assessed by any and all Governmental Authorities in connection with the Work due to violations of Applicable Laws by any member of the Contractor Group; provided, further, that, Contractor’s indemnity obligations under this Section 15.1.2(c) shall exclude any portion of the amount of such fines, penalties, citations or sanctions attributable to (i) violations of Applicable Laws by any member of the Owner Indemnified Parties; or (ii) Pre-Existing Hazardous Materials except as otherwise set forth in Section 15.1.2(f);

(d) a breach by any member of Contractor Group of Contractor’s confidentiality obligations towards any Licensor in connection with the Work;

(e) (i) pollution, contamination or Hazardous Material or the Release of Hazardous Materials which originates from items brought onto the Site by or on behalf of Contractor Group; (ii) any Release of Hazardous Materials, or solid waste, generated from the Hazardous Materials brought onto the Site by or on behalf of any member of Contractor Group; (iii) the use of Hazardous Materials by any member of the Contractor Group, in connection with the performance of the Work, which use includes the storage, transportation, processing or disposal of Hazardous Materials by any member of the Contractor Group; (iv) any enforcement or compliance proceeding commenced by or in the name of any Governmental Authority because of an alleged, threatened or actual violation of any Applicable Laws by any member of the Contractor Group with respect to Hazardous Materials that are referenced in subclause (i) through (iii) of this Section 15.1.2(e), in connection with the performance of the Work; and (v) the release of Hazardous Materials caused by a Defect in the Work; EXCEPT TO THE EXTENT THAT SUCH LOSSES ARISE FROM THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), FAULT, STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF DUTY (STATUTORY OR OTHERWISE), THE BREACH OR VIOLATION OF APPLICABLE LAWS OR THE BREACH OF CONTRACT OF OWNER, OR ANY OTHER OWNER INDEMNIFIED PARTY;

(f) Contractor’s failure to avoid working in affected areas of the Site where there are known, to Contractor or Subcontractor, Archeological Finds or Pre-Existing Hazardous Materials, or stop working in accordance with and comply with its other obligations under Section 2.17.4 in the affected area on the Site where Contractor (or a Subcontractor) has encountered any previously unknown Archeological Find or Pre-Existing Hazardous Materials, to the extent the Losses of the Owner Indemnified Parties due to the Pre-Existing Hazardous Materials are exacerbated by such failure; PROVIDED, HOWEVER, THAT CONTRACTOR’S MAXIMUM OBLIGATION UNDER THIS SECTION 15.1.2(f) SHALL NOT EXCEED [***],

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AND OWNER AND THE COMMON FACILITIES OWNER HEREBY RELEASE CONTRACTOR FROM ALL COSTS AND LIABILITY IN EXCESS THEREOF;

(g) Contractor’s failure to prepare and file the affidavit of completion in accordance with the requirements of Section 2.9.4;

(h) Claims filed by any employee of Contractor, any Supplier (including Affiliates of Contractor), or any employee of any Supplier (including Affiliates of Contractor), in each case, for costs incurred or for compensation arising out of any such employee’s or any such Supplier’s performance of any part of the Work pursuant to (i) a Supply Contract or the performance of Work by an Affiliate of Contractor; or (ii) any employer-employee relationship (including independent contractor relationship) between, on the one hand, Contractor or any Supplier, and, on the other hand, any such employee (or independent contractor); provided that, with respect to claims filed by any Supplier that is not an Affiliate of Contractor, or an employee of a Supplier, where that Supplier is not an Affiliate of Contractor, Contractor has received payment from Owner of undisputed amounts owed in accordance with this Agreement;

(i) any insurance policy required to be provided by Contractor or a Subcontractor hereunder in accordance with Section 16.1 or Appendix MM-1, having been vitiated as a result of Contractor’s failure to comply with any of the requirements set forth in such policy, or any other act or omission of Contractor or any Supplier that vitiates such insurance policy; and

(j) the failure of Contractor or any Supplier to pay Taxes for which Contractor is responsible under this Agreement, including any fines or penalties assessed as a result of Contractor’s failure to timely pay such Taxes; provided, that the foregoing shall not limit Contractor’s right to reimbursement of those Texas Sales and Use Taxes for which Contractor is entitled to reimbursement in accordance with Section 7.5.2 or to reimbursement of Customs Duties for which Contractor is entitled to reimbursement under Section 7.3.2;

in each case due to, arising out of or resulting from the performance of the Work, or Contractor’s obligations under this Agreement.

15.1.3 Contractor Other Indemnities. Contractor shall, to the maximum extent allowed by Applicable Laws, protect, defend, indemnify and hold harmless the Owner Indemnified Parties from and against any and all Losses arising from loss of, damage or destruction of Construction Equipment or other property owned or leased by any member of Contractor Group, due to, arising out of or resulting from the performance of the Work, or Contractor’s obligations under this Agreement EVEN IF CAUSED OR ALLEGED TO BE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), FAULT, STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF DUTY (STATUTORY OR OTHERWISE), THE BREACH OR VIOLATION OF ANY APPLICABLE LAWS, OR THE BREACH OF CONTRACT, OF OWNER OR ANY OTHER OWNER INDEMNIFIED PARTY PROVIDED, HOWEVER, THAT IF A COURT OR OTHER FACT FINDER THAT HAS JURISDICTION

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DETERMINES THAT ANY OF THE INDEMNITIES PROVIDED IN THIS SECTION 15.1.3 DOES NOT COMPLY WITH APPLICABLE LAWS, SUCH INDEMNITY SHALL APPLY EXCEPT TO THE EXTENT THAT SUCH LOSSES ARISE FROM THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), FAULT, STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF DUTY (STATUTORY OR OTHERWISE), THE BREACH OR VIOLATION OF APPLICABLE LAWS OR THE BREACH OF CONTRACT OF OWNER, OR ANY OTHER OWNER INDEMNIFIED PARTY.

15.1.4 Contractor Release. CONTRACTOR HEREBY RELEASES THE OWNER INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES ARISING FROM THE CIRCUMSTANCES AND EVENTS DESCRIBED IN SECTION 15.1.2(a) THROUGH AND INCLUDING SECTION 15.1.2(j), AND SECTION 15.1.3, TO THE EXTENT OF THE INDEMNITY OBLIGATION DESCRIBED THEREIN, AND SUCH RELEASE SHALL APPLY EVEN IF THE UNDERLYING INDEMNITY OBLIGATION IS FOUND TO BE UNENFORCEABLE. CONTRACTOR ALSO HEREBY RELEASES THE OWNER INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES ARISING FROM THE CIRCUMSTANCES AND EVENTS DESCRIBED IN SECTION 15.1.3 EVEN IF SUCH LOSSES ARE CAUSED OR ALLEGED TO BE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), FAULT, STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF DUTY (STATUTORY OR OTHERWISE), THE BREACH OR VIOLATION OF APPLICABLE LAWS OR THE BREACH OF CONTRACT OF OWNER, OR ANY OTHER OWNER INDEMNIFIED PARTY.

15.2 Owner Indemnity and Release.

15.2.1 Owner Employees. Owner shall, to the maximum extent allowed by Applicable Laws, release, and as a separate obligation, protect, defend, indemnify and hold harmless the Contractor Indemnified Parties from and against any and all Losses arising from the bodily injury, illness or death of any Owner Indemnified Party due to, arising out of or resulting from the performance of Owner’s obligations under this Agreement, EVEN IF CAUSED OR ALLEGED TO BE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), FAULT, STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF DUTY (STATUTORY OR OTHERWISE), THE BREACH OR VIOLATION OF ANY APPLICABLE LAWS, OR THE BREACH OF CONTRACT, OF CONTRACTOR OR ANY OTHER MEMBER OF THE CONTRACTOR GROUP.

15.2.2 Owner Indemnities. Owner shall, to the maximum extent allowed by Applicable Laws, protect, defend, indemnify and hold harmless the Contractor Indemnified Parties from and against any and all Losses arising from:

(a) bodily injury, illness, or death of any Person other than a Contractor Group member or an Owner Indemnified Party, to the extent such Losses: (i) are in excess of the coverage available with respect to such covered Loss under the insurance policies

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provided by Contractor in accordance with Article 16 and Appendix MM; and (ii) are caused by the negligence or fault of an Owner Indemnified Party;

(b) loss of, damage or destruction of any property that is owned or leased by any Person other any member of Contractor Group or an Owner Indemnified Party, to the extent such Losses: (i) are in excess of the coverage available with respect to such covered Loss under the insurance policies provided by Contractor in accordance with Article 16 and Appendix MM; and (ii) are caused by the negligence or fault of an Owner Indemnified Party;

(c) due to any violations of Applicable Laws by any Owner Indemnified Party, including citations, notice of violations or complaints, Owner’s obligations under the Tax Abatements (without limiting Contractor’s obligations under Section 2.7.10), assessments, fines or penalties that may be assessed by any and all Governmental Authorities; provided, that Owner’s indemnity obligations under this Section 15.2.2(c) shall exclude any portion of the amount of such fines, penalties, citations or sanctions attributable to (i) violations of Applicable Laws by any member of the Contractor Group; or (ii) Pre-Existing Hazardous Materials to the extent of Contractor’s indemnity obligation under Section 15.1.2(f) applies;

(d) a breach by Owner of any confidentiality obligations of Owner towards any Licensor in connection with the Liquefaction Project; and

in each case due to, arising out of or resulting from the performance of Owner’s obligations under this Agreement.

15.2.3 Owner Other Indemnities. Owner shall, to the maximum extent allowed by Applicable Laws, protect, defend, indemnify and hold harmless the Contractor Indemnified Parties from and against any and all Losses arising from:

(a) loss of, damage or destruction of any property that is owned or leased by any Owner Indemnified Party (other than the Work, a Stage or any component of the LNG Facility prior to Substantial Completion Date of a Stage, or the termination of this Agreement, if earlier);

(b) loss of, damage to or destruction of the Work, a Stage or any component of the LNG Facility in excess of Contractor’s liability under Section 11.3.1 or Section 11.3.2, as applicable; and

(c) Pre-Existing Hazardous Materials that were present at the Site prior to Contractor’s entry thereupon, Hazardous Materials or Archeological Finds, in each case other than to the extent of such Losses for which Contractor is responsible under Section 15.1.2(e) or 15.1.2(f);

(d) in each case due to, arising out of or resulting from the performance of the Owner’s obligations under this Agreement EVEN IF CAUSED OR ALLEGED TO BE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), FAULT, STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF DUTY (STATUTORY OR OTHERWISE), THE

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BREACH OR VIOLATION OF ANY APPLICABLE LAWS, OR THE BREACH OF CONTRACT, OF CONTRACTOR OR ANY OTHER MEMBER OF THE CONTRACTOR GROUP; PROVIDED, HOWEVER, THAT IF A COURT OR OTHER FACT FINDER THAT HAD JURISDICTION DETERMINES THAT ANY OF THE INDEMNITIES PROVIDED IN THIS SECTION 15.2.3 DOES NOT COMPLY WITH APPLICABLE LAWS, SUCH INDEMNITY SHALL APPLY EXCEPT TO THE EXTENT THAT SUCH LOSSES ARISE FROM THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), FAULT, STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF DUTY (STATUTORY OR OTHERWISE), THE BREACH OR VIOLATION OF APPLICABLE LAWS OR THE BREACH OF CONTRACT OF CONTRACTOR OR ANY OTHER MEMBER OF THE CONTRACTOR GROUP.

15.2.4 Owner Release. OWNER HEREBY RELEASES THE CONTRACTOR INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES ARISING FROM THE CIRCUMSTANCES AND EVENTS DESCRIBED IN SECTION 15.2.2(a) THROUGH AND INCLUDING SECTION 15.2.2(d), AND SECTION 15.2.3(a) THROUGH AND INCLUDING SECTION 15.2.3(c), TO THE EXTENT OF THE INDEMNITY OBLIGATION DESCRIBED THEREIN, AND SUCH RELEASE SHALL APPLY EVEN IF THE UNDERLYING INDEMNITY OBLIGATION IS FOUND TO BE UNENFORCEABLE. OWNER ALSO HEREBY RELEASES THE CONTRACTOR INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES ARISING FROM THE CIRCUMSTANCES AND EVENTS DESCRIBED IN SECTION 15.2.3(a) THROUGH AND INCLUDING SECTION 15.2.3(c) EVEN IF SUCH LOSSES ARE CAUSED OR ALLEGED TO BE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), FAULT, STRICT LIABILITY, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF DUTY (STATUTORY OR OTHERWISE), THE BREACH OR VIOLATION OF APPLICABLE LAWS OR THE BREACH OF CONTRACT OF CONTRACTOR, OR ANY OTHER CONTRACTOR INDEMNIFIED PARTY. NOTHING IN THIS SECTION 15.2.4 LIMITS THE RELEASE PROVIDED BY OWNER AND THE COMMON FACILITIES OWNER UNDER SECTION 11.3.2.

15.3 Intellectual Property Infringement.

15.3.1 Contractor Indemnity. Except as otherwise provided in Section 15.3.2, Contractor shall protect, defend, indemnify and hold harmless the Owner Indemnified Parties from and against any and all Losses on account of or by reason of any Claim or suit by a third party for alleged infringement or misappropriation of any Intellectual Property resulting from the design, the Contractor-Furnished Items or any other Work performed by Contractor pursuant to this Agreement, the EDSA or the SWSA; provided, that with respect to Intellectual Property provided by Contractor with respect to the Liquefaction Technology Licensor, Contractor’s indemnity, defense and hold harmless obligations under this Section 15.3.1 shall not exceed the indemnity provided by the Liquefaction Technology Licensor. If, by reason of any such suit or threatened action concerning Intellectual Property, Owner is enjoined from using any Contractor-Furnished Items or part thereof, or from conducting any operation, Contractor, at its own expense, shall:

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(a) diligently procure the right to use such Contractor-Furnished Items or infringing or misappropriating operation;

(b) substitute equivalent but non-infringing or non-misappropriating Contractor-Furnished Items or operation; or

(c) modify the Contractor-Furnished Items or operation to make it or them non-infringing or non-misappropriating but at least equivalent to the infringing or misappropriating Equipment or operation in terms of quality and functionality;

provided, that any substitution or modification shall be acceptable to Owner.

15.3.2 Exclusions. The indemnity set forth in Section 15.3.1 shall not apply to Losses arising out of or in connection with alleged infringement or misappropriation of Intellectual Property based on or arising from any combination or unauthorized use of any of the Work by Owner or the Common Facilities Owner with any product not furnished hereunder where the infringement or misappropriation of Intellectual Property would not have arisen but for such combination or unauthorized use.

15.3.3 Technology. In the event of a Claim involving a License, Contractor agrees to provide all reasonable assistance to Owner through the provision of documents and technical expertise toward resolution of such Claim.

15.3.4 Owner’s Use of Certain Intellectual Property. If Owner or the Common Facilities Owner uses Third Party Proprietary Work Product or Contractor Intellectual Property for purposes other than those relating to the LNG Facility, and Owner or the Common Facilities Owner, as applicable, does not engage Contractor to perform work related to such purposes, Owner shall indemnify, defend and hold harmless the Contractor Indemnified Parties with respect to any Claims arising from such use.

15.4 Notice of Claims. Contractor shall promptly give Owner notice of any Claim made or proceeding commenced against Contractor or, to Contractor’s knowledge, another Contractor Indemnified Party, for which Contractor or such other Contractor Indemnified Party claims to be entitled to indemnification under this Agreement, including a copy of any documents served with respect to the Claim by a third party claimant. Contractor shall promptly give Owner notice of any loss or damage to the Work or Equipment and assist Owner with any potential Claim associated with such loss or damage. Owner shall promptly give Contractor notice of any Claim made or proceeding commenced against Owner or, to Owner’s knowledge, another Owner Indemnified Party, for which Owner or such Owner Indemnified Party claims to be entitled to indemnification under this Agreement, including a copy of any documents served with respect to the Claim by a third party claimant. Failure to provide notice as required pursuant to this Section 15.4 in a timely manner shall not affect the indemnification obligations provided hereunder except to the extent an Indemnitor shall have been actually and materially prejudiced as a result of such failure. Any Person indemnified under this Agreement shall use commercially reasonable efforts to mitigate the Losses for which it is indemnified.

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15.5 Defense of Third Party Claims.

15.5.1 Notice of Third Party Claims. In the event a Claim is asserted or a proceeding is commenced against an Indemnitee by a Person that is not a party to this Agreement with respect to any matter that may give rise to a claim for indemnification against an Indemnitor (a “Third Party Claim”), the Indemnitee shall promptly give the Indemnitor notice of such Third Party Claim including a copy of any documents served with respect to the Third Party Claim, and thereafter, the Indemnitee shall promptly deliver to the Indemnitor copies of all material notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim; provided, that failure to provide such notice, or deliver copies of all notices and documents, in a timely manner shall not affect the indemnification provided hereunder except to the extent the Indemnitor shall have been actually and materially prejudiced as a result of such failure.

15.5.2 Participation in Defense. If a Third Party Claim is made against an Indemnitee, the Indemnitor shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges its obligation to indemnify the Indemnitee therefor, to assume and control the defense thereof with counsel selected by the Indemnitor and reasonably satisfactory to the Indemnitee. Should the Indemnitor so elect to assume the defense of a Third Party Claim, the Indemnitor shall not be liable to the Indemnitee for legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof, except to the extent that the Indemnitee is entitled to indemnification against such expenses pursuant to this Article 15. If the Indemnitor assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnitor; provided, however, that the Indemnitor shall, except as otherwise provided in this Section 15.5, control such defense. The Indemnitor shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnitor has not assumed the defense thereof or fails to continue to defend against thereof. If the Indemnitor chooses to defend any Third Party Claim as set forth in the first sentence of this Section 15.5.2, the Indemnitor shall notify the Indemnitee of the agreement of the Indemnitor to do so; provided, that: (a) the Indemnitor shall keep the Indemnitee advised of all material events with respect to such Third Party Claim; and (b) the Indemnitor shall obtain the prior written approval of the Indemnitee before ceasing to defend against such Third Party Claim or entering into any settlement, adjustment or compromise of such Third Party Claim involving injunctive or similar equitable relief being asserted against any Indemnitee or any of its Affiliates (which approval shall not be unreasonably withheld, conditioned or delayed). The Indemnitee shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnitor’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). No Indemnitor will, without the prior written consent of each Indemnitee, settle or compromise or consent to the entry of any judgment in any pending or threatened Third Party Claim in respect of which indemnification may be sought hereunder (whether or not any such Indemnitee is a party to such action), unless such settlement, compromise or consent by its terms obligates the Indemnitor to pay the full amount of the liability in connection with such Third Party Claim and includes an unconditional release of all such Indemnified Parties from all liability arising out of such Third Party Claim.

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15.5.3 Exceptions. Notwithstanding anything contained herein to the contrary, the Indemnitor shall not be entitled to have sole control over the defense, settlement, adjustment or compromise of: (a) any Third Party Claim (other than a Claim by a Supplier, but without limiting Section 15.3.1) that seeks an order in equity, injunction or other equitable relief against an Indemnitee or any of its Affiliates; (b) any Third Party Claim in which both the Indemnitor and the Indemnitee are named as parties and either the Indemnitor or the Indemnitee determines with advice of counsel that there may be one or more legal defenses available to it that are different from or additional to those available to the other party or that a conflict of interest between such parties may exist in respect thereof. Also notwithstanding anything contained herein to the contrary, the Indemnitor shall not be entitled to have sole control over (and if the Indemnitee so desires, the Indemnitee shall have sole control over) the defense, settlement, adjustment or compromise of any proceeding relating to an alleged criminal violation of Applicable Laws.

15.5.4 Failure to Assume Defense. If the Indemnitor elects not to assume the defense, settlement, adjustment or compromise of an asserted Third Party Claim, fails to timely and properly notify the Indemnitee of his, her or its election as herein provided, or, at any time after assuming such defense, fails to diligently defend against such Third Party Claim in good faith or if the Indemnitee is otherwise entitled pursuant to this Agreement to have control over the defense, settlement or compromise of any indemnification claim, the Indemnitee may pay, defend, settle, adjust or compromise such asserted Third Party Claim (but the Indemnitor shall nevertheless be required to pay all Losses reasonably incurred by the Indemnitee in connection with such payment, defense, settlement, adjustment or compromise to the extent required in accordance with this Agreement).

15.6 Enforceability. To the maximum extent allowed by Applicable Laws, each Party hereby irrevocably waives any right to contend that any of the indemnities set forth in this Article 15 are unenforceable under the Texas anti-indemnity statute (Title 2 Texas Insurance Code §151.102, et. seq.) or any other Applicable Law.

15.7 Additional Indemnity [***].

ARTICLE 16

INSURANCE

16.1 Contractor Insurance Requirements.

16.1.1 Effectiveness. By no later than the FNTP Date, Contractor shall obtain the lines of insurance, the insurance coverages and limits of liability as set forth in Appendix MM-1. Prior to the FNTP Date, Contractor shall obtain the insurance as may be required under the Ramp-Up LNTP or the February 2023 LNTP, as applicable, if and when issued. Contractor shall, and shall cause each Supplier, as applicable, to enroll in Contractor’s insurance program and, as applicable, to maintain all such lines of insurance, insurance coverages and limits of liability as set forth in Appendix MM-1, without interruption through the earlier of the date on which each such Person’s final portion of the Work is performed, including any Corrective

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Work, or the termination of all of the Work; provided, that Contractor and each Supplier shall maintain such lines of insurance and insurance coverages during any period of extended coverage as described in Appendix MM-1. With respect to any Supplier not performing any of the Work as of such date, Contractor shall cause such Supplier to, as applicable, enroll in Contractor’s insurance program and, as applicable, obtain the lines of insurance, the insurance coverages and limits of liability as set forth in Appendix MM-1 by no later than the date on which such Supplier first performs any portion of the Work. Contractor shall have the sole responsibility for determining the lines of insurance, the insurance coverages and limits of liability required to be obtained by the Suppliers in accordance with reasonably prudent business practices. Notwithstanding that the Subcontractors may provide certain insurance coverages, Contractor shall be fully responsible for any Losses arising out of or resulting from the Work performed by the Subcontractors and any other Person performing any of the Work on behalf of Contractor.

16.1.2 Costs. Contractor acknowledges and agrees that the cost of obtaining the insurance coverage required under this Section 16.1 that is obtained by Contractor or any Supplier, is included in the Contract Price. Contractor shall exclude from the Contract Price, and shall require such Supplier to exclude from the contract price of the applicable Supply Contracts, and in each case from the hourly or unit rates of such Person if used in connection with the performance of any of the Work on a time and materials basis in accordance with this Agreement, the cost of maintaining any duplicative insurance coverage with respect to such Person’s activities at the Site.

16.1.3 Rating and Form. Contractor shall, and shall require all Suppliers to, purchase and maintain the insurance required under Appendix MM-1 from an insurance company or companies qualified to do business and duly authorized or licensed in the State of Texas, and in the applicable jurisdictions at locations where Work is performed that are outside of the State of Texas. All such insurance coverages obtained by Contractor shall be written by an insurance company or companies with a minimum credit rating of A from Standard & Poor’s or A-, VIII from A.M. Best, or an equivalent credit rating from another internationally recognized credit rating agency reasonably acceptable to Owner; provided, that state run agencies that provide any such insurance shall not have to satisfy such credit rating requirements.

16.1.4 Waiver and Subrogation. Contractor shall, and shall require all Suppliers to, waive all rights of recovery, including subrogation, and whether because of deductible or self-insured retention clauses, inadequacy of limits of any insurance policy, insolvency of any insurer, limitation or exclusions of coverage, and all insurance policies obtained by Contractor or any Supplier under Appendix MM-1, shall include a waiver of subrogation in favor of Owner, the Common Facilities Owner and the other members of the Owner Indemnified Parties. Such waiver of subrogation shall include any and all rights of recovery whether based in equity, common law or by contract, and shall provide that it shall be effective to the maximum extent allowed by Applicable Laws as to any Person, even if such Person: (a) would otherwise have a duty of indemnification, contractual or otherwise; (b) did not pay the insurance premium directly or indirectly; or (c) does not have an insurable interest in the property damaged. Without limiting the foregoing, Contractor shall require all insurance policies (including policies of Contractor and all Suppliers) in any way relating to the Construction Equipment to include all such waivers as described in this Section 16.1.4.

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16.1.5 Determination of Insurance Coverages. Contractor acknowledges and agrees that the insurance coverages required to be provided by Contractor and the Suppliers pursuant to this Section 16.1 and Appendix MM-1, are intended to, and Contractor agrees that such coverages do, provide coverage for Contractor’s indemnification obligations under this Agreement to the extent such obligations are insurable. Contractor and all Suppliers shall each be solely responsible for determining the appropriate amount of insurance, if any, that Contractor or such Supplier desires or determines is appropriate that is in excess of or in addition to the insurance coverages set forth on Appendix MM-1, and the cost of all such excess coverage shall be at Contractor’s or such Subcontractor’s or Supplier’s cost and expense, including types of coverage, limits of liability and costs of such excess coverage. To the maximum extent permitted by Applicable Laws, the extent of coverage or limits of liability otherwise required under this Section 16.1 shall not be construed as a limitation on the nature or extent of Contractor’s or any Subcontractor’s or Supplier’s obligations under this Agreement or with respect to the Work, as applicable.

16.1.6 Additional Insured Coverage. To the maximum extent permitted by Applicable Law, Owner, the Common Facilities Owner and such other Persons as described on Appendix MM-1 shall be named as additional insureds on the policies required under Appendix MM-1 (but not including any Workers’ Compensation, Employer’s Liability or Contractor’s Equipment policies), carried and maintained by Contractor and its Suppliers, to the extent of Contractor’s or such Supplier’s liability under this Agreement or the applicable Supply Contract.

16.1.7 Deductibles. To the maximum extent permitted under Applicable Law and as required pursuant to and in accordance with Article 15, Contractor shall, and shall require all Suppliers to, be responsible for and pay any deductibles or self-insured retentions in connection with the insurance policies and coverages required to be maintained by Contractor or such Supplier under Appendix MM-1.

16.1.8 Certificate of Insurance.

(a) On or before the date that Contractor is required to obtain the insurance coverage as required under this Section 16.1, Contractor shall provide certificates of insurance and any endorsements required under Appendix MM-1 to Owner. Contractor shall not commence performance of any portion of the Work on the Site, or of the applicable portion of the Work, for which insurance coverage is required to be provided under this Section 16.1 until such certificates have been provided to Owner. If Owner does not allow Contractor to commence performance of the applicable Work due to Contractor’s failure to provide such certificates of insurance, such action by Owner shall not constitute an Owner-Caused Delay. Upon Owner’s written request, Contractor shall provide Owner with copies of certificates of insurance coverage provided by Suppliers under this Section 16.1 and Appendix MM-1. All certificates of insurance, endorsements and insurance policy copies required to be provided pursuant to this Section 16.1 shall be submitted to:

Sempra LNG

Supply Management

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488 8th Avenue

San Diego, CA 92101

E-mail: [###]

with a copy to: Sempra Energy

Insurance & Risk Advisory

488 8th Avenue

San Diego, CA 92101

E-mail: [###]

(b) If any of the insurance coverages are required to remain in force after Final Completion, an additional certificate of insurance evidencing continuation of such coverage shall be submitted with the Final Invoice, and upon renewal of such insurance coverages during the duration of the required period.

(i) Owner and any other Person required pursuant to this Agreement shall be identified as certificate holders, with correct mailing addresses;

(ii) Identification on the certificate of insurance of the named insured, which must match that on this Agreement or the relevant Supply Contract;

(iii) Insurers affording each coverage, policy dates of each coverage, all coverages and limits required under Appendix MM-1 and signatures of authorized representatives of the insurance company or broker issuing said policy of insurance;

(iv) A list of all endorsements attached to the policies of insurance required hereunder, in which endorsement forms are to be identified, as applicable; and

(v) Producer of the certificate, with correct address and phone.

16.1.9 Dividends and Refunds. All dividends, premium refunds, return premiums, premium discounts, retentions, or credits payable or available under any of the insurance policies maintained by Contractor or any Supplier shall belong to Contractor or such Supplier, as the case may be, and are hereby assigned to Contractor or such Supplier. At the request of Contractor or such Supplier, Owner shall execute and deliver to Contractor or such Supplier any waiver, release, assignment, direction, or authorization, which Contractor, such Supplier, any insurer or underwriter may require for such purpose, for the benefit of Contractor.

16.1.10 Contractor’s Insurance is Primary. The insurance policies required to be maintained by Contractor and its Suppliers under Appendix MM-1 shall state that such coverage is primary and non-contributory to any other insurance or self-insurance available to or provided by Owner or the other members of the Owner Indemnified Parties to the extent of Contractor’s indemnity obligations contained herein.

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16.1.11 Severability. All policies (other than the Worker’s Compensation insurance) shall insure the interests of the Owner and the other members of the Owner Indemnified Parties regardless of any breach or violation by Contractor or any other Contractor Group member of warranties, declarations or conditions contained in such policies, any action or inaction of Owner or others, any foreclosure relating to the Liquefaction Project or any change in ownership of all or any portion of the Liquefaction Project.

16.1.12 Copy of Policy. Following the issuance of the Ramp-Up LNTP or the Full Notice Proceed, as applicable, and the inception of the respective project specific insurance policies required in accordance with the Ramp-Up LNTP or the February 2023 LNTP, or Appendix MM-1 following the Full Notice to Proceed, as applicable, Contractor shall promptly provide Owner certified copies of each of the project specific insurance policies of Contractor required by the Ramp-Up LNTP, the February 2023 LNTP or Appendix MM-1, as applicable, or if the policies have not yet been received by Contractor, then with binders of insurance, duly executed by the insurance agent, broker or underwriter fully describing the insurance coverages effected.

16.1.13 Reports. Contractor will advise Owner and Lenders in writing promptly of (a) any material changes in the coverage or limits provided under any policy required by this Section 16.1 and Appendix MM-1; and (b) any default in the payment of any premium and of any other act or omission on the part of Contractor or its Suppliers which may invalidate or render unenforceable, in whole or in part, any insurance being maintained by Contractor or its Suppliers pursuant to this this Section 16.1 and Appendix MM-1.

16.1.14 Loss Survey. All policies of insurance required to be maintained to this Section 16.1 or Appendix MM-1 wherein more than one insurer provides the coverage on any single policy, shall have a clause (or a separate agreement among the insurers) wherein all insurers have agreed upon the employment of a single firm to survey and investigate all losses on behalf of the insurers.

16.1.15 No Waiver. Failure of Contractor or any Supplier to provide insurance as required hereunder, or Owner’s failure to require evidence of insurance, or to notify Contractor of any breach by Contractor or any Supplier of these requirements, shall not be deemed to be a waiver by Owner of any of the terms and conditions of this Agreement, nor shall those actions be deemed to be a waiver of the obligations of Contractor to defend, indemnify, and hold harmless the Owner Indemnified Parties as required under this Agreement.

16.1.16 No Limitation. None of the requirements contained in this Section 16.1 or Appendix MM-1 as to types or limits of insurance coverages to be maintained by Contractor or any Suppliers are intended to, and to the maximum extent permitted by Applicable Laws shall not, in any manner limit, qualify or quantify the liabilities and obligations of Contractor under this Agreement, or of Contractor or any Supplier as otherwise provided by Applicable Laws.

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16.2 Owner-Provided Insurance.

16.2.1 BAR Policy. Owner shall procure, pay the premiums for and maintain a Builders’ All Risk policy (the “BAR”) as described on Appendix MM-2. Reimbursement for any Losses under the BAR and such other policies shall be made payable to Owner.

(a) Owner shall cause the BAR coverage to be in full force and effect at the times as described on Appendix MM-2, and shall cause the BAR and such other insurance coverage to remain in full force and effect at least until Substantial Completion of Stage II.

(b) The BAR shall include commercially available standard U.S. builders risk policy coverages, including coverage for all Equipment, all property, material, supplies, machinery, fixtures, and storage facilities necessary to, or incidental to the construction, erection, installation, supply and testing of the LNG Facility, while such Equipment and other property is located at the Work Site or an Ancillary Site and otherwise as described on Appendix MM-2. The BAR coverage will not extend to the Construction Equipment, including personal property, tools, cranes, mobile equipment, construction trailers and their contents, or other temporary buildings or scaffolding of Contractor or Subcontractors, whether any of the foregoing are owned, leased, rented, borrowed or used, and responsibility for obtaining such coverage shall remain the responsibility of Contractor and Subcontractors. Contractor shall comply with reasonable and customary requirements of the insurer with respect to shipping and storage of Equipment and other property covered by the BAR; provided, however, Contractor’s failure to comply with such requirements does not modify the provisions of Section 11.3.

(c) The BAR and other insurance coverage provided by Owner pursuant to this Section 16.2 shall include the exclusions as described on Appendix MM-2 with respect to such coverage.

16.2.2 Marine Cargo. Owner shall procure, pay the premiums for and maintain a marine cargo policy as described on Appendix MM-2. Reimbursement for any Losses under such policy shall be made payable to Owner. Owner shall cause the marine cargo policy to be in full force and effect during the period of insurance described on Appendix MM-2, and shall cause such marine cargo policy to remain in full force and effect at least until the completion of all shipments of Equipment to the Site or any Ancillary Site. Contractor shall comply with reasonable and customary requirements of the insurer with respect to shipping and storage of Equipment and other property covered by the marine cargo policy; provided, however, Contractor’s failure to comply with such requirements does not modify the provisions of Section 11.3.

16.2.3 Claims. Contractor shall prepare and submit claims and loss statements with respect to any losses incurred or claims made prior to Substantial Completion of Stage II, using the forms required to provide the information as set forth in this Section 16.2.3, and shall co-sign any proof of loss or similar statements under the BAR and the marine cargo policy as

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described in this Section 16.2. Contractor shall, and shall cause its Suppliers to, give Owner and the insurer prompt written notice of the occurrence of physical loss, damage or destruction of the Work, coordinate and cooperate with Owner in pursuing recovery for losses incurred, and respond promptly to requests from insurers for information regarding the loss incurred or claim made. [***]. Losses, if any, under the BAR shall be adjusted by the insurer with Owner, and with the cooperation of Contractor. The policy shall designate as loss payee(s), only the Owner, and if required, the Lenders. All insurance proceeds check(s) shall be made payable only to the loss payee(s). [***].

16.2.4 Property Insurance. If and to the extent that Owner maintains property insurance following Substantial Completion of a Stage, Owner shall procure, pay the premiums for and maintain all risk property insurance covering such Stage. Such insurance coverage shall be provided on an “all risk” replacement cost basis and shall not contain an exclusion for resultant damage caused by faulty workmanship, design or materials. The insurance policy, if any, obtained by Owner pursuant to this Section 16.2.4 shall provide for a waiver by the insurance carrier of all rights of subrogation, including any and all rights of recovery whether based in equity, common law or by contract, against the members of the Contractor Group in respect of loss or damage to such Stage and any other property covered by such insurance policies, as applicable, and such waiver of subrogation shall provide that it is effective to the maximum extent allowed by Applicable Laws as to any members of the Contractor Group, even if such Person: (a) would otherwise have a duty of indemnification, contractual or otherwise; (b) did not pay the insurance premium directly or indirectly; or (c) does not have an insurable interest in the property damaged.

16.2.5 Rating and Form. All insurance coverages furnished by Owner pursuant to this Section 16.2 shall be provided by an insurance company or companies qualified to do business and duly authorized or licensed in the State of Texas. All of such insurance coverages shall be written by an insurance company or companies with a minimum credit rating of A- from Standard & Poor’s or A-, VII rating A.M. Best, or an equivalent credit rating from any other internationally recognized credit rating agency; provided that state run agencies that provide such insurance shall not have to satisfy such credit rating requirements.

16.2.6 Deductibles. Subject to the indemnification obligations of the Parties under Article 15, Owner shall, to the maximum extent permitted under Applicable Law, be responsible for and pay any deductibles or self-insured retentions in connection with the insurance policies and coverages required to be maintained by Owner under this Section 16.2 or Appendix MM-2.

16.2.7 Certificates of Insurance. On or before the date that Owner is required to obtain the insurance policies as required under this Section 16.2 or pursuant to Appendix MM-2, as applicable, Owner shall provide certificates of insurance and any endorsements required under this Section 16.2 or pursuant to Appendix MM-2, as applicable, to Contractor.

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16.3 Territorial Limits. All policies required to be carried under this Agreement shall be valid in the U.S. and have such additional territorial and navigational limits as are necessary for the various locations of the Work.

16.4 Failure to Maintain Policies.

16.4.1 Failure of Contractor to Maintain Policies. If at any time the insurance provided by Contractor hereunder is reduced or is not renewed or maintained in full force and effect, then (without limiting the rights of Owner in respect of any default that arises as a result of such failure) Owner may at its option maintain the insurance required hereby. In such event Owner may withhold the cost of insurance premiums expended for such replacement insurance from any payments to be made to Contractor. Notwithstanding anything in this Agreement to the contrary, the occurrence of any of the following shall in no way relieve Contractor from any of its obligations under this Agreement: (a) failure by Contractor to secure or maintain the insurance coverage required hereunder; (b) failure by Contractor to comply fully with any of the insurance provisions of this Agreement; (c) failure by Contractor to secure such endorsements on the policies as may be necessary to carry out the terms and provisions of this Agreement; (d) the insolvency, bankruptcy or failure of any insurance company providing insurance to Contractor; (e) failure of any insurance company to pay any claim accruing under its policy; or (f) losses by Contractor or any of its Subcontractors not covered by insurance policies.

16.4.2 Failure of Owner to Maintain Policies. If at any time during which Owner is required to maintain the insurance coverages as described in Appendix MM-2, Owner fails to obtain or maintain such insurance coverage, and Owner’s failure to obtain or maintain such insurance coverage was not caused by or due to the acts or omissions of any member of the Contractor Group, Contractor may, upon forty eight (48) hours written notice to Owner, suspend the performance of the Work at the Site, and in the case of the insurance coverage described in Section 16.2.2, suspend transportation of Equipment to the Site, until such time that Owner provides Contractor with certificates of insurance evidencing such insurance coverages are in effect. Any such suspension shall be an Owner-Caused Delay.

16.5 Unavailability of Insurance. If any insurance (including the limits, coverage, endorsements, policy terms, conditions or deductibles thereof) hereby required to be maintained, other than insurance required by Applicable Laws, shall not be available in the market on commercially reasonable terms, including price, Owner and Contractor shall not unreasonably withhold their agreement to waive such requirement to the extent that maintenance thereof is not so available; provided, however, that the Party seeking the waiver shall request any such waiver in writing from the other Party, together with reasonable documentation supporting the need for the waiver, and it shall not be unreasonable for Owner to withhold such waiver if a waiver is subject to Lender approval but is not agreed to by the Lenders. Any such waiver shall be effective only so long as such insurance shall not be available in the market on commercially reasonable terms, including price. Notwithstanding anything to the contrary in this Article 16, including this Section 16.5, Contractor will not be excused from its obligations to provide

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insurance under this Agreement as a result of increased costs of such insurance arising out of or related to Contractor’s negligence or failure to perform its obligations under this Agreement.

ARTICLE 17

FINANCIAL SECURITY

17.1 Contractor Guarantee. Simultaneously with the execution of this Agreement, Contractor shall deliver to Owner the Contractor Guarantee in the form set forth in Appendix Y whereby Contractor Guarantor shall guarantee the full and punctual payment and performance of all obligations of Contractor under this Agreement. The Contractor Guarantee shall supersede and replace the Contractor Parent Guarantee dated as of February 28, 2020, issued in connection with the February 2020 Agreement. Contractor shall cause the Contractor Guarantor to maintain its corporate existence. Contractor acknowledges and agrees that any assignment of the Contractor Guarantee by the Contractor Guarantor, including by operation of law, without the prior written consent of Owner, shall be a material breach of Contractor’s obligations under this Section 17.1.

17.2 Contractor Letter of Credit.

17.2.1 Generally. Within three (3) Business Days after the FNTP Date, and as a condition precedent to Owner’s obligation to make payments under this Agreement on and after such date, Contractor shall deliver to Owner, and maintain in existence throughout the term of this Agreement as set forth in this Section 17.2, an irrevocable stand-by letter of credit in the form of Appendix X, naming Owner and the Common Facilities Owner as beneficiary, in an amount equal to [***] of the Contract Price, issued by a Creditworthy Bank in the United States of America and that may be drawn upon presentation in New York, New York (“Letter of Credit”). If at any time the bank issuing the Letter of Credit ceases to be a Creditworthy Bank or ceases to have a branch in New York, New York where the Letter of Credit may be drawn upon presentation, Contractor shall replace the Letter of Credit within ten (10) Days with an equivalent instrument issued by a Creditworthy Bank in the United States of America.

17.2.2 Owner’s Right to Draw. Owner shall have the right to draw down on or collect against such Letter of Credit upon Owner’s demand in the event of the following: (a) as provided under Section 9.9.4; (b) monies owed from Contractor to Owner under this Agreement for which Owner has invoiced Contractor and Contractor has failed to pay within the period required; (c) the occurrence of a Contractor Event of Default, including a failure by Contractor to pay any amount owing to Owner for Delay Liquidated Damages or Performance Liquidated Damages when due; or (d) any breach by Contractor of its obligations under this Agreement which has not arisen to a Contractor Event of Default, [***]. The amount drawn on the Letter of Credit shall not be greater than the amount that Owner, at the time of the drawing, reasonably estimates is owed it under this Agreement. In addition, if at any time the bank issuing the Letter of Credit ceases to be a Creditworthy Bank, or the issuing bank notifies Owner pursuant to the terms of the Letter of Credit that the issuing bank has decided not to extend the Letter of Credit beyond the then current expiration date and Contractor has not, at least thirty (30) Days before the then current expiration date, delivered to Owner a replacement letter of credit substantially

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identical to the Letter of Credit from a Creditworthy Bank meeting the requirements in this Section 17.2, Owner shall have the right to draw or collect against the Letter of Credit for all remaining funds and hold them as security in lieu of the Letter of Credit until Contractor replaces the Letter of Credit with an equivalent instrument issued by a Creditworthy Bank in the U.S. that has a branch in New York, New York where the Letter of Credit may be drawn upon presentation. Partial drawings shall be permitted under the Letter of Credit.

17.2.3 Increases. In addition to the increases contemplated in Section 17.2.1, Contractor shall, if the Contract Price is increased by [***] or more, increase the amount of the Letter of Credit issued to Owner within ten (10) Days after acceptance of the relevant Change Order (which shall include the cost to increase the Letter of Credit) which causes the Contract Price to exceed such [***] threshold. In connection with any such increase, Owner shall return the Letter of Credit then held by Owner to Contractor upon Owner’s receipt of a replacement Letter of Credit that complies with the requirements of this Section 17.2. If Contractor increases the Letter of Credit by amendment, Owner shall retain the original Letter of Credit and the amendments thereto.

17.2.4 Reductions. Upon the achievement of Substantial Completion and payment of all Delay Liquidated Damages owing with respect to Stage I and, if applicable, increasing the amount of the Letter of Credit or posting of a separate Letter of Credit with respect to Performance Liquidated Damages in accordance with Section 9.10.1, and provided that no Contractor Event of Default has occurred that is then continuing, Contractor may decrease the amount of the Letter of Credit to an amount equal to the sum of: (a) [***] of the Contract Price; plus (b) an amount equal to damages claimed under any Disputes then pending hereunder; plus (c) unless Contractor has posted a separate Letter of Credit with respect to Performance Liquidated Damages in accordance with Section 9.10.1, an amount equal to the increase to the amount of the Letter of Credit that Contractor is required to provide pursuant to Section 9.10.1. Upon the achievement of Substantial Completion and payment of all Delay Liquidated Damages owing with respect to Stage II and, if applicable, increasing the amount of the Letter of Credit or posting of a separate Letter of Credit with respect to Performance Liquidated Damages in accordance with Section 9.10.1, Contractor may decrease the amount of the Letter of Credit so that the stated amount of such Letter of Credit is equal to the sum of: (a) [***] of the Contract Price; plus (b) an amount equal to damages claimed under any Disputes then pending hereunder; plus (c) unless Contractor has posted a separate Letter of Credit with respect to Performance Liquidated Damages in accordance with Section 9.10.1, an amount equal to the increase to the amount of the Letter of Credit that Contractor is required to provide pursuant to Section 9.10.1. Subject to Substantial Completion of Stage II having occurred, upon the expiration of the Warranty Period for Stage I, Contractor may decrease the amount of the Letter of Credit so that the stated amount of such Letter of Credit is equal to the sum of: (a) [***] of the Contract Price; plus (b) an amount equal to damages claimed under any Disputes then pending hereunder; plus (c) unless Contractor has posted a separate Letter of Credit with respect to Performance Liquidated Damages in accordance with Section 9.10.1, an amount equal to the amount of the Letter of Credit that Contractor is required to provide pursuant to Section 9.10.1. To obtain any such decrease, Contractor must submit to the issuing bank a certificate, in the form attached to the Letter of Credit as Annex 1 to Appendix X, jointly signed by Contractor and Owner

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confirming that the relevant conditions for reducing the amount of the Letter of Credit have been satisfied, and setting forth the amount of the reduction. Owner shall promptly execute such a certificate tendered by Contractor when all of the relevant conditions for reducing the amount of the Letter of Credit have been satisfied. Upon the expiration of the Warranty Period for Stage II, Owner shall return the Letter of Credit and any amendments thereto to Contractor.

17.3 Further Assurances. Prior to the FNTP Date, Contractor shall review the most recent audited financial statements for Contractor and Contractor Guarantor with Owner’s chief financial officer and Parent’s chief financial officer (or their respective designees) at a location of Owner’s option. Owner shall not have any right to make copies or to retain such financial statements that are provided for review. The information made available to Owner during this review shall be considered Contractor’s Confidential Information; provided, however, that notwithstanding anything to the contrary in Section 14.2, in no event shall Owner or the Common Facilities Owner or any of its Affiliates, including Parent, disclose any information made available to Owner during such reviews to any other Person without Contractor’s prior written consent. Thereafter, as soon as practicable, but in no event later than one hundred eighty (180) Days after the end of each fiscal year of Contractor, Contractor shall provide Owner with the most recent annual “general fact statement” of Contractor and Contractor Guarantor, together with (a) a cover letter from Contractor and Contractor Guarantor’s external auditor confirming that (i) such general fact statement is a true and accurate extract from the Contractor Guarantor’s audited financial statements for the previous fiscal year; and (ii) that the financial statements from which such general fact statement were taken were prepared in accordance with U.S. GAAP consistently applied; and (b) a letter from Contractor Guarantor’s controller representing and warranting that there has not been a Material Adverse Change to the financial condition of the Contractor or Contractor Guarantor in the prior fiscal year. The information made available for Owner’s review and/or provided to Owner under this Section 17.3 shall be considered Contractor’s Confidential Information (provided however, Owner shall not disclosure such information without Contractor’s prior written consent). If at any time during the term of this Agreement, a Material Adverse Change of the Contractor Guarantor occurs and Owner requests that Contractor provide additional financial assurance, then Contractor shall immediately, at its option, provide additional security to Owner by doing any of the following: (1) providing a guarantee to Owner for the benefit of Owner that is in the form as set forth in Appendix Y (other than for conforming changes) from an Affiliate of Contractor (and from no other Person) that directly or indirectly wholly owns the equity interests of the Contractor, is domiciled in the U.S. and that meets the “Contractor Guarantor Minimum Net Worth” of [***]; (2) restoring the Contractor’s Guarantor’s net worth to at least equal Contractor Guarantor Minimum Net Worth; or (3) delivering to Owner an additional Letter of Credit that is in the form of Appendix X (other than for conforming changes, including consistent with the draw conditions set forth below) in an amount equal to the difference between the Contractor Guarantor Minimum Net Worth and the then-current net worth of Guarantor (the “Contractor Guarantor Letter of Credit”). Owner shall only be able to draw upon the Contractor Guarantor Letter of Credit in the event (a) in full, if the letter of credit will expire within thirty (30) Days and has not been extended; (b) in full, if there has been a Contractor Event of Default in accordance with Section 19.3.1(k); and (c) in full or in part, up to the amount of Contractor Guarantor’s liability to Owner, if a judgment has been rendered against the Contractor Guarantor and Owner has fully drawn, or concurrently fully

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draws, the Letter of Credit. Such Contractor Guarantor Letter of Credit (or proceeds from a draw thereon pursuant to subclause (a) above in this Section 17.3 that have not otherwise been applied against Contractor Guarantor’s liability to Owner or the Common Facilities Owner) shall be returned to Contractor once there is no longer a Material Adverse Change of Contractor Guarantor (specifically, a Contractor Guarantee provided by a Contractor Guarantor that meets the Contractor Guarantor Minimum Net Worth is provided). For the purposes of this Section 17.3, a “Material Adverse Change” means (i) adverse changes, events or effects that have occurred, which could reasonably be likely to materially adversely affect the business, operations, properties, condition (financial or otherwise), net worth, assets or liabilities of Contractor Guarantor, such that Contractor Guarantor no longer has adequate liquidity, nor access to additional liquidity, in order to perform its obligations under the Contractor Guarantee should Owner make a claim thereunder due to the occurrence of a Contractor Event of Default; or (ii) the net worth of Contractor Guarantor falls below the Contractor Guarantor Minimum Net Worth. For purposes of clarity, notwithstanding the foregoing provisions, [***].

ARTICLE 18

FORCE MAJEURE; EXCUSABLE EVENTS; COVID-19 EVENTS; RUSSIAN AND UKRAINE CONFLICT EVENTS

18.1 Effect of Force Majeure, Excusable Event or COVID-19 Event.

18.1.1 Event of Force Majeure Not a Default. Any delays in or failure of performance by the affected Party, other than the obligation to pay monies or post security hereunder, shall not constitute a default (or an Event of Default) hereunder if and to the extent such delays or failures of performance are demonstrably caused by Force Majeure events or a COVID-19 Event.

18.1.2 Relief for Force Majeure; Excusable Event; COVID-19 Event.

(a) Remedies. Subject to Section 18.1.3 and Section 18.1.4, Contractor’s sole remedy for the occurrence of a Force Majeure event, Excusable Event or a COVID-19 Event affecting Contractor, including delays in the commencement, prosecution or completion of the Work, shall be:

(i) an extension to the applicable Guaranteed Substantial Completion Dates and changes to the Key Date Schedule if and to the extent Contractor is actually and demonstrably delayed in the performance of Critical Path Items as a result of such Force Majeure event, Excusable Event or COVID-19 Event, such that, based on the CPM Schedule and using critical path analysis, Contractor will fail to achieve Substantial Completion by the then-current Target Substantial Completion Date; provided, that the Guaranteed Substantial Completion Date shall only be adjusted on a day-for-day basis as such demonstrated delay to the Target Substantial Completion Date; provided, further, that such adjustment shall be limited by the following: (A) to the extent that Contractor has failed to comply with the mitigation requirements in Section 18.2.4; (B) in the case of (1) any change to Import Laws with respect to the importation into the United States or other procurement of Equipment from the

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country of Turkey or (2) any change to the Applicable Laws of the country of Turkey, extensions to applicable Guaranteed Substantial Completion Dates and changes to the Key Day Schedule shall be limited to the extent Contractor has failed to comply with the Contractor Mitigation Plan and, such failure directly resulted in the schedule impact for which relief from the change to Import Laws or Applicable Laws in (1) and (2), respectively, is sought; or (3) any event which would otherwise qualify as a Force Majeure Event if such event occurs in, or affects a Supplier located in, the country of Turkey, then in each such case, to the extent that Contractor has failed to comply with the Contractor Mitigation Plan (and Contractor shall in no event be entitled to any such extension or changes to the extent Contractor’s failure to comply causes delays which would reasonably not be expected to have occurred had Contractor complied with the Contractor Mitigation Plan); and (C) in the case of a Force Majeure event, to the extent that Contractor has failed to comply with its obligations with respect to hurricane preparedness and other emergency responses, as applicable, as described in the Plans (and Contractor shall in no event be entitled to any such extension or changes to the extent Contractor’s failure to comply causes delays which would reasonably not be expected to have occurred had Contractor complied with the Plans);

(ii) if Contractor’s reasonable costs to perform the Work as a result of an event of Force Majeure, an Excusable Event or a COVID-19 Event actually and demonstrably increase despite Contractor’s commercially reasonable efforts to mitigate any such increases in accordance with Section 18.2.4, then, subject to Sections 18.1.2(a)(iii), 18.1.2(a)(iv), 18.1.2(a)(v), 18.1.2(a)(vi) and 18.1.2(a)(viii), the Contract Price shall be adjusted by the sum of: (A) the increase in the actual costs (without limiting Section 8.4.2(m) or Section 8.4.1(b)(iv), without contingency, overhead, margin, fees or profit) [***] incurred by Contractor because of such event of Force Majeure, Excusable Event or COVID-19 Event in accordance with Section 8.4.1(b); less (B) any savings or costs not incurred because of such event of Force Majeure, Excusable Event or COVID-19 Event; less (C) costs incurred due to the failure to take the remedial actions required pursuant to Section 18.2.4;

(iii) with respect to an event of Force Majeure, Contractor shall not be entitled to or receive any adjustment to the Contract Price for costs incurred due to delay caused by the event of Force Majeure unless the delay in the Work resulting from such event of Force Majeure, alone or in conjunction with other events of Force Majeure that have previously occurred, continues for a period of at least [***] Days; once delays in the Work resulting from events of Force Majeure exceed [***] Days of delay, Contractor may include costs incurred due to delay caused by the event of Force Majeure on Change Orders requested under Section 8.3.1, subject to the following Section 18.1.2(a)(iii)(A):

(A) Owner’s total liability under this Agreement for any Contract Price adjustments or payment of costs for all events of Force Majeure occurring during the term of this Agreement (other than with respect to Contract Price adjustments solely for Rehabilitation Costs under Section 11.3.1) shall not exceed [***] in the aggregate, except:

(1) in the case of Rehabilitation Costs arising from physical loss, damages to or destruction of the Work, for which such [***] cap shall not apply; and

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(2) if both of the following are satisfied: (I) delays in the Work resulting from events of Force Majeure that have exceeded [***] Days; and (II) Contract Price adjustments or Owner’s payment of costs resulting from Force Majeure events have reached [***], then once further delays in the Work resulting from Named Windstorms or other Excepted Risks (alone or in conjunction with other Excepted Risks that have previously occurred after the [***] Day period described in Section 18.1.2(a)(iii)) exceed [***], Contractor shall have the right to an adjustment to the Contract Price equal to [***] of delay costs related to any such further delays in the Work incurred beginning on Day [***] and thereafter;

(iv) adjustments to the Contract Price in the case of (A) any change to Import Laws with respect to the importation into the United States or other procurement of Equipment from the country of Turkey or (B) any change to the Applicable Laws of the country of Turkey, adjustment to the Contract Price shall be limited to the extent Contractor has failed to comply with the Contractor Mitigation Plan and such failure directly resulted in the cost impact for which relief from the change to Import Laws or Applicable Laws in (A) and (B), respectively, is sought; or (C) any event which would otherwise qualify as a Force Majeure Event if such event occurs in, or affects a Supplier located in, the country of Turkey, shall be limited in each such case if Contractor has failed to comply with the Contractor Mitigation Plan such that Contractor shall not receive an adjustment to the Contract Price to the extent that Contractor has failed to comply with the Contractor Mitigation Plan;

(v) with respect to a COVID-19 Applicable Law Issuance, [***] for an additional COVID-19 Type A Counter-Measure to the extent that such COVID-19 Type A Counter-Measure was actually required under Applicable Law to have been implemented prior to the COVID-19 Applicable Law Issuance, but Contractor had either wholly or materially failed to do so, and in such case Contractor’s relief for such additional COVID-19 Type A Counter-Measure [***] (had Contractor properly adopted the required COVID-19 Type A Counter-Measure prior to the applicable COVID-19 Applicable Law Issuance), and the new requirements imposed by the new or revised COVID-19 Type A Counter-Measure;

(vi) [***];

(vii) [***];

(viii) if an Excusable Event consisting of a Change in Law occurs, then the provisions of Section 8.4.1(c) shall also apply;

(ix) if a COVID-19 Event occurs other than a COVID-19 PCSC Event, then the provisions of Section 8.4.2(k) shall also apply; and

(x) if a COVID-19 PCSC Event occurs, then the provisions of Section 8.4.2(l) shall also apply.

(b) Requirement for Change Order. Any adjustment to any of the Guaranteed Substantial Completion Dates, the Key Date Schedule or the Contract Price (with

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corresponding adjustments to the Milestones and the Payment Schedule) made in accordance with Section 18.1.2(a) shall be recorded in a Change Order.

(c) Costs of Rehabilitation Work. Notwithstanding the provisions of this Article 18 to the contrary, with the exception of costs incurred due to delay caused by a Force Majeure event as set forth in Section 18.1.2(a)(iii), the costs of performing Rehabilitation Work, including the costs of Rehabilitation Work that are caused by a Force Majeure event, are set forth in Section 11.3, and this Article 18 shall not limit or alter rights to recover such costs of performing Rehabilitation Work as set forth in Section 11.3.

18.1.3 Concurrent Delay. Notwithstanding the provisions of Article 8 or this

Article 18, to the extent that Contractor would otherwise be entitled to an extension of the Key Date Schedule and the Guaranteed Substantial Completion Date for either or both Stage I and Stage II under Section 18.1.2 due to the occurrence of a Claim Submission Event, but the performance of the Work was or would have been suspended, delayed or interrupted by any cause event, condition or circumstance which does not constitute a Claim Submission Event, [***].

18.1.4 Other Limitations. Notwithstanding anything to the contrary herein, the Parties understand and agree that regardless of how, if at all, Contractor compensates its Suppliers with respect to the occurrence of an event of Force Majeure, Excusable Event or COVID-19 Event (whether by direct cost, extension of schedule, or otherwise), Contractor’s sole remedies and rights hereunder for adjustments to the Key Date Schedule or the Guaranteed Substantial Completion Dates, or for changes to the Contract Price, shall only be as set forth in this Section 18.1. Contractor acknowledges and agrees that Contractor bears the risk that any adjustments to the price or schedule that Contractor grants any of its Suppliers as a result of the occurrence of an event of Force Majeure, Excusable Event or COVID-19 Event, if any, shall be different than the adjustments made pursuant to any Change Order that the Parties agree to pursuant to this Section 18.1. Line items on any Supply Contract change order which purport to set forth an adjustment as a result of an event of Force Majeure, Excusable Event or COVID-19 Event shall not be deemed conclusive evidence that the event of Force Majeure, Excusable Event or COVID-19 Event actually caused such delay or increase in cost. Prior to submitting any Claim from any Supplier to Owner, either as incorporated into a Claim from Contractor to Owner or otherwise, Contractor shall review such Supplier Claim for entitlement, accuracy and completeness (including the provision of appropriate back-up documentation).

18.1.5 Owner Relief. Owner’s obligations under this Agreement shall be suspended to the extent that performance of such obligations is prevented by Force Majeure.

18.1.6 Payment Obligations. Notwithstanding Section 18.1.5, no obligation of a Party to pay moneys under or pursuant to this Agreement shall be suspended or excused by reason of Force Majeure.

18.2 Notice of Occurrence and Contractor Notice Regarding Impact.

18.2.1 Notice of Occurrence. Any Party claiming that a Claim Submission Event has occurred that is reasonably anticipated to affect such Party’s ability to perform its obligations

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hereunder shall, within [***] Business Days after such Party becomes aware or reasonably should have become aware of the event of Claim Submission Event, give notice to the other Party of the occurrence of such event. Failure to provide such notice within such [***] Business Day period shall reduce such Party’s claim for which such notice was required if such Party acted in bad faith in not submitting such notice or the other Party is prejudiced as a result of not getting such notice within such period.

18.2.2 Notice of Impact. In addition to its obligations under Section 18.2.1, if Contractor claims there is a Claim Submission Event, Contractor shall: (a) within thirty (30) Business Days after it becomes aware or reasonably should have become aware of such condition, notify Owner in writing of the nature and cause of such event, its anticipated duration and effect upon the performance of such Party’s obligations, and the estimated cost (if eligible) of such Claim Submission Event, and state any action being taken to avoid or minimize its effect; (b) state whether and to what extent the condition is reasonably expected to delay the Substantial Completion Date for a Stage or any other Key Date Items as set forth on the Key Date Schedule; and (c) state whether Contractor requests a Change Order pursuant to Article 8 with respect thereto (an “Impact Notice”). Failure to provide an Impact Notice within such [***] Business Day period shall reduce Contractor’s claim for which such notice was required if Contractor acted in bad faith in not submitting such Impact Notice or Owner is prejudiced as a result of not getting the Impact Notice within such period. The Party claiming that a Claim Submission Event occurred shall have a continuing obligation to deliver to the other Party additional documentation or analysis supporting its claim regarding the occurrence of such Claim Submission Event promptly after such information is available to the Party claiming such Claim Submission Event. The burden of proof shall be on the Party claiming to be affected by such Claim Submission Event (which burden of proof also extends to all of claiming Party’s claims for relief hereunder). All costs incurred by a Party to document the existence of the Claim Submission Event, including such costs necessary to document the impact (whether cost or schedule related) of such events, shall be borne exclusively by the Party which makes such claim and shall not be subject to reimbursement hereunder.

18.2.3 Claim Submission. By the applicable Claim Submission Deadline, the Party that was affected by such Claim Submission Event shall give written notice to the other Party of (in accordance with the provisions of Section 8.9): (a) all Claims hereunder for relief as a result thereof; (b) the length of time such Claim Submission Event was in effect; (c) the effect such Party claims the Claim Submission Event had on the Contract Price (if eligible), as applicable; and (d) the effect such Party claims such Claim Submission Event had on the Guaranteed Substantial Completion Dates and the other Key Date Items (if eligible). If Contractor submits a preliminary Claim by the initial Claim Submission Deadline and the Claim Submission Deadline is extended, Owner shall be under no obligation to review or respond to the preliminary Claim and the Owner Change Order Review Period shall not commence until the final Claim has been submitted. Because a delay in issuing its claim beyond the Claim Submission Deadline will prejudice Owner’s ability to reasonably verify whether the cost or schedule extension claimed by Contractor were actually and demonstrably incurred by Contractor as a result of such Claim Submission Event, Contractor and Owner have agreed that a failure to deliver such notice (with such Claim, if any) by the Claim Submission Deadline is a

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reasonable and enforceable basis to deny relief hereunder as a result of the occurrence of such event (whether the claim for such relief is Contract Price related, Project Schedule related, or both). Oral notice, shortness of time or Owner’s actual knowledge of a particular circumstance shall not waiver, satisfy, discharge or otherwise excuse Contractor’s compliance with the requirements of this Section 18.2.

18.2.4 Scope of Suspension; Duty to Mitigate. The Party affected by an event of Claim Submission Event shall act diligently to overcome, remove or mitigate the effects of the event of Claim Submission Event, including mitigating the duration, costs and impacts arising from such Claim Submission Event. Among other things, the Party affected by such event of Claim Submission Event shall, as reasonably practicable under the given circumstances, adopt measures in anticipation of the occurrence of a Claim Submission Event in an effort to mitigate potential damage.

18.2.5 [***].

18.2.6 No Claims if Ramp-Up LNTP or Full Notice to Proceed Not Issued. Notwithstanding any [***], or the provisions of Section 18.2.5, in no event will Contractor be entitled to any relief hereunder for any Claim Submission Event, or any other act or omission for which Contractor would otherwise be entitled to a Change Order hereunder, which occurs prior to the earlier to occur of the LNTP Date or the FNTP Date, if this Agreement is terminated for any reason prior to such date.

18.3 Suspension and Evacuation Due to Named Windstorms. Where a Force Majeure event consisting of a Named Windstorm poses a substantial degree of risk to the Site, Contractor shall be entitled to suspend the Work occurring at the Site, and evacuate its and its Subcontractors’ staff and labor from the Site to the extent that Contractor, after direct consultation with Owner, reasonably considers to be necessary as a result of such actual or threatened event. Upon the passing of the Force Majeure event consisting of a Named Windstorm, Contractor shall resume Work at the Site and cause its and its Subcontractors’ applicable staff and labor to return to the Site. Contractor shall be entitled to a Change Order in respect of any such evacuation from the Site in accordance with the agreed evacuation plan. Such Change Order shall (a) include the reasonable costs necessarily incurred by Contractor as a result of the suspension and evacuation to the extent directly incurred: (i) in preparing the Work on the Site to safely weather such Named Windstorm; (ii) as a result of demobilization of Contractor’s personnel and Construction Equipment from the Site, to a safe location prior to the Named Windstorm; or (iii) as a result of remobilization of Contractor’s personnel and applicable Construction Equipment from the off-Site to the Site after the Named Windstorm; and (b) adjustments to the Guaranteed Substantial Completion Dates and the other Key Date Items as determined in accordance with Section 8.4.1(a).

18.4 Labor Impacts. Where a Named Windstorm that impacts the Port Arthur region results in a shortage or unavailability of craft or labor to perform the Work, despite Contractor’s attempts to mitigate the impacts of such Force Majeure event on the Work in accordance with Section 18.2.4, Contractor shall consult with Owner as to the actions that Contractor will take to overcome such shortage or unavailability, including short-term incentives, accommodations, per

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diems and other actions reasonably designed to overcome such shortage or unavailability. Contractor may request a Change Order in accordance with Section 8.3.1(h) with respect to the cost of any such actions to overcome such shortage or unavailability of craft or labor to perform the Work taken by Contractor that have been agreed in writing by Owner; provided, that any Change Order requested by Contractor in connection with the foregoing shall only provide for payment of costs incurred by Contractor to overcome such unavailability of craft or labor delays (or an adjustment to the Contract Price), and Owner shall have the right hereunder to accept or reject such Change Order in its sole and absolute discretion. If Owner accepts such Change Order, then Contractor shall not have any right under this Agreement to any extension to the Guaranteed Substantial Completion Dates and the other Key Date Schedule as a result of any shortage or unavailability of craft or labor as a result of such Named Windstorm, except to the extent agreed in such Change Order. If Owner exercises its rights to reject such Change Order request, then, if such shortage or unavailability of craft or labor delays Contractor in the performance of Critical Path Items such that, based on the CPM Schedule and using critical path analysis, Contractor will fail to achieve Substantial Completion by the Target Substantial Completion Date, then, subject to Contractor’s compliance with its duty to mitigate in accordance with Section 18.2.4 and Contractor’s having implemented and followed the actions agreed with Owner pursuant to this Section 18.4, Contractor may, as its sole and exclusive remedy hereunder resulting from such shortage or unavailability of craft or labor caused by such Named Windstorm, request a Change Order in accordance with Section 8.3.1(h) with respect to adjustments to the Guaranteed Substantial Completion Dates and the other Key Date Items as determined in accordance with Section 8.4.1(a), but Contractor shall not otherwise be entitled to any adjustment to the Contract Price as a result of such shortage or unavailability. Contractor shall include all Change Order claims allowed pursuant to this Section 18.4 by the Claim Submission Deadline with respect to the Named Windstorm.

18.5 Russian and Ukraine Conflict Events. [***].

ARTICLE 19

TERMINATION AND SUSPENSION

19.1 Owner’s Termination for Convenience. Owner shall have the right to terminate this Agreement or Contractor’s performance of all of the Work without any cause and providing any reason, by providing Contractor with a written notice of termination, to be effective upon receipt by Contractor.

19.1.1 Payment for Termination for Convenience.

(a) Upon any termination for convenience by Owner pursuant to this Section 19.1, Contractor shall, subject to the remaining provisions of this Section 19.1.1, be paid the sum of: (i) with respect to Work for which Contractor is to be paid based on the completion of Milestones, the reasonable value of the Work performed prior to termination as determined in accordance with Section 19.1.1(d), but in no event more than the Milestone Payment Amount for the Milestone to which such Work relates; plus (ii) with respect to Work for which Contractor is to be paid based on progress or on a time and materials basis, the reasonable value of the Work

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performed prior to termination determined in accordance with Section 6.2.4 and the Payment Schedule, or in accordance with Section 6.3.4 and Appendix KK, as applicable; plus (iii) costs incurred to perform Work for which a Change Order is pending that is not disputed by Owner at the time of termination, to the extent such costs are actually incurred prior to the date of termination; (iv) reasonable demobilization costs incurred by Contractor, submitted in accordance with this Section 19.1.1; plus (v) reasonable and prudent cancellation fees or charges under any Supply Contracts (not including any Supply Contracts with Affiliates) imposing a contractual obligation on Contractor with respect to such cancellation costs, that are not assigned to Owner pursuant to Section 19.7; less (vi) that portion of the Contract Price previously paid to Contractor.

(b) If, at the date of such termination, Contractor has purchased, prepared or fabricated any Equipment or other component of the LNG Facility off the Site for subsequent incorporation into the LNG Facility, and: (i) Contractor delivers such Equipment, portion of Equipment or such component to the Site as directed by Owner, or to such other place as Owner shall reasonably direct; (ii) title to such Equipment, portion of Equipment or such component is transferred to Owner or the Common Facilities Owner, as applicable, free and clear of all Liens, charges or encumbrances; and (iii) the Supply Contract for the procurement of such Equipment is assigned to Owner or the Common Facilities Owner, as applicable, the Equipment and such component of the LNG Facility shall be included in the Work for which Contractor shall be paid.

(c) Contractor shall submit all of its close-out and demobilization costs, including any cancellation fees or charges that it has submitted to Owner for payment, to Owner for verification and audit within [***] Days following the effective date of termination.

(d) With respect to payments made for reaching Milestones, the Parties recognize and agree that the amount and timing of the Milestone Payments have been determined in part to provide a mutually agreeable cash flow to Contractor and do not necessarily represent the value of the Work performed under the Milestones. As such, in the event of a termination for convenience, Contractor shall not be entitled to the full compensation for such Milestones performed but instead shall be entitled to the reasonable value of the Work actually performed without Defects. Contractor shall provide Owner with full documentation to support any claim for payment pursuant to this Section 19.1.1.

(e) In no event shall: (i) Contractor be entitled to receive payment for Work performed to repair or replace loss or damage to the Work if Contractor has received proceeds from insurance policies obtained under Article 16 in connection with such loss or damage; (ii) Contractor be entitled to receive any amount for overhead, contingency or risk on Work not performed, or anticipatory profit; or (iii) the amount to be paid to Contractor pursuant to this Section 19.1.1, together with all other amounts previously paid to Contractor under this Agreement, exceed the Contract Price.

(f) Notwithstanding anything to the contrary herein: (i) if this Agreement is terminated prior to the FNTP Date but after issuance of the Ramp-Up LNTP or the February 2023 LNTP, the maximum amount paid to Contractor under this Section 19.1.1 shall

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not exceed the aggregate amount of the Maximum LNTP Payment Amounts as set forth in the Ramp-Up LNTP or the February 2023 LNTP, respectively.

19.1.2 SOLE AND EXCLUSIVE REMEDY. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN THE CASE OF A TERMINATION OF THIS AGREEMENT PURSUANT TO WHICH THIS SECTION 19.1 SHALL OR WILL APPLY PURSUANT TO THE TERMS OF THIS AGREEMENT, CONTRACTOR’S SOLE AND EXCLUSIVE REMEDIES, WHETHER IN TORT, CONTRACT OR OTHERWISE AGAINST OWNER OR THE COMMON FACILITIES OWNER, AS APPLICABLE, SHALL BE STRICTLY LIMITED TO THE RIGHT TO PAYMENT IN ACCORDANCE WITH THIS SECTION 19.1. NOTHING IN THIS SECTION 19.1.2 SHALL PRECLUDE CONTRACTOR FROM PURSUING DISPUTES UNDER Article 20 FOR DISPUTED CHANGE ORDERS PENDING AT THE TIME OF TERMINATION.

19.2 Owner Suspension for Convenience. Owner may, for any reason and in its sole and absolute discretion, at any time and from time to time, by written notice to Contractor, suspend the carrying out the Work or any part thereof, whereupon Contractor shall suspend the carrying out of such suspended Work for such time or times and in such manner as Owner may require, and shall take reasonable steps to minimize any costs associated with such suspension and shall take such further actions as are described in Section 19.6. Upon Owner’s notice of termination of such suspension, Contractor shall promptly recommence the Work under the same terms and conditions and, to the extent possible, with the same materials, Equipment, Construction Equipment, labor and other resources that were employed prior to the suspension.

19.3 Default by Contractor.

19.3.1 Contractor Events of Default. Each of the following shall constitute a “Contractor Event of Default”:

(a) Contractor shall fail to pay or cause to be paid when due any amount payable by Contractor to Owner in accordance with the terms and conditions of this Agreement, and such failure continues and is not cured within [***] Business Days after written notice from Owner regarding such failure;

(b) Contractor shall fail to provide or maintain in effect a Letter of Credit required to be provided by Contractor after Contractor has initially provided such Letter of Credit, or Contractor shall fail to provide additional assurances in accordance with Section 17.3, and such failure continues and is not cured within [***] Business Days after written notice from Owner regarding such failure;

(c) Contractor shall fail to provide or maintain in effect the Contractor Guarantee required to be provided by Contractor, or Contractor Guarantor breaches, defaults or fails to comply with any material covenant or material obligation of Contractor Guarantor under the Contractor Guarantee, and such failure, breach, failure to comply or event of default continues and is not cured within [***] Business Days after written notice from Owner regarding

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such failure, which cure in the case of a breach, default or failure to comply by Contractor Guarantor may include Contractor’s delivery of a replacement Contractor Guarantee that cures such failure, breach or event of default from a Person acceptable to Owner in Owner’s sole discretion; provided, however, that if such replacement Contractor Guarantor satisfies the requirements of Section 17.3, Owner’s acceptance of such Person shall not be unreasonably withheld;

(d) Contractor’s Abandonment of the Work;

(e) Contractor shall fail to perform any material covenant or material obligation hereunder not otherwise addressed in this Section 19.3.1, and Contractor shall fail to commence the cure of such failure within [***] Days after receipt of notice from Owner identifying such failure, or if, having commenced the cure within such period, Contractor shall fail (i) to diligently pursue such cure in a manner in compliance with this Agreement; (ii) to cure such failure within [***] Days after Contractor’s receipt of such notice, or such longer period of time as Contractor and Owner agree is reasonably necessary to complete such cure; or (iii) provided that Contractor has ordered the Equipment necessary to effectuate such cure within [***] Days of receipt of Owner’s notice of Contractor’s failure to perform such material covenant or obligation, if it is not reasonably possible to cure such failure to perform within such [***] Day period due to extended delivery times of Equipment necessary to effectuate such cure, then Contractor shall be afforded an extended cure period (reflecting the delivery time for such Equipment and a reasonable period of time for installation) to enable Contractor to cure such failure while at all times exercising all practicable diligence and expediting the delivery of the long lead Equipment;

(f) Contractor shall fail to provide or maintain the insurance coverage as required under this Agreement, and such failure continues and is not cured within [***] Business Days after written notice from Owner regarding such failure;

(g) subject to Owner having paid undisputed amounts owed to Contractor in accordance with this Agreement, Contractor shall fail to discharge or bond Liens filed by any Subcontractor as required under this Agreement;

(h) subject to Owner having paid undisputed amounts owed to Contractor in accordance with this Agreement, Contractor shall fail to make undisputed payments to Subcontractors for labor or materials owed in accordance with the respective Subcontracts, and such failure continues and is not cured within [***] Business Days after written notice from Owner regarding such failure;

(i) any representation or warranty under Article 13 made by Contractor hereunder shall prove to be incorrect (and, with respect to those contained in Section 13.1.5, shall have been incorrect as of the Effective Date), such failure continues and is not cured within [***] Days after written notice from Owner regarding such failure, and such failure has a material adverse effect upon the Liquefaction Project or Contractor’s ability to perform its obligations under this Agreement;

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(j) Contractor shall: (i) generally not, or shall be unable to, or shall declare in writing its inability to, pay its debts as such debts become due and such failure is not cured by Contractor within [***] Business Days; (ii) file or have filed against it a petition in bankruptcy; or (iii) have a trustee or receiver appointed with respect to all or a portion of its properties or affairs;

(k) the Contractor Guarantor shall: (i) generally not, or shall be unable to, or shall declare in writing its inability to, pay its debts as such debts become due; (ii) file or have filed against it a petition in bankruptcy; or (iii) have a trustee or receiver appointed with respect to all or a portion of its properties or affairs, and such failure continues and is not cured by Contractor within ten (10) Business Days, which cure may include Contractor’s delivery of a replacement Contractor Guarantee from a Person acceptable to Owner in Owner’s sole discretion;

(l) Contractor incurs Delay Liquidated Damages equal to the Delay LD Cap, without regard to whether such Liquidated Damages have actually been paid;

(m) (i) Contractor fails to propose a reasonable Recovery Plan in accordance with Section 4.4.2 (without regard as to whether or not Owner has approved the proposed Recovery Plan, but without limiting Owner’s right to challenge the reasonableness of such plan); or (ii) Contractor provides a Recovery Plan but fails to materially comply with that Recovery Plan, and in either case such failure continues and is not cured within [***] Business Days after written notice from Owner regarding such failure;

(n) if at any time prior to the Guaranteed Substantial Completion Date for a Stage, Contractor’s performance of the Work is delayed such that such Stage is not projected to achieve Substantial Completion until after the Guaranteed Substantial Completion Date for such Stage to such an extent that the Delay LD Cap for such Stage would be met, and either: [***].

(o) Contractor is required pursuant to Section 17.3 to provide either an alternative parent company guarantee or an additional letter of credit to Owner as set forth in Section 17.3, and Contractor fails to provide such parent company guarantee or additional letter of credit within [***] Business Days following Owner’s request for such assurance.

Contractor’s attempt to cure any failures as described in any of the foregoing shall not restrict or prohibit Owner from exercising its rights under Section 19.3.2 with respect to any other Contractor Event of Default that may occur during such cure period.

19.3.2 Owner’s Remedies.

(a) Upon the occurrence of a Contractor Event of Default, Owner may, at its option, undertake any one (1) or more of the following:

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(i) cure the same and recover from Contractor or offset against amounts otherwise owing to Contractor or draw from the Letter of Credit the reasonable and substantiated amounts expended by Owner in effecting the cure;

(ii) suspend performance of Contractor’s obligations hereunder;

(iii) terminate this Agreement; provided, however, that in the case of a Contractor Event of Default as described in Section 19.3.1(n) with respect to a Stage, Owner may only terminate this Agreement prior to the Guaranteed Substantial Completion Date for such Stage; or

(iv) subject to the provisions of Sections 4.3.2(d), 5.2.2(c) and 19.3.1(n), Article 15, Article 20 and Article 21, including the exclusions, apportionment and limitations of liability and the Parties’ mutual waiver of any right of equitable rescission therein, exercise any other rights available to Owner at law or in equity.

(b) In addition, Owner shall be entitled to suspend performance of Contractor’s obligations hereunder immediately upon written notice to Contractor (without waiting for the expiration of the cure periods specified in this Section 19.3.2) for such period and to such extent as may be reasonable in the circumstances in a case where the Contractor Event of Default gives rise to an emergency with respect to the safety of Persons or property, including the Work. All remedies for a Contractor Event of Default shall be cumulative and the exercise of one (1) shall not preclude the exercise of another.

19.3.3 Additional Owner Rights Upon Termination for Contractor Event of Default.

(a) If Owner terminates this Agreement for a Contractor Event of Default, then Owner may in its sole and absolute discretion: (i) enter onto the Site and take possession of all equipment, tools, supplies, scaffolding and machinery rented by Contractor for purposes of completing the Work (but not including any equipment, tools, supplies, scaffolding and machinery owned by Contractor or its Affiliates), and all Equipment and Work Product; (ii) take assignment of any or all of the Supply Contracts (excluding Affiliates of Contractor but including CIMTAS and any other Affiliate of Contractor that is no longer wholly directly or indirectly owned by Contractor, the Contractor Guarantor or any Person that directly or indirectly owns the equity interests of Contractor Guarantor); and (iii) complete the Work either itself or through others.

(b) Upon termination of this Agreement by Owner for a Contractor Event of Default, Contractor shall not be entitled to any further payments of the Contract Price except for Work previously performed and such other amounts as calculated using the principles in Section 19.1.1, less that portion of the Contract Price previously paid to Contractor (and subject to Owner’s right to withhold payments under this Agreement). In no event shall the amount paid to Contractor pursuant to this Section 19.3, together with all other amounts previously paid to Contractor under this Agreement, exceed the Contract Price, nor shall

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Contractor be entitled to payment of any such amounts until Contractor’s liability for damages hereunder has been determined in accordance with Section 19.3.3(c).

(c) In the event of a termination of this Agreement for a Contractor Event of Default pursuant to this Section 19.3.3, the Parties agree that Owner shall be entitled to all damages, losses and actual and reasonable costs and expenses incurred by Owner arising out of or resulting from such Contractor Event of Default, including: (i) any and all Delay Liquidated Damages that have accrued in accordance with Section 4.3.1 prior to the date of termination, subject to the termination date having occurred after the Guaranteed Substantial Completion Date of a Stage; and (ii) Owner's actual and reasonable costs (at fully burdened rates for internal personnel costs) of replacing Contractor and mobilizing one (1) or more other contractors in order to complete the Work above the remaining unpaid portion of the Contract Price, including: (A) all actual and reasonable costs of preparing requests for proposals, soliciting and negotiating with contractors; (B) all actual and reasonable costs for the replacement contractors to mobilize, review and understand the LNG Facility, the Liquefaction Project and related documents, and meet with the Liquefaction Project participants in order to get to substantially the same position as Contractor was at the point of termination; and (C) all actual and reasonable costs for the replacement contractors to complete the Work as soon as reasonably practicable and to warrant all Work otherwise completed by Contractor. Upon determination of the total cost of the Work, Owner shall notify Contractor in writing of the amount, if any, that Contractor shall pay Owner or Owner shall pay Contractor. Contractor acknowledges that in the event of such a termination, Owner may enter into a fixed price contract for the completion of the LNG Facility and that the cost to complete the LNG Facility in such event may greatly exceed the cost hereunder.

(d) IF IT IS DETERMINED FOR ANY REASON THAT A CONTRACTOR EVENT OF DEFAULT HAD NOT OCCURRED OR THAT OWNER WAS NOT ENTITLED TO TERMINATE THIS AGREEMENT PURSUANT TO THIS SECTION 19.3, SUCH TERMINATION WILL BE DEEMED TO BE A TERMINATION FOR CONVENIENCE PURSUANT TO SECTION 19.1 AND CONTRACTOR’S SOLE AND EXCLUSIVE REMEDIES WHETHER IN TORT, CONTRACT OR OTHERWISE AGAINST OWNER OR THE COMMON FACILITIES OWNER, AS APPLICABLE, SHALL BE STRICTLY LIMITED TO THE RIGHT TO PAYMENT AS PROVIDED IN SECTION 19.1.1.

19.4 Default by Owner.

19.4.1 Owner Events of Default. Each of the following shall constitute an “Owner Event of Default”:

(a) Owner shall fail to pay or cause to be paid any amount payable by Owner to Contractor when due in accordance with the terms and conditions of this Agreement, except for any sum that (i) Owner has Disputed in accordance with Section 6.4; or (ii) Owner has the right to withhold or offset payment thereof under Section 6.5, and such failure shall continue and is not cured within ten (10) Business Days after written notice from Contractor regarding such failure;

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(b) any representation or warranty made by Owner hereunder shall prove to be false or incorrect, such failure shall continue and is not cured within [***] Days after written notice from Contractor regarding such failure, and such defect shall have a material adverse effect upon Owner’s ability to perform its obligations under this Agreement; or

(c) Owner: (i) shall generally not, or shall be unable to, or shall declare in writing its inability to, pay its debts as such debts become due; or (ii) shall file or have filed against it a petition in bankruptcy; or (iii) shall have a trustee or receiver appointed with respect to all or a portion of its properties or affairs, and such failure shall continue and is not cured within [***] Business Days after written notice from Contractor regarding such failure.

19.4.2 Contractor’s Remedies. Upon the occurrence of an Owner Event of Default specified in Section 19.4.1:

(a) Contractor may serve Owner with a notice of intent to suspend the Work (a “Suspension Notice”) on or after [***] Days after the occurrence of an Owner Event of Default that is continuing as of the date of such Suspension Notice, effective immediately or on such later date as Contractor indicates in the date of the Suspension Notice, and may thereafter suspend the Work; and

(b) on or after [***] Days after the suspension of the Work in accordance with Section 19.4.2(a) and provided that the Owner Event of Default is continuing as of such date, Contractor may serve Owner with a notice of intent to terminate this Agreement (a “Termination Notice”) effective immediately or within [***] Days thereafter, and if the Owner Event of Default has not cured by the termination date indicated in the Termination Notice, this Agreement shall terminate in accordance with the Termination Notice;

provided, that in either case upon cure of such Owner Event of Default by Owner, the aforementioned rights shall no longer be applicable.

19.4.3 Mitigation. After Contractor shall have suspended the Work under Section 19.4.2, Contractor shall take reasonable steps towards mitigating the costs and expenses it incurs hereunder.

19.4.4 Termination due to Suspension or Force Majeure. If on or after the FNTP Date, all or a substantial portion of the Work is suspended by Owner pursuant to Section 19.2 for [***] consecutive Days or [***] Days in the aggregate, or is stopped due to one (1) or more Force Majeure events or COVID-19 Events for [***] Days in the aggregate, Contractor may terminate this Agreement upon [***] Days prior written notice to Owner; provided, however, in the case of Force Majeure events, if Owner agrees to pay delay costs in accordance with Section 18.1.2(a)(ii) beginning on Day [***], without applying the [***] Day threshold or the [***] limitation on Owner’s liability as set forth in Section 18.1.2(a)(ii), Contractor shall not have the right to terminate this Agreement under this Section in connection with such Force Majeure events.

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(a) IF THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION 19.4.2 OR SECTION 19.4.4, CONTRACTOR’S SOLE AND EXCLUSIVE REMEDY SHALL BE PAYMENT OF THE AMOUNTS THAT WOULD BE OWING PURSUANT TO SECTION 19.1.1, AND CONTRACTOR:

(i) AGREES THAT SUCH PAYMENT SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF CONTRACTOR, WHETHER IN TORT, CONTRACT OR OTHERWISE, WITH RESPECT TO THE TERMINATION OF THIS AGREEMENT; AND

(ii) HEREBY WAIVES AND RELEASES (AND SHALL CAUSE THE OTHER MEMBERS OF THE CONTRACTOR GROUP TO WAIVE AND RELEASE) THE OWNER GROUP FROM LIABILITY FOR ANY CLAIMS AND EXPENSES (INCLUDING COURT COSTS, ATTORNEYS’ FEES AND DISBURSEMENTS, AND OTHER LITIGATION COSTS) SUFFERED BY ANY CONTRACTOR GROUP MEMBER IN CONNECTION WITH SUCH TERMINATION.

19.5 Cure Rights of Lenders.

19.5.1 Right to Cure. Each Lender shall have the right to cure any Owner Event of Default or other breach of this Agreement, which shall include reasonable rights of access, if requested by such Lender, and the right to receive reasonably requested information, if either is necessary for such Lender to cure such Owner Event of Default or other breach; provided, that such Lender shall not receive any right of access or information beyond that to which Owner is entitled to hereunder.

19.5.2 Notices. If Owner provides Contractor with the identity and contact information of any Lender, Contractor shall provide such Lender with a copy of each notice by Contractor of an Owner Event of Default, Suspension Notice, Termination Notice, notice terminating this Agreement, notice of Force Majeure, Impact Notice and written amendment to or waiver of rights under this Agreement proposed by Contractor to Owner (other than a Change Order) with respect to this Agreement at the same time, and in the same manner, as Contractor furnishes such notice to Owner.

19.6 Contractor General Obligations Upon Suspension. During any suspension of the Work, Contractor shall properly protect and secure such suspended Work in such manner as Owner may reasonably require. Unless otherwise instructed by Owner, Contractor shall during any suspension, subject to Owner making the undisputed payments due to Contractor during such suspension, including pursuant to Change Orders issued under Section 8.3.1 as a result of such suspension, maintain its staff and labor on or near the Site and otherwise be ready to proceed expeditiously with the Work upon receipt of Owner’s further instructions; provided, that after a period of thirty (30) Days, Contractor may fully demobilize the Work; provided, further, that, during any suspension of the Work, notwithstanding any demobilization, and until termination of this Agreement, Contractor shall maintain, at a minimum, Site management and security (the cost of which shall be included in the Change Order, if any, issued pursuant to Section 8.3.1(e) or 8.3.1(i), as applicable).

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19.7 Contractor General Obligations Upon Termination. Upon termination of this Agreement under this Article 19, Contractor shall, using GECP: (a) discontinue the Work on the date and to the extent specified in the notice of termination; (b) place no further orders under Supply Contracts, or any other items or services except as may be necessary for completion of such portion of the Work as is not discontinued; (c) unless Owner elects to take assignment of a Supply Contract, promptly make commercially reasonable efforts to cancel the Supply Contracts on terms reasonably satisfactory to Owner; (d) assist Owner in the maintenance, protection, and disposition of Work in progress; (e) cooperate with Owner in the efficient transition of the Work; (f) cooperate with Owner in the transfer of the Work Product, including Drawings and Specifications, Permits, Licenses; and (g) thereafter execute only that portion of the Work as may be necessary to preserve and protect Work already in progress and to protect Equipment at the Site, or in storage off-Site or while in transit, and to comply with any Applicable Laws. Owner may, at its sole option, take assignment of any or all of the Supply Contracts, including Supply Contracts with CIMTAS but excluding other Affiliates of Contractor.

19.8 Termination for Delay in FNTP Date. If the FNTP Date does not occur on or before May 8, 2023 and the Parties have not reached agreement as to how to proceed with this Agreement on or before May 8, 2024, either Party may terminate this Agreement in its sole discretion at any time after such date by providing the other Party with a written notice of termination, to be effective upon receipt by the receiving Party. Notwithstanding anything to the contrary herein, if this Agreement is terminated pursuant to this Section 19.8, except in connection with the Ramp-Up LNTP or the February 2023 LNTP, if issued, and subject to Section 19.1.1(f), Contractor shall not have any right to receive any payment hereunder, and Owner shall have no obligation to make any payment to Contractor hereunder, in connection with the termination of this Agreement.

19.9 WAIVER OF CERTAIN RIGHTS. CONTRACTOR WAIVES ANY RIGHT IT MAY HAVE UNDER ANY APPLICABLE LAWS OR EQUITABLE PRINCIPLES TO SUSPEND PERFORMANCE OF THE WORK OR TERMINATE THIS AGREEMENT, EXCEPT AS EXPRESSLY AUTHORIZED BY THIS ARTICLE 19.

ARTICLE 20

DISPUTE RESOLUTION

Any disputes, controversies or claims between Owner and Common Facilities Owner on the one hand, and Contractor on the other hand (the “Disputing Parties”) arising under or related to this Agreement (a “Dispute”), including the construction, validity, enforceability, breach, termination of this Agreement, that is not resolved in the ordinary course by the Parties, shall be resolved in accordance with the procedures established in this Article 20. References to Owner in this Article 20 shall be read and understood to include a reference to Common Facilities Owner. Common Facilities Owner hereby agrees and appoints Owner as its attorney-in-fact to pursue any Claims or Disputes that Common Facilities Owner may have against Contractor hereunder or in connection with this Agreement or the Work.

20.1 Notice of Dispute. Either Disputing Party shall give notice to the other Party in writing that a Dispute has arisen (“Dispute Notice”).

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20.2 Informal Dispute Resolution.

20.2.1 Executive Officer Negotiation. If the Disputing Parties have failed to resolve the Dispute within [***] Business Days after the Dispute Notice was given, the Disputing Parties shall seek to resolve the Dispute by negotiation between the executive officers of each Disputing Party. Such executive officers shall endeavor to meet and attempt to amicably resolve the Dispute. If the Disputing Parties are unable to resolve the Dispute for any reason through negotiation within [***] Business Days after the Dispute Notice was given, then the Dispute shall be finally resolved in accordance with the following provisions of this Article 20.

20.2.2 Designated Claims. If (a) the executive officers of each Disputing Party have met and the Disputing Parties are unable to resolve a Dispute or Disputes in accordance with Section 20.2.1 through negotiation within thirty (30) Business Days after the applicable Dispute Notice was given; and (b) such Dispute is a Designated Claim (as defined in Appendix XX), the Disputing Parties shall be entitled to inspect and copy the documents in accordance with Appendix XX to the extent permitted therein.

20.2.3 Early Arbitration. Notwithstanding anything to the contrary in Section 20.2 or Section 20.3, arbitration may be initiated before completion of negotiation or mediation pursuant to Section 20.2 or Section 20.3, if necessary, and only to the extent necessary, to preserve a Party's rights or to avoid irreparable harm pending resolution of the Dispute, but any such proceedings shall be limited to those purposes until the negotiation or mediation is completed or the time for negotiation has expired.

20.3 Mediation.

20.3.1 Initiation of Mediation. If a Dispute is not resolved by the negotiations described in Section 20.2, either Party may initiate mediation; provided, however, that if Owner has exercised its copy and inspection rights under Appendix XX, and subject to Section 20.3.3, such mediation shall not commence until Owner has had a reasonable opportunity to review the Books and Records and other documents produced or required to be produced pursuant to Appendix XX. The Parties shall work together for period of [***] Days to jointly choose a mediator, but if the Parties cannot agree on a mediator, then the mediation and the identification of the mediator shall be initiated by the method prescribed in the AAA Rules in effect at the time the Dispute arises. The mediation shall be attended by representatives of Owner and Contractor that have sufficient authority to resolve the Dispute or have ready access to persons with such authority.

20.3.2 Conduct of Mediation. Unless Owner and Contractor otherwise agree, the mediation shall be administered by the AAA and conducted by an independent mediator and in accordance with the AAA Rules in effect at the time of the Dispute Notice. The mediation shall be conducted in Houston, Texas, and the Parties shall endeavor to conduct the mediation within [***] Days after the notice initiating mediation is delivered, unless a different time is agreed to by the Parties or the Parties have not provided all of the documents required under Appendix XX.

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20.3.3 Mandatory Mediation. Subject to Section 20.2.3, completion of the negotiations and mediation is a condition precedent to the initiation of arbitration and no Dispute shall be brought either separately or together with other claims or disputes, unless such Dispute first has been the subject of negotiations and mediation; provided, however, that with respect to a Designated Claim, Owner and Contractor shall each have the right to immediately commence an arbitration pursuant to Section 20.4 with respect to any such claim at any time after the end of the negotiating period in Section 20.2.2.

20.4 Arbitration and Arbitration Procedures. Any Dispute that is not settled pursuant to Section 20.2 or Section 20.3 shall be finally settled by arbitration in accordance with the AAA Rules in effect at the time of the Dispute Notice (except as they may be modified herein or by mutual agreement of the Disputing Parties), as follows:

20.4.1 Location; Arbitration Request. The place of arbitration shall be Houston, Texas, and the language of the arbitration shall be English. The Disputing Party initiating recourse to arbitration shall submit a request for arbitration (“Request for Arbitration”) as provided under the AAA Rules. Any questions regarding the enforceability of the arbitration requirements set forth herein, or the arbitration of claims arising out of or relating to the Work or this Agreement shall be resolved by an arbitration tribunal selected in accordance with this Agreement.

20.4.2 Arbitration Tribunal. The arbitration proceeding shall be conducted by a tribunal (the “Tribunal”) comprised of three (3) neutral and impartial arbitrators selected in accordance with the process and each having the qualifications set forth in this Section 20.4. Each of the Disputing Parties shall nominate one (1) arbitrator by filing a notice of appointment of such arbitrator with the AAA in accordance with the AAA Rules. If a Party fails to nominate an arbitrator in accordance with this Section 20.4.2, the AAA shall appoint an arbitrator in accordance with this Section 20.4 and the AAA Rules. Within [***] Days after the nomination or appointment of the second arbitrator, the two (2) party-nominated or appointed arbitrators shall nominate the third arbitrator to serve as chairperson of the Tribunal. In the event that the party-nominated or appointed arbitrators are unable to agree on the third arbitrator within the time provided by this Section 20.4.2, any arbitrators or the chairperson of the Tribunal shall, as necessary, be appointed by the AAA in accordance with the AAA Rules.

20.4.3 Qualifications of Arbitrators. Each of the three (3) arbitrators is to be experienced with the engineering and construction industry or disputes on large construction projects. At least two (2) of the arbitrators, including the chairperson, shall be attorneys with at least fifteen (15) years of legal experience relating to the engineering and construction industry, or retired judges with experience in disputes with respect to large construction projects. A non-lawyer arbitrator, if any, shall have at least twenty (20) years of experience in the engineering and construction industry and shall be trained and have served as an arbitrator. All arbitrators shall be fluent in English.

20.4.4 Discovery. Each Disputing Party shall have the right to request the other Disputing Party and any nonparties to produce documents and to request depositions of the other Disputing Party and other Persons. In making any determination regarding the scope of

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production, including the production of documents and depositions, the arbitration tribunal selected under Section 20.4.2 shall be guided by the Federal Rules of Civil Procedure as applied by the United States District Court for the Southern District of Texas.

20.4.5 Expedited Procedures. In the event that Owner and Contractor do not agree upon whether Ready for Start-Up for a Stage, or Substantial Completion of a Stage has been achieved pursuant to Section 9.4.2 or 9.8, respectively, either Party may initiate an expedited arbitration process pursuant to this Section 20.4.5 by delivering a notice of such expedited arbitration to the other Party. In the case of any such expedited arbitration: (a) the provisions of Section 20.3 shall not be applicable; (b) the thirty (30) Business Day period referred to in Section 20.4.2 shall be reduced to a ten (10) Day period; (c) the Parties shall use good faith efforts to promptly resolve any Disputes regarding discovery; (d) the arbitration hearing shall be commenced as promptly as possible, giving due consideration to the nature and complexity of the Dispute; and (e) the Parties shall request that the arbitration tribunal issue its final award or awards within twenty (20) Days after the conclusion of the arbitration hearings. In no event shall the provisions of this Section 20.4.5 be construed or be deemed to limit or modify Owner’s right to conduct audits pursuant to this Agreement.

20.5 Entry of Judgment. The award of the Tribunal shall be final and binding upon the Parties as from the date the Parties are notified of the award by the Tribunal, and shall be the sole and exclusive remedy between the Parties regarding any Disputes, issues or accounting presented to the Tribunal. Judgment upon any award may be entered and enforced in any court having jurisdiction over a Party or any of its assets. To the extent permitted by Applicable Laws, the Parties hereby waive any right to appeal from or challenge any arbitral decision or award, or to oppose enforcement of any such decision or award before a court or any Governmental Authority, except with respect to the limited grounds for modification or non-enforcement provided by any applicable arbitration statute or treaty. For the purpose of the enforcement of an award, the Parties irrevocably and unconditionally submit to the jurisdiction of a competent court in any jurisdiction in which a Party may have assets and waive any defenses to such enforcement based on lack of personal jurisdiction or inconvenient forum.

20.6 Fees and Expenses. Each Party shall bear its own costs, expenses and attorney’s fees, including any disbursements and costs of arbitration, associated with the resolution of Disputes in accordance with this Article 20, and shall share equally the costs of mediation and arbitration, as applicable. Notwithstanding anything to the contrary herein or in the AAA Rules, none of the mediators or the arbitrators shall have the authority to allocate the costs or expenses of the Dispute resolution proceedings.

20.7 Joinder; Consolidation. In order to facilitate the comprehensive resolution of related Disputes, all Disputes between the Parties arising under or related to this Agreement and all Disputes between Owner, Contractor and any of Owner’s or Contractor’s respective Suppliers may be brought in a single arbitration.

20.7.1 Joinder. The Parties to this Agreement are bound, each to each other, by the arbitration provisions in this Agreement. Each Party to this Agreement agrees, and Owner and Contractor, as applicable, shall use commercially reasonable efforts to cause each of

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Owner’s or Contractor’s respective Other Contractors and Suppliers that are Affiliates of Contractor or that have entered into a Supply Contract directly with Contractor, to agree to be joined as an additional party to any arbitration begun under this Agreement or any other agreement related to the LNG Facility between Owner, Contractor or any of Owner’s or Contractor’s respective Other Contractors and Suppliers, and each Party to this Agreement consents to the joinder of any Other Contractors or Suppliers, in accordance with AAA Rules. Neither Owner nor Contractor shall object to the joinder of any Supplier or Other Contractor that has agreed to be joined as an additional party.

20.7.2 Consolidation. Upon the request of any Party to an arbitration proceeding constituted under this Agreement, the AAA may consolidate such arbitration proceeding with any other arbitration proceeding arising under or related to this Agreement and other agreement related to the LNG Facility between Owner, Operator or Owner’s or Contractor’s respective Other Contractors and Suppliers, as provided in the AAA Rules. In deciding whether to consolidate, the AAA may take into account any circumstances it considers to be appropriate including whether (a) there are issues of fact or law common to the proceedings so that a consolidated proceeding would be more efficient than separate proceedings; and (b) any Party would be prejudiced by consolidation due to undue delay or otherwise. If the parties to the arbitrations to be consolidated are not the same, then the Parties shall have fifteen (15) Days from receipt of the order of consolidation to nominate a three (3) member tribunal to serve as arbitrators for the consolidated arbitration, and if no such agreement is reached, all three (3) arbitrators shall be appointed by the AAA. The Parties waive any right they may have to appeal or to seek interpretation, revision or annulment of such order of consolidation under the AAA Rules or in any court. The Parties agree that upon such an order of consolidation, they will promptly withdraw their claims and any counterclaims and terminate any arbitration brought under this Article 20, the subject of which has been consolidated into another arbitral proceeding under this Section 20.7.2.

20.8 Confidentiality. Any Dispute Notice pursuant to Section 20.1, informal Dispute resolution pursuant to Section 20.2, mediation pursuant to Section 20.3, or arbitration pursuant to Section 20.4 relating to a Dispute (including a settlement resulting from an arbitral award, documents exchanged or produced during an arbitration proceeding, and memorials, briefs or other documents prepared for the arbitration) shall be confidential and may not be disclosed by the Parties, their employees, officers, directors, counsel, consultants, and expert witnesses, except (a) (in accordance with Article 14) to the extent necessary to enforce this Article 20, including the consolidation of related Disputes as set forth in Section 20.7, or any arbitration award; (b) to enforce other rights of a party to the Dispute; (c) to the Lenders and the Independent Engineer, and their respective employees, officers, directors, counsel and consultants, in accordance with and subject to the provisions of Article 14; or (d) as required by Applicable Laws or the rules of any stock exchange applicable to the Person making such disclosure; provided, however, that breach of this confidentiality provision shall not void any settlement, expert determination or award.

20.9 Continuation of Work During Dispute. Notwithstanding any Dispute, Contractor shall continue to prosecute all of the Work diligently and in a good and workmanlike manner in

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conformity with this Agreement. Except to the extent provided in Section 19.4, Contractor shall not cease performance of the Work or its obligations hereunder, or permit the performance of the Work to be delayed. Owner shall, subject to its right to withhold or offset amounts pursuant to this Agreement, continue to pay Contractor amounts not in Dispute in accordance with this Agreement; provided, however, that in no event shall the occurrence of any negotiation or litigation prevent or affect Owner from exercising its rights under this Agreement, including Owner’s right to terminate pursuant to Article 19.

ARTICLE 21

LIMITATION ON LIABILITY

21.1 CONTRACTOR OVERALL LIMIT OF LIABILITY. NOTWITHSTANDING ANY OTHER PROVISIONS OF THE AGREEMENT TO THE CONTRARY, EXCEPT AS EXPRESSLY DESCRIBED IN THIS SECTION 21.1, CONTRACTOR SHALL NOT BE LIABLE TO EITHER OR BOTH OWNER AND THE COMMON FACILITIES OWNER UNDER THIS AGREEMENT, OR ANY CAUSE OF ACTION RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR OTHERWISE, FOR CUMULATIVE AGGREGATE AMOUNTS IN EXCESS OF THE MAXIMUM LIABILITY CAP, AND, SUBJECT TO THE FOLLOWING PROVISIONS OF THIS SECTION 21.1, OWNER AND THE COMMON FACILITIES OWNER HEREBY RELEASE CONTRACTOR FROM ANY LIABILITY IN EXCESS OF THE MAXIMUM LIABILITY CAP IN ALL CASES EVEN IF THIS AGREEMENT IS TERMINATED FOR A CONTRACTOR EVENT OF DEFAULT; PROVIDED, THAT, NOTWITHSTANDING THE FOREGOING, BUT IN ANY EVENT SUBJECT TO SECTION 21.2, THE LIMITATION OF LIABILITY AND THE RELEASE SET FORTH IN THIS SECTION 21.1 SHALL NOT APPLY TO: (A) CONTRACTOR’S OBLIGATION TO PERFORM AND COMPLETE THE WORK NECESSARY TO ACHIEVE SUBSTANTIAL COMPLETION FOR EACH STAGE OF THE LNG FACILITY (SUBJECT TO CONTRACTOR’S RIGHT TO PAY PERFORMANCE LIQUIDATED DAMAGES WITH RESPECT TO A GUARANTEED PERFORMANCE LEVEL TO WHICH A MINIMUM PERFORMANCE STANDARD APPLIES IN ACCORDANCE WITH SECTION 9.10); (B) CONTRACTOR’S OBLIGATIONS UNDER ARTICLE 15; AND (C) CONTRACTOR’S OBLIGATION TO DELIVER TO OWNER FULL LEGAL TITLE TO AND OWNERSHIP OF ALL OR ANY PORTION OF THE WORK AND THE LNG FACILITY FREE AND CLEAR OF ANY LIENS OR OTHER ENCUMBRANCE IN ACCORDANCE WITH THIS AGREEMENT. IN NO EVENT SHALL AMOUNTS INCURRED BY CONTRACTOR TO PERFORM THE WORK, INCLUDING TO REPAIR OR REPLACE DEFECTIVE WORK, PRIOR TO SUBSTANTIAL COMPLETION OF A STAGE, OR TO PERFORM ITS OBLIGATIONS HEREUNDER THAT ARE COVERED BY PROCEEDS RECEIVED FROM INSURANCE COVERAGE OBTAINED BY CONTRACTOR PURSUANT TO ARTICLE 16, BE COUNTED AGAINST THE LIMITATION OF LIABILITY SET FORTH IN THIS SECTION 21.1.

21.2 LIMITATION ON CONSEQUENTIAL, PUNITIVE AND OTHER DAMAGES. NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT TO THE CONTRARY, NEITHER OWNER NOR THE COMMON FACILITIES OWNER, NOR CONTRACTOR, SHALL BE LIABLE TO THE OTHER (OR TO ANY OTHER PERSON CLAIMING THROUGH THEM OR UNDER THIS AGREEMENT) PURSUANT TO THIS

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AGREEMENT OR UNDER ANY CAUSE OF ACTION RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, PRODUCTS LIABILITY, PROFESSIONAL LIABILITY, INDEMNITY, CONTRIBUTION, OR ANY OTHER CAUSE OF ACTION FOR (A) SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL LOSSES OR DAMAGES; OR (B) LOSS OF PROFITS, LOSS OF USE, LOSS OF PRODUCT, LOSS OF PRODUCTIVITY, LOSS OF OPPORTUNITY, LOSS OF REVENUES, LOSS OR COST OF OBTAINING OR MAINTAINING FINANCING, COST OF CAPITAL, LOSS OF OR REDUCTION IN BONDING CAPACITY, LOSS OF GOODWILL, BUSINESS INTERRUPTION OR CLAIMS BY OWNER’S CUSTOMERS, WHETHER OR NOT ANY OF THE FOREGOING ARE CONSIDERED OR CLASSIFIED AS DIRECT, SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, AND OWNER, THE COMMON FACILITIES OWNER AND CONTRACTOR ON BEHALF OF THEMSELVES AND ANY OTHER PERSON CLAIMING THROUGH THEM OR UNDER THIS AGREEMENT, HEREBY WAIVE AND RELEASE EACH OTHER FROM ALL SUCH LOSSES AND DAMAGES. THE WAIVER, RELEASE AND LIMITATION OF LIABILITY SET FORTH IN THIS SECTION 21.2 SHALL NOT APPLY TO THE DELAY LIQUIDATED DAMAGES SET OUT IN SECTION 4.3 OR THE PERFORMANCE LIQUIDATED DAMAGES SET OUT IN SECTION 5.2, OR, IF SUCH LIQUIDATED DAMAGES AMOUNTS ARE FOUND TO BE UNENFORCEABLE DUE TO A CHALLENGE BY CONTRACTOR OR CONTRACTOR’S GUARANTOR, TO ANY ACTUAL DAMAGES PAYABLE IN LIEU OF SUCH LIQUIDATED DAMAGES AMOUNTS. IF CONTRACTOR OR CONTRACTOR GUARANTOR SEEKS AN ORDER FROM A COURT OR A FINDING BY AN ARBITRATOR TO INVALIDATE OR REDUCE ANY OF THE LIQUIDATED DAMAGES AMOUNTS SET FORTH IN THIS AGREEMENT, CONTRACTOR SPECIFICALLY AGREES TO PAY OWNER ALL ACTUAL DAMAGES INCURRED BY OWNER IN CONNECTION WITH THE FAILURE TO ACHIEVE THE APPLICABLE GUARANTEED SUBSTANTIAL COMPLETION DATE OR GUARANTEED PERFORMANCE LEVELS, AS APPLICABLE; PROVIDED, THAT THE FOREGOING SHALL NOT LIMIT CONTRACTOR’S RIGHTS TO DISPUTE WHETHER OR NOT LIQUIDATED DAMAGES ARE ACTUALLY OWED. DAMAGES CLAIMED BY THIRD PARTIES (BUT NOT INCLUDING ANY OWNER INDEMNIFIED PARTIES OR CONTRACTOR INDEMNIFIED PARTIES) FOR WHICH CONTRACTOR OR OWNER HAVE A DUTY TO INDEMNIFY THE OTHER PARTY PURSUANT TO THIS AGREEMENT, SHALL NOT BE SUBJECT TO THE LIMITATIONS SET FORTH IN THIS SECTION 21.2. THE LIMITATIONS SET FORTH IN THIS SECTION 21.2 SHALL APPLY TO ANY SUPPLIER THAT INCLUDES A SIMILAR WAIVER AND LIMITATION ON LIABILITY IN FAVOR OF OWNER IN THE SUPPLY CONTRACTS SUCH SUPPLIER ENTERS INTO WITH RESPECT TO THE WORK.

21.3 APPLICABILITY OF LIABILITY LIMITATIONS. EXCEPT TO THE EXTENT PROHIBITED BY APPLICABLE LAWS, OR AS OTHERWISE STATED IN THIS AGREEMENT TO THE CONTRARY, THE WAIVERS, RELEASES, EXCLUSIVE REMEDY PROVISIONS, DISCLAIMERS OF LIABILITY, LIMITATIONS AND APPORTIONMENTS OF LIABILITY SET FORTH IN THIS AGREEMENT SHALL APPLY EVEN IN THE

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EVENT OF THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), GROSS NEGLIGENCE, WILLFUL MISCONDUCT, STRICT LIABILITY, BREACH OF DUTY (STATUTORY OR OTHERWISE), BREACH OF CONTRACT, VIOLATION OF LAW OR OTHER LEGAL FAULT OF THE PERSON WHOSE LIABILITY IS WAIVED, DISCLAIMED, LIMITED OR FIXED, A PRE-EXISTING DEFECT, OR ANY OTHER CAUSE WHATSOEVER, AND SHALL EXTEND TO A PARTY’S AFFILIATES AND ITS AND THEIR DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. [***].

21.4 EXCLUSIVE REMEDIES. IT IS THE INTENT OF THE PARTIES THAT TO THE EXTENT THAT THERE ARE SPECIFIC REMEDIES SET OUT IN THIS AGREEMENT THAT ARE IDENTIFIED AS THE SOLE AND EXCLUSIVE REMEDIES, SUCH REMEDIES SHALL BE THE SOLE AND EXCLUSIVE RIGHTS AND REMEDIES OF THE PARTIES FOR THE OBLIGATIONS AND LIABILITIES TO WHICH SUCH REMEDIES ARE EXPRESSLY STATED TO APPLY, NOTWITHSTANDING ANY OTHER REMEDIES THAT MAY OTHERWISE BE AVAILABLE AT LAW OR IN EQUITY. NOTWITHSTANDING THE FOREGOING, TO THE EXTENT THIS AGREEMENT DOES NOT SET FORTH A SPECIFIC REMEDY, THE PARTIES MAY EXERCISE ANY RIGHTS AND OBTAIN ANY REMEDIES AVAILABLE AT LAW OR IN EQUITY, OTHER THAN RESCISSION, AND EACH PARTY EXPRESSLY WAIVES ANY RIGHT OF RESCISSION THAT MAY OTHERWISE BE APPLICABLE.

ARTICLE 22

NOTICES

22.1 Address Information. Any notices and communications required or permitted to be given hereunder shall be sufficient in all respects if given in writing and delivered personally or sent by bonded overnight courier, or mailed by U.S. Express Mail or by certified or registered United States Mail with postage fully prepaid, or sent by electronic transmission (provided that any such electronic transmission is confirmed either orally or by written confirmation), addressed to the appropriate Party at the address for such Party shown below or at other such address as such Party shall have designated by written notice delivered to the Party giving such notice:

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			If to Contractor:			Bechtel Energy Inc.
						3000 Post Oak Blvd.
						Houston, TX 77056
						E-mail: [###]
						Attn: Kane McIntosh

			With a copy to:			Bechtel Energy Inc.
						3000 Post Oak Blvd.
						Houston, TX 77056
						E-mail: [###]
						Attn: Manager of Legal

			If to Owner:			Port Arthur LNG, LLC
						1500 Post Oak Blvd., Suite 1000
						Houston, TX 77056
						E-mail: [###]
						Attn: Karim El Kheiashy

			With a copy to:			Sempra Infrastructure
						1500 Post Oak Blvd., Suite 1000
						Houston, TX 77056
						E-mail: [###]
						Attn: Carolyn Benton Aiman

			If to Common Facilities Owner:			PALNG Common Facilities Company, LLC
						1500 Post Oak Blvd., Suite 1000
						Houston, TX 77056
						E-mail: [###]
						Attn: Karim El Kheiashy

			With a copy to:			Sempra Infrastructure
						1500 Post Oak Blvd., Suite 1000
						Houston, TX 77056
						E-mail: [###]
						Attn: Carolyn Benton Aiman

Whenever any notice is required to be given by Applicable Laws or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

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22.2 Deliveries of Notices; Revised Notice Information. Unless otherwise provided herein, any notice given in accordance with this Agreement shall be deemed to have been given: (a) when delivered to the addressee in person or by courier; (b) when transmitted by electronic transmission during normal business hours, or if not transmitted during normal business hours, at the commencement of normal business hours on the next Business Day; or (c) upon actual receipt by the addressee after such notice has either been delivered to an overnight courier or deposited in the United States Mail, as the case may be. A Party may change the address and address for electronic transmissions to which such communications are to be addressed, by giving written notice to the other Party in the manner provided in Section 22.1.

22.3 Routine/Technical Correspondence. Owner and Contractor shall establish channels of communication for routine and technical correspondence pursuant to Appendix S that do not comply with this Article 22. Notwithstanding establishment and use of such alternate channels of communication, any notices of an Event of Default, claims, Disputes and similar communication and correspondence shall not be effective unless and until delivered pursuant to and in accordance with this Article 22.

ARTICLE 23

MISCELLANEOUS

23.1 Entire Agreement. This Agreement, together with the Contractor Guarantee and the Direct Agreements, sets forth all of the understandings and agreements between the Parties solely with respect to the subject matter hereof and supersede all prior agreements, including the February 2020 Agreement, the September 2022 Letter Agreement, the First Amended and Restated Agreement and the Contractor Guarantees issued in connection therewith, negotiations, understandings and representations, whether written or oral, between the Parties with respect to the subject matter hereof. Each Party represents and warrants to the other that it has not relied on any information or representations, express or implied, provided by the other Party or any promises made by the other than as expressly contained in this Agreement.

23.2 Amendments. This Agreement may not be amended, modified, varied or supplemented except by an instrument in writing signed by Owner and Contractor.

23.3 Waiver. Unless otherwise specifically indicated herein, any waiver, consent or acceptance or rejection of any kind or character by any Party of any term or condition set forth in this Agreement, or of any breach or default hereunder, shall be given or withheld in the sole and absolute discretion of the waiving, consenting, accepting or rejecting Party and all such waivers, consents, acceptances and rejections shall be in writing. No delay or omission to exercise any right, power or remedy accruing to any Party as the result of any breach or default hereunder shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed or otherwise constitute a waiver of any other breach or default theretofore or thereafter occurring.

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23.4 Effect of Review, Acceptance and Inspection. No acceptance or rejection of, inspection of or failure to inspect, review or non-review of, or rejection of or failure to reject, nor any comments with respect to any of the Work by Owner pursuant to this Agreement shall relieve Contractor of any of its obligations, guarantees or warranties hereunder.

23.5 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to its principles of conflicts of laws. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement and shall be disclaimed in and excluded from any Supply Contracts entered into by Contractor in connection with the Work or the LNG Facility.

23.6 Severability. If any provision of this Agreement or the application thereof to any Party or circumstance is held invalid or unenforceable to any extent: (a) the remainder of this Agreement and the application of that provision to the other Party or other circumstances is not affected thereby; and (b) the Parties shall negotiate in good faith to replace that provision with a new provision that is valid and enforceable and that effects the intent of the Parties in such original provision.

23.7 Assignment and Assumption of Obligations.

23.7.1 Assignment. This Agreement may be assigned to other Persons only upon the prior written consent of the non-assigning Party hereto, except Owner may, upon notice to Contractor, assign this Agreement, in whole or part, to any of its Affiliates or any of its co-venturers or to any Person who acquires an ownership interest in Owner or the LNG Facility; provided, however, that if this Agreement is assigned in part to any Person, that Owner shall remain fully liable for the performance of Owner’s obligations hereunder; provided, further, that if this Agreement is assigned in its entirety to any such Person, that such assignee provides Contractor with a statement signed by a duly authorized officer of such assignee confirming that such assignee has sufficient funds, which may be through financing, to fulfill its monetary obligations under this Agreement, and in either case, the assignment would not violate any Applicable Law. Furthermore, Owner may assign, pledge or grant a security interest in this Agreement and any form of security provided by Contractor hereunder, and all claims resulting from any failure of performance with any provision of this Agreement, to any Lender without Contractor’s consent. When duly assigned in accordance with the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the assignee; provided, that any assignment by Contractor pursuant to this Section 23.7 shall not relieve Contractor of any of its obligations or liabilities under this Agreement. Any assignment not in accordance with this Section 23.7 shall be void and without force or effect, and any attempt to assign this Agreement in violation of this provision shall grant the non-assigning Party the right, but not the obligation, to terminate this Agreement at its option for Default.

23.7.2 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties, their successor and permitted assigns.

23.8 Further Assurances. Contractor and Owner agree to provide such information, execute and deliver any such instruments and documents and to take such other actions as may

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be necessary or reasonably requested by the other Party that are not inconsistent with the provisions of this Agreement and that do not involve the assumptions of obligations greater than those provided for in this Agreement, in order to give full effect to this Agreement and to carry out the intent of this Agreement. In addition, Contractor agrees to cooperate with any Lender: (a) to supply such information and documentation; (b) to grant such written consents to the assignment of this Agreement; (c) to execute such amendments to this Agreement as any Lender may require to the extent that the requested changes do not adversely affect the rights, obligations and liability limitations of Contractor hereunder and Contractor’s entitlement to payment in accordance with this Agreement; and (d) to take such action or execute such documentation as any Lender shall reasonably require.

23.9 No Third Party Beneficiaries. This Agreement is entered into for the benefit of the Parties only, and except as may be specifically set forth herein, no other Person shall be entitled to enforce any provision hereof or otherwise be a third party beneficiary hereunder; provided, that the Lenders shall be third party beneficiaries of Section 2.29, Section 19.5 and Section 23.7. Nothing in this Agreement shall otherwise be construed to create any duty to, or standard of care with reference to, or any liability to, any Person other than a Party.

23.10 Excluded Interests. The execution of this Agreement shall not be deemed to convey any estate or legal title in the Site or the LNG Facility. Each Party expressly acknowledges that it has not relied on any representation or warranty of the other Party in relation to this Agreement except for any representation or warranty expressly set out or referred to in this Agreement; provided, that nothing in this Section 23.10 shall operate so as to exclude or prevent a claim for fraudulent misrepresentation.

23.11 No Advertising.

23.11.1 No Signage. Contractor shall have no right, without the express prior written consent of Owner, to erect or otherwise display any type of advertising upon or adjacent to the Site or the LNG Facility.

23.11.2 No Advertisements. Without Owner’s express prior written consent, Contractor shall not publish or permit to be published or supplied to the press or other news media (excluding in-house magazines and speeches) any photographs of or information regarding the Work, including the award of this Agreement or Owner’s business or business activities.

23.12 Survivability. All representations, warranties, covenants and agreements made herein shall be considered to have been relied upon by the Parties and shall survive the execution and delivery of this Agreement. Notwithstanding anything in this Agreement or implied by law to the contrary, each provision of this Agreement which by its nature is intended to survive the termination, cancellation, completion or expiration of this Agreement, including any express limitations of or releases from liability shall continue as a valid and enforceable obligation of the Party notwithstanding any such termination, cancellation, completion or expiration.

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23.13 Ethical Business Considerations.

23.13.1 Obligations of the Parties. In connection with each Party’s activities with respect to this Agreement, the LNG Facility and the Liquefaction Project, each of the Parties hereby agrees that:

(a) without limiting Section 13.1.7, such Party shall not enter into any business arrangement with any director, employee or agent of the other Party without prior written notification to such other Party;

(b) such Party shall comply with all Applicable Laws, and such Party has not and shall not engage in any activity that would cause such Party to be in violation of any Applicable Laws;

(c) such Party shall comply with the U.S. Foreign Corrupt Practices Act and all other applicable U.S. anti-bribery anti-money laundering, anti-terrorism and economic sanctions laws and regulations; these obligations include not making payments directly or indirectly that are prohibited by the U.S. Foreign Corrupt Practices Act and not dealing with Persons designated by the U.S. Department of Treasury as “specially designated nationals” or “blocked persons”, or by the U.S. Department of State as “foreign terrorist organizations”; each Party covenants that neither it nor any of its Affiliates is or has been designated by the U.S. Government as “a specially designated national”, “blocked person” or “foreign terrorist organization”, or similarly designated by the United Nations;

(d) such Party represents and warrants that, as of the Effective Date, except by virtue of ownership of publicly-traded securities, no Government Official owns any interest in such Party, whether directly or indirectly through Affiliates, or has any right to any revenues or dividends or other distributions of such Party; no Party nor any of its direct or indirect parent companies shall assign or transfer any interest in such Party or such direct or indirect parent company or any right to any revenues or dividends or other distributions of such Party or such direct or indirect parent company to any Government Official, except as a consequence of such Government Official’s purchase of publicly-traded securities; and

(e) such Party has not, nor shall such Party, pay or give, offer to pay or give, promise to pay or give, or authorize the payment of giving of, money or any other thing of value to:

(i) a Government Official; or

(ii) to any other Person while knowing, or being aware of a high probability, that all, or a portion, of such money or thing of value will be offered, given, or promised, directly or indirectly, to a Government Official, in violation of the U.S. Foreign Corrupt Practices Act or any Applicable Laws, or in order to influence an act or decision of a Government Official in his official capacity (including a decision to fail to perform his official functions) or cause a Government Official to influence an act or decision of a Governmental

231

Authority or instrumentality thereof for the purpose of assisting either Party to obtain or retain business.

23.13.2 Suppliers. If any Supplier or any Supplier’s employees or agents violates the provisions of this Section 23.13, as it applies to such Supplier and its employees and agents pursuant to this Section 23.13.2, Contractor shall, if so required by Owner, terminate the relevant Subcontract with immediate effect and thereafter shall not permit or allow such Supplier or its Affiliates to perform any of the Work or any other services with respect to the Work, the LNG Facility or the Liquefaction Project after the date of termination. Contractor shall require, and shall require all Suppliers (excluding Affiliates of Contractor but including CIMTAS) to require, in all agreements in connection with the Work, their agreement to the provisions of this Section 23.13, including:

(a) that the Suppliers and its employees and agents shall comply with the provisions of Section 23.13.1 in relation to themselves;

(b) an express obligation to notify Contractor immediately of any such violation or of such Supplier’s having reasonable grounds for suspecting that such violation has occurred; and

(i) an express obligation to immediately reimburse Contractor, out of any and all monies paid to such Supplier, an amount equal to the amount of the payment or the value of the gift to a Government Official that gives rises to such violation, which amount Contractor agrees in turn to reimburse to Owner immediately on receipt;

(ii) an express obligation to reimburse each Owner Group member and Contractor for all reasonable legal and investigatory expenses directly incurred by it arising out of such violation; and

(iii) an express right in favor of Contractor to terminate the relevant Supply Contract effective upon notice, and thereafter Contractor shall not permit or allow such Supplier or its Affiliates to perform any of the Work or any other services with respect to the Work, the LNG Facility or the Liquefaction Project after the date of termination.

(d) Contractor shall notify Owner immediately on receipt of notification or otherwise becoming aware of any such violation.

23.13.3 Audit. A representative authorized by Owner (and, if such representative is a Third Party, subject to such Person entering into a mutually agreeable non-disclosure agreement with Contractor with customary terms covering such Books and Records of Contractor and its Suppliers, as applicable) may, subject to any applicable data privacy laws and the attorney-client privilege or work product privilege (as defined by Texas rules of civil procedure rule 192.5) and upon reasonable notice, audit relevant Books and Records of Contractor and any Supplier related to the Work and all transactions or matters related to this

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Agreement or any Supply Contract for the purpose of determining compliance with this Section 23.13; provided, that such audits shall not be conducted with respect to Contractor or a given Supplier more than once in a six (6) Month period.

23.14 Counterpart Execution. This Agreement may be executed in any number of counterparts and each such counterpart shall be deemed an original Agreement for all purposes. A signature delivered by facsimile or other electronic means shall be deemed to be an original signature for purposes of this Agreement.

23.15 Expenses. Each Party shall be responsible for and bear all of its own costs and expenses incurred in connection with the preparation and negotiation of this Agreement.

23.16 Relationship of Parties. The rights, duties, obligations and liabilities of the Parties under this Agreement shall be individual, not joint or collective. It is not the intention of the Parties to create, nor shall this Agreement be deemed or construed to create, a partnership, joint venture or other association or a trust. This Agreement shall not be deemed or construed to authorize any Party to act as an agent or employee for the other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries.

23.17 Drafting. Each provision of this Agreement shall be construed with the recognition that both Parties participated in the drafting of the same. Thus, any rule of construction that requires this Agreement to be construed against the drafting Party shall not be applicable.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized officers as of the date and year first above written.

OWNER:

PORT ARTHUR LNG, LLC

By: /s/ Justin C. Bird

Name: Justin C. Bird

Title: Chief Executive Officer

CONTRACTOR:

BECHTEL ENERGY INC.

By: /s/ Bhupesh Thakkar

Name: Bhupesh Thakkar

Title: Senior Vice President and General Manager, LNG Business Line

And only for the purposes of Sections 4.3.2(d), 5.2.2(c), 10.6, 11.1, 11.3.2, 12.2, 13.2, 14.2, 15.1.2(f) and 15.3, the opening paragraph of Article 20, Article 21, and the waivers and releases, disclaimers of liability, and limitations and apportionments of liability set forth herein:

COMMON FACILITIES OWNER:

PALNG COMMON FACILITIES COMPANY, LLC

By: /s/ Justin C. Bird

Name: Justin C. Bird

Title: Chief Executive Officer

{Signature page to Engineering, Procurement and Construction Contract}

APPENDIX A

SCOPE OF WORK

TABLE OF CONTENTS

A-2


1.0		INTRODUCTION	A-4
2.0		LIQUEFACTION PROJECT OVERVIEW	A-5
	2.1	THE LNG FACILITY	A-5
3.0		KEY PROJECT DOCUMENTS	A-7
4.0		ENGINEERING	A-8
	4.1	PROCESS ENGINEERING	A-8
	4.2	ROTATING AND PACKAGED EQUIPMENT	A-15
	4.3	VESSELS, TANKS & COLUMNS	A-17
	4.4	LNG TANKS	A-17
	4.5	HEAT EXCHANGERS	A-18
	4.6	TRUCK LOADING, UNLOADING, AND WEIGH STATIONS	A-19
	4.7	DESIGN ELEMENTS	A-19
	4.8	PIPING	A-21
	4.9	CIVIL & STRUCTURAL	A-24
	4.10	CONTROL SYSTEMS	A-29
	4.11	ELECTRICAL	A-41
	4.12	TELECOMMUNICATIONS	A-46
	4.13	SITE SECURITY	A-49
	4.14	FIRE PROTECTION & SAFETY SYSTEMS	A-50
	4.15	LNG LOADING, WARM LNG TANKER GAS-UP AND COOL-DOWN	A-51
	4.16	MARINE	A-52
	4.17	TIE INS	A-54
	4.18	TECHNICAL DEVIATION AND MANAGEMENT OF CHANGE PROTOCOLS	A-54
5.0		ENGINEERING SUPPORT GROUPS	A-54
	5.1	REGULATORY	A-55
	5.2	IT/IS & DOCUMENT CONTROL	A-56
	5.3	PROJECT HANDOVER	A-56
	5.4	PROJECT CONTROLS	A-56
6.0		PROCUREMENT, MATERIALS MANAGEMENT & LOGISTICS	A-56
	6.1	PROCURMENT PLAN	A-56
	6.2	PURCHASE ORDER AND SUBCONTRACTOR MANAGEMENT	A-56
	6.3	PROCUREMENT AND SUBCONTRACTING REPORTING	A-56
	6.4	OWNER PARTICIPATION DURING SUPPLIER POST-AWARD MEETINGS	A-57
	6.5	EXPEDITING	A-57
	6.6	LOGISTICS AND MATERIALS MANAGEMENT	A-58
	6.7	EQUIPMENT PRESERVATION PLAN	A-59
7.0		CONSTRUCTION	A-59
	7.1	HEALTH, SAFETY, SECURITY AND ENVIRONMENT (HSSE)	A-59
	7.2	QUALITY ASSURANCE AND QUALITY CONTROL	A-59
	7.3	SCOPE OF CONSTRUCTION	A-59
	7.4	WORK PERMITS	A-61

A-3


	7.5	TRAFFIC PLAN AT SITE	A-61
	7.6	CONSTRUCTABILITY	A-62
	7.7	LABOR SURVEY AND LABOR RELATIONS	A-63
	7.8	SECURITY	A-64
	7.9	FIELD CHANGES; DEFECTS	A-64
	7.10	HSSE RISK ASSESSMENT	A-64
	7.11	HEAVY LIFT AND TRANSPORTATION	A-65
	7.12	SITE FACILITIES AND LOGISTICS	A-66
	7.13	TEMPORARY FACILITIES	A-67
	7.14	TOOLS AND EQUIPMENT	A-67
	7.15	FIELD EXECUTION	A-68
	7.16	BORROW PITS	A-68
	7.17	DISPOSAL SITES	A-68
8.0		COMMISSIONING, COMPLETION, AND ACCEPTANCE	A-68
	8.1	TRAINING OF O&M PERSONNEL	A-69
	8.2	COMMENCEMENT OF COMMISSIONING & START-UP	A-69
9.0		OPERATIONAL INTERFACES	A-70
10.0		SIMOPS	A-70
11.0		PERFORMANCE TESTING	A-71
12.0		SHIP ARRIVAL & CARGO TANKER	A-71
13.0		SCOPE OF WORK EXCLUSIONS	A-71

Attachments:
ATTACHMENT A-1 - CONTRACTOR DELIVERABLES
ATTACHMENT A-2 - PORT ARTHUR LIQUEFACTION PROJECT ENVIRONMENTAL PLAN
ATTACHMENT A-3 - MASTER DOCUMENT INDEX

APPENDIX A

SCOPE OF WORK

1.0INTRODUCTION

This Appendix A is the Scope of Work referenced in the Agreement. This Appendix A is comprised of this main document, all referenced documents, and includes all of the attachments to this Appendix A, which are hereby incorporated by reference. Capitalized terms used but not defined in this Appendix A have the meanings given to those terms in the Agreement. Acronyms, terms and symbols have the meaning set forth in Appendix K to the Agreement.

Contractor has previously performed Work under the EDSA, the SWSA and the September 2022 Letter Agreement). Contractor, using the related Deliverables generated during performance of Work under the EDSA, SWSA or September 2022 Letter Agreement, shall progress the engineering and design for the LNG Facility as per the design requirements listed in the Basis of Design, design criteria, Specifications, Drawings, engineering calculations

A-4

supporting the design, plans and ancillary documents that establish the scope of the LNG Facility and associated facilities that are to be further engineered (detailed design) and constructed in accordance with the Agreement and this Appendix A.

Contractor shall complete all aspects of the LNG Facility design, including any that were not completed under the EDSA, the SWSA or the September 2022 Letter Agreement. In the performance of the Work, Contractor may modify certain aspects of the Deliverables as necessary to meet the requirements of the Agreement subject to Contractor’s compliance with the requirements in Sections 2.4.6 and 2.25.4 of the Agreement. Notwithstanding the foregoing, Contractor shall not make modifications that would adversely impact the safety or operability of the LNG Facility.

Contractor shall perform all engineering and design required to meet its obligation under the Agreement. This includes engineered Drawings, data sheets, associated engineering documents, procurement inspections, expediting, testing for all the systems, and commissioning.

2.0LIQUEFACTION PROJECT OVERVIEW

The Port Arthur LNG Facility is to be located on a tract of land owned by Port Arthur LNG, LLC on the Sabine-Neches Waterway.

Feed gas for liquefaction will be supplied through a high-pressure feed line with pipeline quality gas in accordance with Basis of Design.

2.1 THE LNG FACILITY

The LNG Facility will include two (2) identical LNG Trains each capable of producing a loaded capacity of 5.84 million tonnes per annum (MTPA) (6.195 MTPA net in LNG Tank), two (2) full containment 160,000 m3 LNG Tanks, one (1) marine LNG carrier Berth with associated loading facilities, NGL extraction, storage and delivery facilities, piping and infrastructure, utilities, and all other facilities.

More specifically, the LNG Facility shall consist of the systems and facilities outlined below. The LNG Facility description and design requirements are as set forth in the Basis of Design, Appendix B to the Agreement:

Process Facilities separate for each LNG Train

- Inlet Gas Receiving

- Mercury Removal

- Acid Gas Removal Unit (AGRU)

- Gas Dehydration

- NGL Extraction / condensate stabilization

- Liquefaction (MR and Propane Refrigeration and End Flash Gas System)

Process Facilities Common for both LNG Trains

- Ground and Marine Flare Systems

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- LNG Storage and Loading

- Condensate Storage and truck loading

- Refrigerant Unloading and storage

- Boil-off Gas System

- Start-up Fuel Gas System

- Amine Storage

- Feed gas distribution pipelines including takeoffs to both LNG trains.

Utilities and Support Facilities Separate for each LNG Train

- Amine drains

- Hot oil system

- Waste Heat Recovery Unit (WHRU)

- Fuel gas system

- Defrost gas system

- H2S scavenger beds

- Thermal oxidizer system

- Utility cooling (Tempered Water)

- ISBL powerhouses and analyzer shelters

Utilities and Support Facilities Common for both LNG Trains

- Utility and Instrument Air

- Nitrogen system

- Fresh Water (Potable) System

- Demineralized Water System

- Firewater System

- Spill containment system for each LNG Train into a common containment sump

- Fire and gas detection system

- Wastewater Collection and Disposal

- Stormwater Collection and Disposal

- Sanitary Sewer System

- Marine Facilities

•LNG Loading Berth and Access Trestle

•LNG Berth Shore protection and navigational aids

•Ship Turning Basin and Berthing Pocket

•Material Off-Loading Facility (MOF)

•Pioneer Docks

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•Pre-turnover dredging of shoaling and maintenance dredging

- OSBL Powerhouses, GIS Substation and Analyzer Shelters

- Other plant infrastructure such as plant roads, berm, fencing, gates etc.

- LNG impoundment basins

- Essential power generation system

- Security, control, and telecommunication (including communication tower) systems

Permanent Plant Buildings

- Jetty control building (South)

- Main control building

- Administration and Maintenance shop

- Emergency response / first aid building

- Laboratory building

- Entrance guardhouses (North and South)

- Hazardous chemical storage building

- Prefabricated Electrical powerhouses with the instrument I/O rooms

- Prefabricated main substation

- Prefabricated Analyzer Shelters

On-Site Roads

- Heavy haul road (inclusive of Oilfield Rd. bridge crossing)

- Primary and access roads within the LNG Facility

Storm protection perimeter Berm

Fencing

- Perimeter security fence

- Permanent fencing

Nitrogen metering station support structure

If Owner exercises Scope Option [6], future Train 3 & 4 pre-investment as described herein

3.0KEY PROJECT DOCUMENTS

The Work is governed by the Agreement, including this Appendix A and its attachments hereto, and the Basis of Design as set forth in Appendix B.

The Scope of Work in this Appendix A shall be executed in accordance with the plans set forth and referenced in the Project Execution Plan, Appendix W to the Agreement.

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Document numbering shall be in accordance with the requirements in Attachment U-1 to Appendix U to the Agreement and in the Document Management Plan as referenced in Appendix W to the Agreement.

4.0ENGINEERING

This section outlines Contractor’s engineering Scope of Work under the Agreement.

4.1 PROCESS ENGINEERING

As part of the process engineering Scope of Work, Contractor shall develop and/or progress Drawings, calculations, datasheets, and other associated engineering documents in order to bring them to their final issue status in accordance to Attachment A-1.

The following documents listed in Attachment A-3 shall be reissued if there is a scope change or a Defect that requires it:

Process Basis of Design;

Process and utility flow diagrams;

Heat and material balances for all design cases;

Material selection diagrams;

Process datasheets for Equipment

Steady state process models;

The following documents will be issued per Attachment A-1.

Utility summaries

Datasheets for instruments including all control valves, safety valves, on/off valves, RO, flow meter, analyzers, etc.

Piping and instrumentation diagrams

Flare Load Summary

Design calculations and development of:

- System hydraulics;

- Surge analysis;

- Line sizing;

- Sizing of the relief system, including relief valves;

- Insulation system for cryogenic services, material selection, thickness;

- First fill volume for refrigerant, hot oil, amine;

- Emergency depressurization calculations;

Cause and effect diagrams (CED)

HAZOP and LOPA for vendor packages

Lists:

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- Equipment list

- Line designation tables (LDTs);

- Line Case Summaries (LCSs);

- List of chemicals & catalysts

4.1.1 Process Design Documents

Attachment A-1 lists the required process design documents and Contractor design Deliverables. Contractor has developed process and mechanical data sheets for Equipment under the EDSA which shall be deemed incorporated herein, as listed in Attachment A-3. Any updates to the process design shall be marked on a new revision of the existing datasheets and other documents in accordance with the final version of the Heat & Material Balances for the various operating cases.

4.1.2 Equipment List

Contractor shall maintain and issue a sized Equipment list, inclusive of Equipment weights, based upon the final Equipment design.

4.1.3 Process Flow Diagrams (PFD) and Utility Flow Diagrams (UFD)

Contractor shall update and maintain the Process Flow Diagrams and Utility Flow Diagrams as required during the performance of the Work until the Substantial Completion Date of Stage II.

4.1.4 Process and Utility Summaries

Contractor shall maintain the process utility and emissions summaries during the performance of the Work until the Substantial Completion Date of Stage II.

4.1.5 Piping and Instrumentation Diagrams (P&IDs)

Contractor shall develop and maintain all P&IDs, including all utility, auxiliary, interconnecting P&IDs, through commissioning and start-up of each Stage and until the Substantial Completion Date of Stage II.

P&IDs shall comply with the requirements of 49 CFR 193 and NFPA 59A.

HAZOP and LOPA reviews have been completed in the EDSA and recommendations resulting from those reviews have been implemented into the design of the LNG Facility. Any changes to the P&IDs shall be managed under management of change protocol and an MOC HAZOP performed, where required by the procedure.

Contractor shall redraw P&IDs provided by Vendors using AutoCAD after the Vendors’ final submittal of P&IDs so that a full set of P&IDs for the LNG Facility are available using common symbology.

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4.1.6 Line Lists

Contractor has developed LDTs for all lines shown on the Contractor developed P&IDs as listed in Attachment A-3. Line calculation summaries will be used by Contractor in determining the final line sizes on the LDTs and shall provide information for instrumentation and pipe stress calculations. The final line size will be documented in the LDTs during the detailed engineering phase in accordance with Contractor’s process design guidelines, and Contractor’s heat and material balances. Updates to the LDTs shall be made for subsequent revisions of P&IDs.

4.1.7 Simulation

Contractor shall utilize Equipment Supplier data to develop a dynamic simulation model, as further detailed in Appendix B and the Specifications, for the main units of the LNG Facility, and shall utilize these models to confirm the control philosophy of major Equipment including the anti-surge control system of the compressors, MCHE operation, and mitigation of the relief scenarios and flare loads. Contractor shall include control logic and details for such Equipment included in the design. Contractor shall also use the dynamic simulation model to demonstrate that during the transient scenarios, the design temperatures and pressures of such Equipment will not be exceeded.

Contractor shall make the latest version of the dynamic and steady simulation models available to Owner.

4.1.8 Relief Valves and Flare System Design

Contractor shall develop potential flaring scenarios and determine the relief loads as per the Relief Design Basis in Appendix B.

Contractor shall generate a hydraulic model of each flare system.

4.1.9 Flare Relief and Liquid Disposal System

The flare will be designed as a multi-point ground flare system. The ground flare will be designed in a [***] configuration. Each [***] flare cell will contain a wet flare and dry flare runners. A radiation fence will be provided to separate each flare cell.

4.1.10 Marine Flare System

Contractor shall provide a marine flare system for the purpose of collecting and processing the boil-off gas from the LNG Tanks and return vapor from the LNG loading facilities, which will include the vapor return from ship loading operations and also the gas-up and warm ship cooldown operations on the south Berth.

4.1.11 Nitrogen Supply System

4.1.11.1 Primary Supply

Gaseous nitrogen will be imported through a pipeline routed adjacent to the Site. A metering station for the imported nitrogen will be located on a skid placed on top of a raised platform outside of the perimeter fence around the LNG Facility.

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Contractor shall interface with the third-party supplier, Air Liquide, throughout the design, construction, and commissioning phases. Contractor shall also be responsible for construction of the raised platform, procurement and installation of permanent fencing around the nitrogen metering station, and the design, procurement and construction of the nitrogen distribution system, including pressure let down regulator station, and connection to the interface point, which is the metering station check valve outlet.

Contractor shall provide the nitrogen supplier, Air Liquide, with access to the raised platform for metering station construction, routine check-ups and maintenance of instruments and valves located on the skid.

4.1.11.2 Back-up Supply

Back-up nitrogen Equipment, consisting of two (2) leased liquid nitrogen dewars and associated vaporizers inside the utilities area, shall be provided by Airgas, an Air Liquide company, for use when gaseous nitrogen may not be available from the pipeline, under a lease and maintenance agreement with Contractor. The lease shall be assigned to Owner upon Substantial Completion of Stage I.

The lease agreement shall include the supply of liquid nitrogen dewars and associated vaporizers in accordance with the requirements defined in Appendix B. For clarity, Contractor shall be responsible for the installation of the leased liquid nitrogen Equipment, commissioning and startup in accordance with Appendix W.

4.1.12 Demineralized Water System

Contractor shall engage a Supplier to provide a leased demineralized water system in accordance with the requirements defined in Appendix B. The lease shall be assigned to Owner upon Substantial Completion of Stage I.

For clarity, Contractor shall be responsible for the design, lease, installation and construction of the demineralized water system, including connection to the interface point. Contractor shall also be responsible for the commissioning and start-up in accordance with Appendix W.

4.1.13 High Feed Gas Nitrogen Study Implementation

Contractor shall implement the additional work recommended in the High Feed Gas Nitrogen Study PAL-PJT-PRO-RPT-00-GEN-0011 (26196-100-M0R-1TDK-00011) conducted during the EDSA as follows:

•Inclusion of the high nitrogen feed gas defined in PAL-PJT-PRO-RPT-00-GEN-0011 as an additional case for gas turbine fuel variability, without change to the design and rating cases defined in the Process Design Basis (PAL-PJT-PRO-BOD-00-GEN-0002)

•Update the Baker-Hughes gas turbine data sheet for the additional fuel gas composition defined in PAL-PJT-PRO-RPT-00-GEN-0011

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•Further assessment by Baker-Hughes with a study report defining any required changes to the instrumentation, controls, etc. (implementation of any recommendations resulting from such study report are not included in the Work)

•Definition of the required operational adjustments required to manage this infrequent, short-term event

4.1.14 Studies

To the extent not completed under the September 2022 Letter Agreement, Contractor shall complete and deliver the following studies:

•Alternate Feed Gas Case: Contractor will develop an alternate Feed Gas rating case and provide a heat and material balance (“HMB”) based on the Feed Gas composition defined in the table below:


Component			Composition (Mol%)

N2			[***]
CO2			[***]
C1			[***]
C2			[***]
C3			[***]
iC4			[***]
nC4			[***]
iC5			[***]
nC5			[***]
nC6			[***]
nC7			[***]
nC8			[***]
nC9			[***]
nC10			[***]
Undecane			[***]
Cyclohexane			[***]
Cycloheptane			[***]
Benzene			[***]
Toluene			[***]
Ethylbenzene			[***]
m-Xylene			[***]
o-Xylene			[***]
p-Xylene			[***]
H2S			[***]
H2O			[***]
MDEA			[***]

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Piperazine			[***]
TEG			[***]

Contractor to advise Owner of any production or operational impact identified in the study.

•C10+ Study /Mitigation: Contractor to perform a study based on the latest PALNG Feed Gas analysis that shows the heavy hydrocarbon tail gases (C10+), similar to the study that Contractor has performed for Owner’s Affiliate. Contractor shall make recommendations for future modification to the NGL system to determine the optimal solution for the handling of the heavy hydrocarbon tail gases. The design of all modifications shall consider safety, operability, availability, and capital cost. The study should include the identification of design options to be implemented in the warm end or the NGL unit to avoid performance issues with equipment located in the cryogenic systems of the LNG Train. Contractor shall provide pricing and a scope of work to procure and install the recommended solution as a Scope Option under the Revised Agreement, including the latest date on which such Scope Option shall be exercisable without adversely impacting the CPM Schedule. Composition for study is below.


Component	Mol%) Average Gas	(Mol%) Lean Gas	(Mol%) Rich Gas
Oxygen	[***]	[***]	[***]
H2S	[***]	[***]	[***]
Nitrogen	[***]	[***]	[***]
Carbon Dioxide	[***]	[***]	[***]
Methane	[***]	[***]	[***]
Ethane	[***]	[***]	[***]
Propane	[***]	[***]	[***]
Iso-Butane	[***]	[***]	[***]
n-Butane	[***]	[***]	[***]
1-Butene	[***]	[***]	[***]
Iso-Butylene	[***]	[***]	[***]
Trans-2-Butene	[***]	[***]	[***]
Cis-2-Butene	[***]	[***]	[***]
1,3-Butadiene	[***]	[***]	[***]
Iso-Pentane	[***]	[***]	[***]
n-Pentane	[***]	[***]	[***]
i-Hexanes	[***]	[***]	[***]
n-Hexane	[***]	[***]	[***]
i-Heptanes	[***]	[***]	[***]
n-Heptane	[***]	[***]	[***]
Benzene	[***]	[***]	[***]
Cyclohexane	[***]	[***]	[***]
Toluene	[***]	[***]	[***]
i-Octanes	[***]	[***]	[***]
n-Octane	[***]	[***]	[***]
Ethylbenzene	[***]	[***]	[***]

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Xylenes	[***]	[***]	[***]
i-Nonanes	[***]	[***]	[***]
n-Nonane	[***]	[***]	[***]
i-Decanes	[***]	[***]	[***]
n-Decane	[***]	[***]	[***]
n-C11	[***]	[***]	[***]
n-C12	[***]	[***]	[***]
n-C13	[***]	[***]	[***]
n-C14	[***]	[***]	[***]
n-C15	[***]	[***]	[***]
n-C16	[***]	[***]	[***]
n-C17	[***]	[***]	[***]
n-C18	[***]	[***]	[***]
n-C19	[***]	[***]	[***]
n-C20	[***]	[***]	[***]
n-C21	[***]	[***]	[***]
n-C22	[***]	[***]	[***]
n-C23	[***]	[***]	[***]
n-C24	[***]	[***]	[***]
n-C25	[***]	[***]	[***]
n-C26	[***]	[***]	[***]
n-C27	[***]	[***]	[***]
n-C28	[***]	[***]	[***]
n-C29	[***]	[***]	[***]
i-C11s	[***]	[***]	[***]
i-C12s	[***]	[***]	[***]
i-C13s	[***]	[***]	[***]
i-C14s	[***]	[***]	[***]
i-C15s	[***]	[***]	[***]
i-C16s	[***]	[***]	[***]
i-C17s	[***]	[***]	[***]
i-C18s	[***]	[***]	[***]
i-C19s	[***]	[***]	[***]
i-C20s	[***]	[***]	[***]
i-C21s	[***]	[***]	[***]
i-C22s	[***]	[***]	[***]
i-C23s	[***]	[***]	[***]
i-C24s	[***]	[***]	[***]
i-C25s	[***]	[***]	[***]
i-C26s	[***]	[***]	[***]
i-C27s	[***]	[***]	[***]
i-C28s	[***]	[***]	[***]
i-C29s	[***]	[***]	[***]

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Sulfur Components	[***]	[***]	[***]
TOTAL	100.0000	100.0000	100.0000

•Future Carbon Capture Study/ System Tie-Ins: Contractor to perform a study (similar to the study that Contractor has performed for Owner’s affiliate) to identify the interface of the liquefaction train acid gas handling system with a future CO2 capture system to be provided by others. Contractor shall identify CO2 system tie-ins and allow for future routing of a CO2 line from the Train AGRU to a future CO2 compression system. Contractor shall provide pricing and a scope of work to install the CO2 system tie-ins to be included as a Scope Option under the Revised Agreement, including the latest date on which such Scope Option shall be exercisable without adversely impacting the CPM Schedule.

•Increase LNG Production

Contractor will request that [***]. The Propane Compressor will be modified to accommodate the higher propane flow rate needed for both the increase in LNG production as well as the additional load resulting from deletion of the Inlet Refrigeration Package. Other Liquefaction equipment and piping will remain unchanged, with the exception of:

◦[***] to handle the higher flow

◦HP Propane Suction Drum 1/2V-2703 diameter may be increased by 1 ft (ID grows from 15’-6” to 16’-6”)

Contractor will perform the following tasks and activities:

◦ Issue revised [***] cases

◦Develop and issue an updated [***]

◦Support Owner update of the production model by providing the Feed Gas rate, LNG rundown rate, condensate production rate, power consumption, for each of the following cases:

•AGAA design and rating, AGCA rating, AGHA rating

◦Update RAM study

◦Coordinate design with [***]; this will require award of additional Early Works Engineering (EWE) scope to [***]

◦Issue revised mechanical data sheets to [***] cases

◦Perform hydraulic verification of [***]

◦Develop guarantee AGAA case aligned with [***]

◦Finalize and reissue Refrigeration Compressor data sheets after receipt and validation of LGHA and RGCA [***]

◦Revise and reissue HP Propane KO Drum process / mechanical data sheets and process change order with vessel vendor

◦Issue DECN to redline changes on master P&IDs

◦Commence update of affected engineering deliverables, including Basis of Design, Process Design Basis, and hydraulic / sizing calculations as required

◦Commence update of 3D Model to incorporate the changes in the Propane Compressor and HP Propane KO Drum as necessary to support Project schedule for model reviews

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◦Commence update of Liquefaction equipment process / mechanical data sheets to incorporate the revised cases

4.2 ROTATING AND PACKAGED EQUIPMENT

Contractor shall be responsible for the engineering and procurement of all rotating Equipment for the facility and shall conduct reviews for packaged Equipment details provided by Equipment Suppliers. This includes progression and finalization of datasheets, material requisitions, bid evaluation and review of vendor engineering documents and Drawings. Contractor’s responsibilities also include the inspections, expediting, testing (per Appendices T-1 and T-2), and the installation and commissioning of such Equipment packages.

Contractor shall update all necessary Deliverables to reflect the removal of the inlet gas refrigeration package, subject to Owner’s review and approval of the updated Deliverables prior to implementation.

4.2.1 General Requirements

Rotating and packaged Equipment shall be capable of unattended outdoor operation (unless indoor installation is required by design), and shall be engineered, designed, fabricated, inspected, tested and delivered in accordance with the Agreement.

All Equipment and materials for construction shall meet the applicable Specifications and suitably designed for its intended electrical area location and hazardous area classifications.

Rotating and packaged Equipment shall be pre-assembled, pre-piped and pre-wired skid mounted units, to the extent possible. All necessary interconnecting piping, interconnecting wiring, cabinets, loose materials and hook-up valves / piping shall be supplied with the packaged units or by Contractor to provide the complete unit assembly. Equipment and skids shall be appropriately designed and packaged for conditions customarily encountered during shipping and handling.

Suppliers shall conduct special studies for Equipment, such as finite element analysis and computational fluid dynamics, etc., where required by Contractor or recommended by the Supplier. Contractor shall work with the Equipment Suppliers to identify the specific testing requirements, obtain recommendations for lubricants to be used, and identify spare parts required for the continuous operation for the life of the Equipment package.

The following packages are being supplied with ABB motor rotor removal tool for removal of the rotor in a maintenance shop, but permanent structure or means will not be provided for the motor rotor removal in the field.

•EFG compressor

•BOG compressor

•Booster compressor

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4.2.2 Refrigeration Compression Trains

Baker Hughes, (BH) has been selected as the Supplier for the propane, HP MR, LP MR, & MP MR refrigeration compression trains. [***].

Contractor shall be responsible for the procurement (manufacture), proper design, inspection, testing, supply, installation, preservation, site testing and performance of such Equipment, as well as, the interface with the LNG Facility integrated control and safety system (ICSS).

Contractor shall update the Specifications with the following modifications:

•Provide for a single [***]

•Provide for single tube design (316SS) and leak detector for each helper motor air cooler

•Provide for ultrasonic testing (UT) for casing welds in butt-joint configuration; radiographic testing (RT) will be provided for crossings between butt welds only, while butt joints will be checked by manual UT before and after post weld heat treatment (PWHT)

Contractor shall also update the Specifications related to the removal of the refrigeration compressor/gas turbine string tests as well as the following associated tests:

•VFD efficiency test

•Gas turbine PTC 22 performance test

Contractor shall submit its proposed updated Specifications to Owner for review and approval

[***].

4.3 VESSELS, TANKS & COLUMNS

All vessels, tanks, columns and towers shall be designed, fabricated, inspected, tested, and installed, in compliance with the requirements specified on the engineering Drawings, mechanical data sheets, Specifications, and Applicable Codes and Standards.

Contractor, and selected Vendors, shall be responsible for supplying and installing all appurtenances including nozzles, man-ways, davits and/or hinges, ladders and platforms as required for the vessels, tanks, columns and towers.

All shop fabricated vessels, tanks, columns and towers shall be pressure tested at the fabrication facilities and painted in accordance with the specifications provided prior to release from the Supplier’s facilities. All Equipment shall be packaged in accordance with the mode of transportation and adequately protected for shipping and transportation prior to release from the Supplier’s facilities and preservation procedures implemented for field storage and after installation prior to operation and referenced in Appendix B.

Contractor shall issue the required Drawings and specifications for erection, inspection, testing, external painting and internal lining if applicable.

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4.4 LNG TANKS

Contractor shall perform all engineering activities required for the design of full containment LNG Tanks to meet its obligation under the Agreement. This includes development of engineering Drawings and supporting calculations, data sheets, procurement documentation, inspections / testing / expediting reports and schedules for Factory and Site Acceptance Tests (FAT / SAT).

The Contractor shall also be responsible for the development of documentation required for the testing, pre-commissioning, commissioning and cooldown of the LNG Tank(s) and associated piping systems in accordance with the Specifications in Appendix B.

Contractor shall be responsible for sourcing water of adequate quantity and quality for hydro-testing and disposal purposes in compliance with the applicable regulatory requirements.

Each LNG Tank shall include three (3) in-tank pumps and one (1) spare pump column, in accordance with Specification for LNG Tanks as shown in Appendix B. The LNG Tank scope does not include logos or elevators.

4.5 HEAT EXCHANGERS

The Work includes preparation of data sheets, material requisitions, bid evaluation and review of Supplier engineering documents and Drawings for the heat exchangers.

The liquefaction unit is designed around the Main Cryogenic Heat Exchanger (MCHE), which is designed and fabricated by Air Products and Chemicals, Inc. (APCI). Contractor shall coordinate activities with APCI for the design reviews and testing of the MCHE. In addition to the above, the Contractor shall also be responsible for the interface, coordination, transportation, installation, and insulation of the MCHE. The initial pre-cooldown and final cooldown of the MCHE shall be conducted by the Contractor in conjunction with the APCI start-up representatives in accordance with Appendix W.

The engineering, design and fabrication of shell and tube, brazed aluminum and air-cooled heat exchangers shall be in accordance with the relevant project Specifications and Applicable Codes and Standards.

Contractor shall verify and confirm the thermal and mechanical design of each piece of equipment with the responsible Supplier of each shell and tube heat exchanger, which shall include a vibration analysis.

Contractor shall review electric heaters and heater system designs from the applicable Suppliers to confirm the thermal and mechanical designs. Additionally, functional testing of the local control system will also be required. All electrical Drawings and wiring diagrams are to be submitted by the applicable Suppliers to Contractor for review and approval.

Brazed aluminum core exchangers are provided with aluminum flanges. Insulation block made from Micarta or Owner approved equivalent shall be used to insulate core from structural steel. Contractor shall verify that the design conditions shown on the applicable Supplier’s data sheet are in accordance with the process data for each stream. The brazed aluminum heat exchanger is to be built in accordance with ALPEMA requirements.

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The fuel gas heater designs, as submitted by the applicable Supplier, shall be checked for process condition accuracy. Contractor is responsible for all Drawings from the applicable Supplier, including controls schematic and power supply.

All anchor bolts required for the installation of the heat exchangers shall be sized by Contractor to safely handle weight, pullout, thermal, seismic and wind loadings and any other applied loads. The required bolts are to be provided by Contractor.

4.6 TRUCK LOADING, UNLOADING, AND WEIGH STATIONS

Contractor shall design, procure, install and commission the unloading station for incoming propane, ethane, diesel fuel, liquid nitrogen, hot oil, and amine delivered by truck.

Contractor shall design, procure, install and commission the loading station for outgoing condensate (C5+) and process waste water to be removed by truck.

Contractor shall also design, procure, install and commission the weigh stations for the applicable trucks entering and leaving the LNG Facility as described above and for other deliveries of consumables. Contractor shall include all hardware and software required to collect and archive historical data of the weigh system, including a printer to issue loading/unloading tickets to the trucks at an outdoor workstation that interfaces with scale. Scales shall be inspected and certified by the Department of Agriculture. See also Section 4.10.22.14 of this Appendix A.

Contractor shall specify requirements for hose connection sizes and types, grounding, spill protection, containment, and all required safety and environmental measures for loading and unloading stations.

Minimum horizontal distances from any trucks to the property line and to adjacent facilities inside the property line shall be in accordance with NFPA 30. Sufficient room shall be provided for trucks with a capacity up to 8,000 gallons in the loading/unloading area to turn around without having to back-up and obstruct other traffic.

A safety barrier (bollards) shall be provided between the storage tanks and the truck loading/unloading area where required.

4.7 DESIGN ELEMENTS

4.7.1 Welding

Contractor shall develop Liquefaction Project welding Specifications and procedures which shall cover shop and Site fabrication in accordance with Attachment A-1 and Appendix U. The Specifications and procedures shall include key performance indicators for shop and Site welding.

All welding and weld inspections shall be performed and shall meet the requirements of such welding Specifications and procedures.

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4.7.2 Chemical Cleaning

Contractor shall identify the extent of chemical cleaning to be carried out for each Stage and perform all such chemical cleaning. Contractor shall prepare a chemical cleaning procedure for each application defining the following:

Fluids to be used for cleaning

Operating conditions that must be achieved during the cleaning process

Duration of the cleaning process

Acceptance criteria

Disposal of the cleaning fluids

Safety and environmental precautions to be implemented

4.7.3 Cathodic Protection (CP)

As part of the Work, Contractor shall develop details of the cathodic protection system, specifying the type of system to be installed for specific locations in the LNG Facility. The cathodic protection system shall protect external surfaces of marine steel piles and sheet piling (in the immersion zone), underground CS or SS piping, Equipment, tanks, which contain water as described in the Specification for Cathodic Protection referenced in Appendix B.

Contractor shall also be responsible for the supply and installation of the cathodic protection system including all insulation flange/gasket sets and/or pipe isolation joints necessary to electrically separate the underground portions from the above ground facilities. Details of these components and applied coating shall also be provided to Owner.

4.7.4 Positive Material Identification

Contractor shall implement a program as required per the Specification for “Positive Material Identification (PMI)” and is listed in Appendix B.

4.7.5 Material Certification

Contractor shall ensure that where required, Equipment, bulk piping, bulk steel, and other applicable materials are supplied with material certifications, including third party certificates, to meet the quality assurance and quality control (QA/QC) requirements in accordance with Appendix R. Such material certifications shall include documented traceability per the Specification for “Material Traceability for Hydrocarbon Services” referenced in Appendix B. Where required, Equipment and pressure components shall be certified in accordance with ASME codes, and non-pressure components and piping shall be certified in accordance with ASTM codes.

4.7.6 Noise

Contractor shall design and build the LNG Facility to satisfy the noise requirements in Appendix B and Appendix G.

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Where noise control measures (e.g. silencers, acoustic insulation) are required, to meet the Specification set forth in Appendix B, Contractor shall include noise control measures in the design and in the Supplier purchase requirements (as applicable).

4.7.7 Acoustically/Flow Induced Vibration

Contractor shall prepare a vibration study to assess anticipated flow induced or acoustically induced vibration, and deliver a report documenting the results of this assessment and associated calculations.

4.7.8 Painting, Coating and Galvanizing

Equipment and piping shall be supplied, painted and coated in accordance with the procedures set forth in Appendix B. Contractor shall follow the color requirement for the finish coat of the LNG Facility in accordance with the “Project Specification for Protective Coatings (Paint)” 26196-100-3PS-NX00-00001 (PAL-PJT-MET-STD-00-GEN-0022) referenced in Appendix B. Bulk piping materials shall be color coded in accordance with the “Project Specification for Piping Material Color Code” 26196-100-3PS-PB00-00003 (PAL-PJT-PIP-STD-00-GEN-0023) referenced in Appendix B.

Structural steel shall be supplied with hot dipped galvanized protection in accordance with the procedures set forth in Appendix B. The Specification for galvanized steel shall also govern the repair procedures to be used for structural steel.

4.7.9 Insulation and Fireproofing

Contractor shall design all piping, Equipment and structural steel requiring insulation / fireproofing to be insulated and/or fireproofed in accordance with the Specifications listed in Appendix B. Equipment and piping shall be supplied with insulation vertical support rings, and/or fireproofing clips. Insulation and fireproofing material shall be supplied and installed by Contractor, its Suppliers, or at the module yard. Contractor’s Drawings shall clearly indicate the type, thickness and extent of insulation and fireproofing.

4.8 PIPING

Contractor shall engineer, design, procure, fabricate, install, test (e.g. pneumatic, hydro, service, etc) and commission all piping systems in accordance with the P&IDs, Specifications, and Applicable Codes and Standards. Contractor shall ensure Owner requirements as specified in Appendix B are incorporated into the final design.

Pneumatic test requirements supported by test packs shall identify stored energy classification. Closure weld requirement and acceptance criteria shall be identified.

Contactor shall specify the default valve selection for cryogenic services as per Appendix B. Owner approved valve substitutions shall be indicated on the P&IDs.

Contractor to provide space in the liquefaction train piperack for a rundown line from future Train 4, associated cool-down line and a BOG return line to Train 4, and ensure rack is designed for the additional load of these lines.

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If Owner exercises Scope Option [6]:

•Contractor to design the OSBL East/West piperack to accommodate the later addition of the piping, cable trays, etc. up to an agreed elevation for the Train 3 addition

•Contractor to accommodate the future Trains 3 & 4 by sizing the BOG suction and discharge lines and the instrument air and potable water headers for the future additions

4.8.1 Piping Isometric Drawings

Contractor shall produce dimensioned isometric Drawings of all piping systems, regardless of pipe size, except where a Vendor does not provide isometric drawings for a piping system. Isometric Drawings shall be identified by the corresponding line number on the P&IDs. Each isometric drawing, including the fabricated spool isometrics shall also contain the complete Bill of Material (BOM) for the Drawing.

4.8.2 Piping Plot Plans

Contractor shall be responsible for the definition and location of Equipment on plot plans through detailed design. If required, the Contractor shall further sub-divide and create additional plot plan drawings at smaller scales. Contractor shall indicate all Equipment, structures, pipe racks, sleeper-ways, accessways, maintenance envelopes, building outlines, marine facilities, jetties, roads, detention ponds, impoundments, drainage ditches, and other major civil features such that the safe construction, operation and maintenance of the LNG Facility can be adequately demonstrated.

Contractor shall consider the Equipment spacing and location for personnel safety while maintaining access ways for proper operation and maintenance of the LNG Facility. Equipment that produces regulated emissions, Equipment that impacts vapor dispersion, spill containment trenches and impoundment basins/containment areas may not be relocated without written authorization from Owner.

4.8.3 Piping 3D Model

Contractor shall develop a scaled 3-dimensional model of the LNG Facility to demonstrate to Owner an acceptable plant layout. The model will be reviewed by Owner at the following specific review gates: 30% design, 50% design, and 90% design. Model reviews will be conducted in accordance with Contractor’s procedure for 3D Model Reviews (PAL-PJT-PMT-PRO-00-GEN-0004) as provided to Owner.

Contractor shall establish and maintain a method of tracking Owner comments. Contractor shall close Owner comments by incorporation into final design and obtaining Owner approval through tag review and sign-off of comments by Owner.

The 3D model shall represent all plant equipment, structural steel, concrete, piping, instruments (off-line and in-line), electrical equipment, cable trays, buildings and roads. Sufficient detail is required to indicate adequate clearances exist to safely construct, operate and maintain the LNG Facility in accordance with the “Plant Design and Layout Criteria” in Appendix B. Additionally, Contractor shall conduct interference checks against the 3D model so that final

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Issued for Construction (IFC) designs are clash free and compliant with minimum clearance requirements.

Contractor shall request that the Vendors of packaged Equipment, compressor and ground flare supply 3D model geometry for all such Equipment. Any such Vendor-supplied 3D model geometry shall be incorporated into the Liquefaction Project 3D Model viewer for the LNG Facility. In the event that a Vendor does not provide the 3D model geometry, Contractor shall recreate such 3D Model geometry directly into S3D geometry (without intelligent attributes attached) that includes piping tie in locations for the LNG Facility.

4.8.4 Piping Supports

Contractor shall be responsible for development of standard and custom engineered pipe supports that will be incorporated into the design of the LNG Facility.

Contractor shall provide pipe supports in accordance with the project standards and Specifications.

4.8.5 Piping Stress Analysis

Contractor is responsible for the mechanical integrity for all piping systems. Contractor shall include in the design of the LNG Facility the effects of loads imposed by all piping components, pressure testing, dynamic and transient effects, and thermal displacement to prevent transmission of excessive movements and forces to Equipment connections and structures.

Contractor shall provide piping systems with sufficient flexibility covering all ranges of operating and design conditions to prevent transmission of excessive loads and forces onto Equipment and structures. Flexibility shall be achieved through pipe routing with flexible fittings (e.g. 90º ells) rather than specifying expansion joints.

Contractor shall follow piping flexibility and stress analysis criteria in accordance with “Stress and Support Design Criteria” as described in Attachment B.

4.8.6 Piping Material Control

Contractor shall utilize an electronic system for the purchase, expediting, control, reporting, inventory, material tracking, and logistics evaluation of the piping bulk materials. The system shall have the capability of importing data from the 3D model.

Contractor shall create material requisitions from the electronic system and procure all pipe, fittings, flanges, valves, supports, specialty items and bolts and gaskets required to fabricate and install all piping systems for the LNG Facility. Reports from the system shall identify overall bulk material requirements which can be disseminated into construction areas and required onsite dates. All piping bulk materials shall comply with the piping class Specifications.

4.8.7 Ergonomic Design

Contractor shall perform multiple 3D Model reviews for the LNG Facility, to ensure that adequate access is provided for the safe operation and maintenance of all Equipment in accordance with

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the “Plant Design and Layout Criteria” in Appendix B. Items to be considered in these reviews shall include the following:

Stairs / ladders needed for accessing Equipment and instrumentation.

Valve manoeuvring space (distance and height from the valve);

Clearances around Equipment for maintenance activities;

Platforms needed for operation and maintenance of Equipment;

Access for maintenance Equipment, such as cranes, fork-lifts, welding machines (based on the maintenance envelope);

Provision of adequate lighting around Equipment, including Instrumentation; and

Permanent access to maintain critical instrumentation, such as permanent access to valve stations, positioners and solenoids of critical service control valves, emergency shutdown valves (ESDVs), blowdown valves (BDVs), anti-surge valves, and any instrumentation critical to the operation and safety of the LNG Trains.

Human Factors Engineering (HFE) requirements are limited to the criteria set forth in the “Plant Design and Layout Criteria” referenced in Appendix B, with the exception of the ergonomics study to be performed on the Central Control Room (CCR) referenced in Section 4.10.2 of this Appendix A.

4.9 CIVIL & STRUCTURAL

4.9.1 Site Geotechnical Data

The civil design of the LNG Facility shall be based on the geotechnical data requested by Contractor and identified in Appendix B.

4.9.2 Site Preparation

Contractor shall prepare the engineering recommendations and design based on Contractor’s interpretation of the geotechnical data and reports referenced in Appendix B. Subsequently, the Site shall be prepared in accordance with Contractor’s recommendations and design, as well as any other applicable Specifications included in Appendix B.

Site preparation includes, clearing and grubbing, stripping, cut and fill (general fill and structural fill), drainage system and berm, fencing, and construction of roads, pre-settlement (wick drainage) design, soil stabilization, finished grade and paving, DMM, and underground piping. Site preparation also includes preparation for temporary construction facilities, including laydown areas, and the permanent third LNG Tank area.

4.9.3 Soil Stabilization

Contractor shall prepare the soil stabilization recommendations and design based on Contractor’s interpretation of the geotechnical data reports referenced in Appendix B and the result of Contractor’s shallow soil mixing and wick drain test and monitoring program that was conducted under the SWSA. Soil stabilization shall be performed in accordance with Contractor’s recommendations and design, as well as any other applicable Specifications referenced in Appendix B.

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4.9.4 Finish Grading

Contractor shall prepare the finish grading recommendations and design based on Contractor’s interpretation of the geotechnical data reports referenced in Appendix B. The high point of finish grading on site (excluding berms) shall be +7.0 ft NAVD88 based on the survey as requested by Contractor and identified in Appendix B.

The Contractor shall build up layers to the final grading elevations in accordance with the Drawings, Specifications and the engineering recommendations developed by Contractor based on Contractor’s interpretation of the geotechnical data reports referenced in Appendix B. Contractor shall develop a detailed paving plan based on its conceptual Drawings.

4.9.5 Drainage

Contractor shall develop and implement an overall Site drainage plan showing the sheet flow direction, conveyer system (ditches, culverts) and the outfall discharge quantities based on the Site plot plan and the Site drainage Drawing listed in Appendix B. In designing the Site drainage plan, Contractor shall ensure that the Work does not have an adverse impact on the surrounding areas beyond the limits of construction in accordance with Applicable Laws, the Permits and Appendix B.

Drainage systems shall be provided for the proper discharge and disposal of effluents from the sanitary sewer, the process, the utilities, and the contaminated / clean (non-contaminated) surface water streams in accordance with the Specifications, the spill containment Basis of Design in Appendix B and the Permits.

In order to meet these design objectives, the drainage systems are classified as follows:

Clean (uncontaminated) storm water system: Clean storm water shall be directed off site through outfalls to the Sabine-Neches Waterway.

Oil-contaminated drainage system (oily water contained by paved, curbed areas): Potential contaminated oily water will be contained in curbed areas that will have a local sump; a vacuum truck will be utilized to evacuate contaminated water from the system.

Sanitary Sewer: Sanitary sewage from the facility will be pumped from the Sanitary Lift Stations inside the facility to an offsite sanitary treatment facility for processing.

Contractor shall also design and maintain adequate temporary drainage through the construction phase of the Liquefaction Project. Contractor shall also implement best management practices to manage stormwater run-off during construction in accordance with the applicable provisions of the Environmental Plan and Contractor’s storm water pollution prevention plan.

4.9.6 Berm/Levee

Contractor shall design and build the berm in accordance with Appendix B. Contractor shall maintain the berm through Substantial Completion of Stage II. The berm is required to be functional before any permanent plant rotating, exchangers, electrical or control systems Equipment is stored or installed on the Site.

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4.9.7 Roads, Paving and Fencing

The entrance and exit ramps from newly relocated Highway 87 to the LNG Facility shall follow the design and construction in accordance with Permits, other local requirements, and engineering Drawings and Specifications listed in Appendix B.

Areas that may receive accidental spills from contaminants shall be surfaced with liquid tight concrete paving or other impermeable liners. Areas where spills are not likely to occur may be covered with concrete, bituminous paving, grass or gravel layer to prevent wind and water erosion.

The paving shall be designed to accommodate the anticipated traffic loads, and loads from mobile cranes at designated areas according to the lifting plan and mechanical handling study as listed in Attachment A-1 including outriggers and maintenance vehicles.

Roads and paving shall be in accordance with the Project Specification for Roads and Paving and is listed in Appendix B.

A security fence shall be mounted on the berm all around the perimeter of the LNG Facility as per the Site Security Plan requirements listed as a part of Appendix Q as well as Drawings as listed in Attachment A-3. The security fence shall consist of 8 foot high chain-link perimeter fence equipped with additional 1 feet high barbed wire (6 strand) and razor wire on top of the fence.

Fencing shall be in accordance with the Project Specification for “Fencing and Gates” in Appendix B and the Site Security Plan included as part of Contractor’s HSSE Program in Appendix Q.

Temporary fencing shall be provided by the Contractor as per the Site Security Plan, included as part of Appendix Q to segregate work areas of others as it deems necessary.

If Owner exercises Scope Option [5] as set forth in Appendix C, Contractor shall design, procure and install vapor fencing as required by the “Summary of Exponent Analysis” findings as referenced in Appendix B.

4.9.8 Piling

Contractor shall engineer, design, supply, test and install all piling required for the Liquefaction Project based on the geotechnical data reports in Appendix B. The detailed piling Drawings, to be delivered as part of the Work, shall show coordinate locations, type, and details of piles, such as cross section and length, and cut-off elevation, and connection to the foundation. The number and length of piles for each foundation shall be determined, taking into account the group effect modification factor and the down drag effect in order to stay within the allowable differential settlement permitted for the foundation under consideration.

Piling shall be in accordance with the applicable Specifications referenced in Appendix B.

Contractor has conducted an early test pile program to confirm the piling design. Additionally, Contractor shall complete the full test pile program as part of piling production to meet Permit and technical requirements as listed in Appendix B.

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4.9.9 Foundations

Foundations shall meet the requirements of the Design Criteria for Structures and Foundations listed in Appendix B. Contractor shall design foundations for specific loading conditions such as static and dynamic, wind and earthquake in addition to dead and live loads, and hydro loads for pipe testing, and using geotechnical data provided in Appendix B.

It is anticipated that the majority of foundations will be supported on piling. Contractor shall perform piling selection, design and installations in accordance with the piling Specifications as listed in Appendix B.

4.9.10 Pipe Racks

Contractor shall design pipe racks in accordance with the Design Criteria for Structures and Foundations as listed in Appendix B.

4.9.11 Structures

Contractor shall include platforms, stiles, stairs, ladders and railings required for maintenance and operability. The location of these structures shall be determined during engineering and confirmed via the 3D model reviews. The design, erection and installation shall meet the requirements of the applicable Specifications and Design Criteria for Structures and Foundations as listed in Appendix B.

4.9.12 Permanent Plant Buildings

The buildings are set forth in the building list referenced in Appendix B. Contractor shall design the architectural buildings to meet the Specification for “Permanent Plant Buildings”, and the Vendor supplied buildings (powerhouses and analyzer shelters) to meet the Specifications in the parent equipment Specifications listed in Appendix B.

Contractor shall design buildings to meet Site specific criteria for blast overpressure and natural occurrences set forth in Overpressure and Impulse Calculations” referenced in Appendix B.

Contractor’s designs shall consider long term maintenance of the buildings. Exterior finishes that do not require maintenance and are suitable for the environmental location, such as bricks, pigmented concrete, metal siding or architectural blocks shall be used where practical.

The heating, ventilation, and air conditioning (HVAC) systems for occupied buildings and buildings where control system equipment is located shall be designed to provide positive building pressure by use of an air purifier that uses outside air for makeup. The HVAC system in buildings where widely varying heat loads may affect cooling capabilities shall be zoned and balanced. Single-pass, water-cooled units shall not be used. Electric resistance air heaters for building heat and humidity control are preferred.

For more details about buildings and HVAC refer to the “HVAC Systems Basis of Design for Plant Buildings” as listed in Attachment A-3.

Instrumentation and telecommunication systems as well as the fire protection / detection system shall be designed and constructed per Specifications as listed in Appendix B. Where specified,

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buildings shall have the same fire control panel manufacturer, model number (to be dictated by Fire and Gas control system manufacturer).

4.9.13 LNG Impoundment and Spill Containment

The sizing of the LNG impoundment basin shall be based on a design spill of LNG as defined in NFPA 59A “Standard for the Production, Storage, and Handling of Liquefied Natural Gas (LNG)” and 49 CFR 193 “Liquefied Natural Gas Facilities: Federal Safety Standards”.

Impoundment basins and spill containment shall be in accordance with the “Spill Containment Design Basis” listed in Appendix B.

Spills from the storage tanks that contain refrigerant or hydrocarbon material shall be contained in its own impoundment. Impoundment basins and trenches designed and built in accordance with project Drawings and Specifications as referenced in Appendix A-1. The condensate and refrigerant truck loading/unloading station will drain into the Refrigerant Impoundment basin.

Contractor shall implement the update to the LNG Facility layout based on the changes in the LNG and Refrigerant Impoundment areas identified as part of the permit variance work executed under the letter agreement dated August 3, 2022, as shown in the following drawings:

•PAL-T0-CIV-DWG-20-X-6081 112A1 Refrigerant Impoundment Basin 0Q-2905 Plan and Elevation

•PAL-PJT-PIP-PLN-00-GEN-0001 Rev 00J PALNG Site Plan

•PAL-PJT-PIP-PLN-00-GEN-0002 Rev 00H PALNG Facility Plot Plan

•PAL-T0-PIP-PLN-00-GEN-4007 Rev 00F Area Plot Plan - LNG Storage Tank #3, BOG Comp & LNG Impoundment Basin

•PAL-T0-PIP-PLN-00-GEN-4004 Rev 00F Area Plot Plan - South Ground Flare and Chemical Storage Area

•PAL-T0-PIP-PLN-00-GEN-4008 Rev 00F Area Plot Plan - Main Power House, GIS Power House and Essential Power Area

•PAL-T0-PIP-PLN-00-GEN-4002 Rev 00G Area Plot Plan - Refrigerant and Condensate

Contractor shall update the Deliverables as necessary to reflect the new layout into the Work. Contractor shall quantify the impact of the changes and submit to Owner a Change Order to reflect the updated dimensions of the Propane Bullets and the Refrigerant Storage Impoundment Basin; relocations of the Hazardous Chemical Storage Building, Stand-By Generation Packages, and LNG Impoundment Basin; and modification of the C5+ Storage Tank Dike. As part of the update, Contractor shall update Scope Option 4 (cost and quantities) for the adjustment to the capacity of the Refrigerant Storage Impoundment Basin to exceed the volume of the largest refrigerant storage vessel plus ten (10) minutes of firewater requirements in the refrigerant storage area (Section 4.12.5 of the FEIS).

4.9.14 Liquid Storage Facilities

The storage of refrigerants, NGL (C5+ condensate), amine, hot oil, and liquid nitrogen and the associated truck loading/unloading area shall be located downwind of any potential ignition sources. The distance between storage tanks containing flammable material and buildings shall be in accordance with API 2510 and NFPA 30.

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4.9.15 Grouting of Equipment and Base Plates

Cement mortar grout, non-shrink cementations, and epoxy grout shall be used for grouting the base plates and equipment skids and shall be in accordance with the Specifications referenced in Appendix B.

4.9.16 Engineering Support - Entergy Pad

Provide technical support to Owner in connection with the Entergy pad construction by responding to requests for information, analyzing and providing recommendations on settlement monitoring data, and reviewing requested field changes to confirm construction is consistent with Entergy pad specifications provided by Contractor.

4.10 CONTROL SYSTEMS

4.10.1 General

Contractor shall engineer, design, procure, install, test, commission and perform all the functional checks for all control systems and instrumentation in Liquefaction Project as described herein and appendices. This includes engineered Drawings, data sheets, associated engineering documents, and procurement and field installation of the control system instrumentation, inspections, expediting, required testing for the systems, complete loop checking and commissioning.

The control and operating philosophy for the Liquefaction Project is described in the “Control Systems Design Criteria”, as referenced in Appendix B.

The integrated control system and field instrumentation is considered the “Integrated Control and Safety System” (ICSS). The ICSS shall be made up of the following systems:

Basic Process Control System (BPCS)

- Alarm Management System (ALMS)

- Instrument Asset Management System (IAMS)

- Data Historian System (Process Historians and Enterprise/Shadow Historian)

Safety Instrument System (SIS)

- High Integrity Pressure Protection System (HIPPS)

Fire and Gas System (FGS)

Control Network

The Instrumentation and Control Systems of the following subsystems shall interface with the ICSS:

Closed circuit television system (CCTV)

Machinery control and monitoring system (MCMS)

Switchgear and medium voltage motor control centers (MCC) ENMCS monitoring interface to BPCS

General Electric (G.E.) Mark VI controls for the gas turbines / compressors

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Gas Chromatography, Analyzers and Calorimeters (GC)

3rd Party mechanical package Equipment programmable logic controllers (PLC)

LNG Tank gauging system (TGS)

Truck Scales System (TSS)

Plant Information Management System (PIMS)

CCC Anti-Surge Systems

Measurement devices (compliance and inventory)

Analyzer Management and Data Acquisition system (AMADAS)

Ship to Shore link system

Loading Arms Control systems

The following systems are stand alone:

Marine Navigational Aids and Monitoring system

Public address and general alarm system (PAGA)

Contractor’s Scope of Work shall be to provide the interface with Owner’s systems as follows:

Pipeline Metering and Nitrogen Metering Stations

Contactor shall install Single Mode Fiber Optic and related hardware and configuration from the LNG Facility (utility powerhouse) to the inlet gas pipeline metering skid and the nitrogen metering station.

Owner will provide a communication list in Microsoft Excel format to Contractor for implementation in the ICSS. Contractor shall configure ICSS as per the communication list, including configuration of points in BPCS, configuration of graphics in BPCS, configuration of points into the historians, configuration of flow and energy totalizers (daily, weekly, Monthly) for each flow paths and total flows in metering skid. The total number of configured points will be limited to one hundred fifty (150) within Contractor’s Scope of Work.

Energy and Mass balance reconciliation application

Contractor shall reserve space in the ICSS server cabinets for Owner to install the EMBR server with a communication link to the Enterprise Historian.

The Human Machine Interface (HMI) for the ICSS and for control systems shall be the BPCS. Where indicated on P&IDs, the systems listed above shall be accessed through the HMIs. The variables, graphic points and readings associated with the package equipment controls shown on the vendor P&IDs will be displayed on local HMIs and shall also be displayed/mimicked on the dedicated BPCS HMIs.

Contractor shall update the project Specification “Human Machine Interface (HMI) Graphics” as listed in Attachment A-3 as part of the Work. The updated Specification will be based on the selected ICSS system and the graphics shall follow EEMUA-201 Process plant control desks utilizing Human-Computer Interfaces” and ANSI/ISA-101.01 HMI standard for process

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automation. The new graphics shall be gray/blue scale, where the use of color shall be reserved only for abnormal process situations.

Contractor shall develop/design the ICSS HMIs/Graphics in conjunction with Owner. Graphics shall be reviewed and approved by the Owner. In case of vendors offers more than one HMIs software solution, Contractor shall provide the latest and more advance solution available for Owners approval for the long-term operability of the project and to extend the life of the product.

At a minimum, graphics HMIs/graphics shall have 4 different levels

Level 1: Overview of project

Level 2: Primary operating display

Level 3: System/Subsystem detail displays

Level 4: Diagnostic displays, Interlocks, First-Outs, Procedures, Documentation

The ICSS shall interface with remote subsystems. The remote subsystems located between buildings shall be connected using Fiber Optic cable. (See ICSS System Block Diagram as referenced in Appendix B). Field instrumentation shall be wired to a Remote IO (RIO) which shall use fiber optic cables to connect with the ICSS Control system cabinet located in the IO Room of the Electrical powerhouses.

4.10.2 Control Room Ergonomic Study

A Control Room Ergonomic Study (including human factors, lighting design of CCR, console arrangement planning, glare and reflection studies, and final CCR layout) shall be conducted in accordance with the Specification, “Basic Process Control System (BPCS)”, regarding the operating console desk arrangement. The Control Room Ergonomic Study will be completed after FNTP, and the findings of the Control Room Ergonomic Study shall be presented to Owner with impact to be evaluated for scope inclusion. This study will review the control panel layout for the current Liquefaction Project.

ICSS Operator consoles including desk in the Central Control Room shall be supplied for all the ICSS systems.

4.10.3 Cybersecurity

Contractor shall cybersecure the ICSS systems as require in Site Security Plan. Contractor shall incorporate into the detail design ICSS cybersecurity minimum requirements per Specification for Integrated Control and Safety System (ICSS) referenced in Appendix B.

4.10.4 Instrumentation

Contractor shall engineer, design, procure, and install all field instrumentation. The Scope of Work shall include inspection, factory acceptance test (FAT), storage and preservation of equipment at Site prior to installation, site acceptance test (SAT), pneumatic hook-ups, wiring, calibration at manufacture’s facilities and at Site, continuity checks, functional, loop diagrams for field checking, and commissioning, as required. Additional specialty loops (for instance gas chromatographs) requirements shall also be included.

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Contractor shall prepare data sheets for all instruments in scope as shown on the relevant P&IDs. Contractor shall coordinate with Mechanical package suppliers and obtain datasheets of all the instruments supplied with the package.

All instruments shall be designed and supplied for their intended application, location, and hazardous area classification. Transmitters shall be explosion proof, smart 4-20 mA plus HART with LCD indication and mounted on manifolds.

All instruments shall be calibrated and tested in the Vendor facility before shipment. Contractor shall obtain calibration certificates from suppliers for all the instrumentation including mechanical packages. Contractor shall inspect, and conduct loop testing of the instrumentation system during construction.

Contractor shall comply with instrumentation action items resulting from HAZOP, SIL, and Alarm Rationalization reviews, and revise all affected documents and Drawings to include recommendations from the reviews.

All transmitters and valve positioners shall be 4-20 mA plus “HART Protocol” compliant.

The Contractor shall use SmartPlant–Instrumentation for developing an Instrumentation Database in accordance with Attachment U-1 to Appendix U.

Contractor shall design and implement partial stroke testing (PST) for all the ESD and critical valves, using positioners to record the movement of the valve in the BPCS. Initialization of the “partial stroke” test shall be performed from the BPCS.

Fire-rated valves in ESD and critical systems shall be in compliance with the Project Loss Prevention Philosophy, Fire Zone Layout Drawings, as well as the Specification for General Instrumentation listed in Appendix B.

Contractor shall provide all bulk materials required to install the instrumentation.

Contractor shall take into account all RTDs for cool down of cryogenic systems in accordance with Specifications, and RTDs shall be permanently installed and the temperatures shall be displayed in the BPCS.

Contractor shall preserve and store Instrumentation and Control Systems in accordance with the Equipment Preservation Plan (PAL-PJT-PMT-STD-00-GEN-0001) as included in Appendix W.

Contractor shall provide the following flare ultrasonic flowmeters with dual path sensors 0FE-19284, 0FE-19004 and 0FE-19009. Existing datasheet requirements for retractable transducer shall be maintained.

Contractor shall provide flowmeters in the LNG Tank BOG lines with indication to the plant control systems (BPCS) as per FERC condition 62.

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4.10.5 Instrument Process Data

Contractor shall be responsible to develop the instrument data sheets for instruments including flow elements, control valves, analyzers, pressure relief valves, ESD & isolation valves, blow down valves and other instruments.

4.10.6 Piping and Instrumentation Diagrams (P&IDs)

Contractor shall develop the control and instrumentation details for all systems shown on the Contractor developed P&IDs as the engineering design progresses.

Contractor shall include two-out-of-three instrumentation where an interlock results in shutdown of the LNG train(s). Contractor shall also include the remote start capabilities for Equipment as described in Appendix B.

4.10.7 Instrument Index

Contractor shall develop a single project database as the instrument index for the instrumentation systems, including instrument indexes provided by Vendors.

4.10.8 Major Process Control Loop Narratives

Contractor shall develop process control narratives for major control loops. These control schemes specify the general operation of systems and Equipment within the LNG Trains and their auxiliary support systems. Contractor shall develop final control logic narratives and interlocks descriptions during the engineering phase.

4.10.9 Loop Diagrams

Contractor shall develop loop diagrams for each instrument loop. The diagrams shall start at the field device and end at the indication or control device. The diagrams shall indicate the instrument tag number, wire number and ICSS I/O number.

4.10.10 Cause and Effect Diagrams

Contractor has developed Cause & Effects Diagrams to incorporate interlock and shutdown logics as per the Project P&IDs, Equipment Process Data Sheets.

Contractor shall complete the development of the cause and effect diagrams, following criteria as shown below:

a.Improving readability

b.Standardization between areas

c.Utilization of standard cause and effect terminology used in the LNG industry

d.Include input from packaged Equipment Vendors’ cause and effect

e.Recommendations from the HAZOP, PHAs, and SIL studies

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4.10.11 Instrumentation on Packaged Equipment

Instrumentation on packaged equipment shall be consistent with the other plant instrumentation and in accordance with Instrumentation for Packaged Equipment Specification listed in Appendix B.

4.10.12 Instrument/Electrical Interfaces

Instrument/electrical interface shall be a combination of soft (connected through ENMCS) and hardwired signals.

Contractor shall engineer and design the instrument/electrical interface and procure the interposing relay panels or remote input output (RIO) interface cabinets.

ENMCS (Electrical Network Monitoring Control System) controllers shall be independent from BPCS controllers and provided by Electrical. ENMCS shall be located in individual Power Houses and shall share the plant backbone fiber optic network. ENMCS controller information shall be made available to plant operator on a dedicated console in the central control room.

4.10.13 Analyzers

Contractor shall engineer, design and procure the analyzers. Field analyzers shall be installed close to the sample probe. Gas chromatographs requiring environmentally controlled installation will be in ‘Analyzer Houses’ with their associated components, including calibration system. Contractor shall engineer, design, procure, install and commissioned all the analyzers including subcomponents such as sampling probes and conditioning system.

Sample probes shall be designed in accordance with Specification for Packaged Analyzer System as referenced in Appendix B.

4.10.14 Instrument Protection and Accessibility

Instrument installations shall be designed for safe and convenient access for operation, calibration, other routine maintenance, as well as for ease of construction and instrument protection (winterization). Field transmitters located in hazardous areas shall be accessible from both sides without requiring turning or movement that may compromise the electrical seal.

4.10.15 Instrument Winterization

Heat tracing of instruments / impulse lines shall be provided as required for specific systems. Diaphragm seal instruments are preferred over heat traced instruments where applicable.

4.10.16 Instrument and Control Systems Installation and Field Testing

Instrument installation shall be in accordance with the Specifications referenced in Appendix B. Contractor shall prepare a project-specific procedure, as required in Attachment A-1.

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4.10.17 Instrument Process Connections and Instrument Air Lines

Contractor shall prepare instrument installation details for all process and utility system instruments. Typical installation details, which include tube fittings, pipe fittings, and root valves required for each instrument type shall be referenced in the instrument index.

4.10.18 Instrument Power and Grounding

Contractor shall design an instrument power system and a grounding system to provide an accurate voltage point measurement, protect personnel, and prevent digital bit signal mixing, RF and electrical interference.

Contractor shall develop the grounding design in accordance with the Specifications and Applicable Standards and Codes (for instance, the National Electrical Code) and vendor recommendations.

All plant automation systems and critical instruments shall be provided with back-up power from the UPS system.

Electrical power distribution system for control panel boards and UPS systems shall be designed and procured by Contractor. Contractor shall also design and procure instrumentation power feeders including fuses and/or breakers distributed from the main power supplies.

4.10.19 Location Plans

Contractor shall provide instrument location plans for all instrumentation and instrument equipment, junction/remote IO boxes, and control panels.

Instrument air supply main header routes shall be identified on the applicable Drawings with offtakes to the LNG Trains and other facilities, identifying the piping line numbers and the instrument air take-off valves.

Tagging and elevations shall be identified on the applicable Drawing.

4.10.20 Wiring

Wiring diagrams developed shall include:

a.Cable schedules listing details for the cable type, class, length, start and finish points for all cables;

b.Junction box wiring diagrams, showing terminal connection details, core and cable numbering, cable run detail from the junction boxes to the individual instruments, including details for multi-core cables;

c.Electrical installation detail showing typical cable gland arrangements and miscellaneous electrical installation detail; and

d.Fiber Optic Patch Panels termination connection details, block diagrams for fiber optics cables.

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4.10.21 Junction Boxes for Instrumentation

Contractor shall supply separate field junction boxes (JB) / Remote-IO box for BPCS Signals, SIS, FGS, PLCs.

The following sparing philosophy shall be implemented for junction boxes:

a. physical space in the junction boxes (at least 20% at Substantial Completion of the Stage)

b. terminal strip/terminal blocks, and wired pairs (at least 20% at Substantial Completion of the Stage).

4.10.22 Plant Automation

Contractor shall engineer, design, procure and install the ICSS. Contractor shall establish/solve communications protocol between systems. Contractor shall advise where the ICSS configuration, programming, graphics configuration, engineering, testing and integration shall be performed. The ICSS shall be based on the following sub-systems:

4.10.22.1 Basic Process Control System (BPCS)

The BPCS shall be the operator HMI interface for all process control and monitoring systems for the facility. The primary function of this system is to produce, monitor, and control quality of LNG at design flow rates.

Controllers and servers for the LNG Facility shall be integrated. Control and measurement signals from PLCs (package equipment), truck scales system, SIS, FGS system, cool down temperatures, LNG storage, LNG cooldown, and loading operations shall also be displayed on the BPCS consoles.

Contractor shall provide auto-tuning software. Contractor shall use OTS tuning parameters as initial set up during start up and commissioning of the facility, and Contractor shall fine tune the control loops as required.

4.10.22.2 Enterprise Historian

Contractor shall specify, procure, configure, install interface and test the OSI-PI Enterprise Historian. Enterprise Historian will be in Level 4 in accordance with ICSS block diagrams. Enterprise Historian shall collect and store all the ICSS points of the LNG Facility including packaged Equipment. Contractor shall include licensing for a minimum of 50 users.

Contractor shall provide access to Historian, Historian tools and Historical data, as soon as Historian is energized on site, as Owner will have to configure operation reports as preparation to readiness for Operation.

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4.10.22.3 Safety Instrumented Systems (SIS) and HIPPS (High Integrity Pressure Protection System)

The primary function of this system is to predict unsafe operating conditions and provide protection for critical process equipment and systems. Each LNG Train and the Common Facilities systems shall be provided with independent SIS and HIPPS.

SIS shall be engineered for the LNG Terminal based on IEC 61508 and 61511 (ANSI-ISA-84).

SIL 3 is defined as the maximum level for the LNG Terminal.

4.10.22.4 Fire and Gas System for Process (FGS)

A fire & gas detection and alarm system with a fully redundant controller shall provide continuous fire and gas surveillance throughout the LNG Facility to alert personnel of the presence of gas, fire or smoke.

The FGS shall consist of smart gas detectors, flame detectors, heat sensors, smoke detectors, manual pull stations, and other fire mitigation equipment for surveillance/protection of all the outdoor process areas, and indoor shelters/buildings in accordance with Applicable Laws.

Refer to the Specification for fire and gas system in Appendix B, for additional details.

4.10.22.5 Fire and Gas System Panels for Buildings

Building fire alarm control panel (FACP) shall communicate with the ICSS-FGS through ethernet or modbus/TCP IP.

4.10.22.6 Alarm Management System (ALMS)

Contractors shall develop, design and install the ALMS following ANSI/ISA–18.2-2016 Management of Alarm Systems for the Process Industries to improve and manage safety, quality, and productivity of the facility.

Contractor shall follow all the Alarm Management Lifecycle stages per ANSI/ISA–18.2-2016 Management.

Contractor shall develop an Alarm Philosophy for the Liquefaction Project and conduct alarm rationalization studies for alarms generated in ICSS and in packages equipment.

Contractor shall develop and deliver:

a)Master alarm database per ANSI/ISA–18.2-2016

b)A fully developed and configured Software Package for the facility.

An effective alarm management system ensures that deviations from desired state/mode are communicated effectively to and prioritized for the console operator. The alarm system is primarily for the console operators and configuration of the alarm system to focus on operation needs.

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The ALMS shall capture alarm and events of all ICSS systems/sub-systems and chronologically log the events in an event database. It shall be possible to export the event database to various other applications for analysis.

The ALMS shall have the following minimum requirements:

a)Alarm Metrics, Benchmark and Analyze the alarms in given period

b)Alarm Shelving

c)Dynamic Alarming

d)First Out multi-alarm suppression

e)During start-up, the Operators shall be able to Shelve the process areas and equipment not in service.

The ALMS shall be configured using Enhanced and Advanced Alarming techniques to shelve alarms when rotary equipment is not running, i.e. low current or low speed shall be disabled when the equipment is not running. Contractor shall identify those alarms during the Alarm rationalization studies. ALMS shall have Dynamic Flood Suppression

ALMS and alarms in general shall comply with ANSI/ISA–18.2-2016 metrics in section 16.9 Alarm Performance Metric Summary

4.10.22.7 Instrument Asset Management System (IAMS)

This system shall be provided by the BPCS OEM (Original equipment manufacturer).

SIS to BPCS HART protocol demodulation shall be provided by the SIS OEM.

Propane and mixed refrigerant compressors and all the other packaged equipment shall be supplied with IAMS connectivity thru HART multiplexers. HART passthrough is acceptable for ControlLogix PLCs; Contractor shall provide any additional software/hardware and integration required.

The primary function of the system is to maintain data on plant Equipment such that Equipment maintenance requirements can be identified prior to the failure of the units.

4.10.22.8 Public Address and General Alarm System (PAGA)

A field-proven design of the PAGA system shall be provided to inform personnel of an abnormal situation and support safe evacuation of the LNG Facility.

The PAGA System provides specific alarm tones, pre-recorded or live voice messages, to all or selected areas of the facility by use of loudspeakers. In areas with a high ambient noise level, flashing lights (beacons) complement voice messages and audible alarms.

Alarms can be initiated either manually from any one of the dedicated access panels or automatically from the Fire and Gas Detection System and/or Emergency Shutdown System

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main panel. Voice messages can be generated either from the microphones at dedicated access panels or from telephones in the facility.

PAGA system shall be provided for indoors and outdoors locations.

4.10.22.9 Machine Condition Monitoring System (MCMS)

A permanent on-line MCMS shall be provided by Contractor to continuously monitor the performance and condition of all critical rotating Equipment, such as the refrigeration compressors, their gas turbine drivers, and other pumps/compressors installed in the LNG Trains and the common support facilities.

The primary function of this system is to safeguard critical Equipment through motion detection measurements; collection of equipment performance data to predict any abnormalities and provide early notification of deterioration and unit condition changes.

Part of the function of this system is the diagnosis of machine performance and assistance in the predictive maintenance for selected Equipment.

Hardware and software required for the MCMS shall be supplied by Contractor. Data collection and archiving shall be in rack mounted servers located in indoor cabinets with local HMI.

Contractor to provide five (5) licenses for sole use by Owner.

4.10.22.10 Programmable Logic Controller Network (PLC)

The primary function of this system is to provide package equipment control system applications. Communication networks shall also be used for maintenance as well as for local control. The control and maintenance network for PLCs shall be independent.

All PLCs shall be supplied with HART multiplexers with connectivity to the Instrument Asset Management System (IAMS) for analog input/output signals. The use of HART passthrough is allowed for ControlLogix PLCs with compatible and supported IAMS systems.

Contractor shall include any additional hardware or software to establish communication between PLCs and IAMS, and shall be connected to the propane and mixed refrigerant compressor control systems supplied by Baker Hughes.

Anti-surge controllers shall have the same control and maintenance networks as the PLCs.

The Air compressor package will not include a Unit Control Panel (UCP) and this functionality will be provided in the Local Control Panel (LCP) with interface to the control room.

4.10.22.11 LNG Tank Gauging System (TGS)

A LNG Tank Gauging System (TGS) shall be provided to provide overfill protection and stratification monitoring, with alarms to warn of potential rollover conditions. The TGS shall have the capability of measuring / providing tank level, temperature and density profiles over the tank height plus provide calculation data for tank inventory. The TGS shall be designed as a fully redundant system and data communication to the BPCS shall be redundant.

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4.10.22.12 Anti-Surge System

Anti-Surge Systems shall be provided where specified in the mechanical datasheets. Contractor shall coordinate activities with Vendors that provide compressors, anti-surge valves, flow measurement devices (orifice and venturi) to ensure that the anti-surge system is installed and tuned to the design requirement of the compressors and the LNG Facility.

CCC anti-surge controllers shall be supplied with HART multiplexers and connectivity with IAMS. Trainview station located in the Main Control Room shall communicate and display all the compressors with CCC anti-surge systems.

4.10.22.13 Maintenance Network associated with package equipment

The primary function of this system is to communicate with the IAMS and PLC systems. The system will be programmed and configured to provide online trouble shooting capabilities for various systems.

4.10.22.14 Truck Scale System (TSS) (Weigh Station)

The primary function of this system is to weigh the product trucks prior to and after loading/unloading to determine the weight of their shipping cargo. The TSS shall interface with the BPCS using ethernet or modbus TCP/IP or OPC, data shall be collected in the historian.

4.10.22.15 Plant Information Management System (PIMS)

The primary function of this system is to provide many different types of LNG Facility information to desktop applications.

Contractor shall supply a desktop PC on the operating console and configure it to the LAN.

4.10.22.16 Analyzer Management and Data Acquisition System (AMADAS)

An analyzer management and data acquisition system shall be provided to measure the performance, availability and maintainability of a broad variety of all process analyzers and other critical instruments inside analyzer shelters. AMADAS shall be used to optimize the performance of the gas chromatographs, process analyzers, and help in determining when maintenance is required.

Contactor shall update the Specification for the Packaged Analyzer Systems to include the AMADAS requirements as part of the Work.

4.10.22.17 Control Network

Contractor shall be responsible for the control network for the LNG Facility. Contractor shall continue detailed design of the ICSS- Block Diagrams as referenced in Appendix B, and shall incorporate details of Supplier packaged Equipment, details of the ICSS Supplier selected scope, and Specifications into the design of the control network.

The control network shall be detail designed by Contractor in coordination with its Vendors and their networking and telecommunications SMEs.

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The fiber optic communications network shall be the primary media for communication for the LNG Facility control network. Separate cabinets shall be provided for the ICSS system (not to be combined with the telecommunications cabinets) with dedicated ICSS patch panels and including switches, routers and media converters for the ICSS system. All communications systems shall be redundant.

The fiber optic communication network shall also be designed with a minimum of 50% spare capacity at Substantial Completion for fiber optic cable fibers and all fibers will be terminated in patch panels in accordance with the Specification “Telecommunications Design Criteria” referenced in Appendix B.

4.10.23 Operator Training Simulator (OTS)

In accordance with the requirements listed in Appendix P, the OTS shall be provided as outlined below:

[***].

4.10.24 Special Tools and Software

Contractor shall supply all the special tools required to calibrate, connect and configure all control systems that are part of the LNG Facility. This shall include tough books (field hardened) and tools suitable for Class 1 Div. 2 for PLCs and GC troubleshooting, Hart Handhelds, Gas Calibration Kits for Gas Detectors, Pressure Calibration Handhelds, Device Net/Modbus Handhelds, PLCs, and configuration software. Any special tools included as part of the control system purchase orders will be turned over to Owner as per the requirements of the Agreement.

All software and licenses provided shall be accompanied by their original installation media (CD, DVD, USB) and installation certificate, where applicable. The software, licenses and installation certificates provided to Owner shall be sufficient for Owner to re-install in new computers in case of failure of the original devices.

Contractor shall request each Supplier to generate a list containing all software information, licenses, operating systems information, special tools, laptops, printers, handhelds and any software, special tools or ship loose item provided by Supplier.

Contractor shall compile a list of all software, special tools, USB dongles licensing drivers, original installation drives (CDs, DVDs, Hard drives, USBs), laptops and documentation, for transfer to Owner prior to Substantial Completion.

This list shall contain, as a minimum, the following information

a)Package/System equipment

b)Project PO number, in case vendor has a different PO number, this needs to be included

c)Vendor information, including contact information

d)Item description, Software or license description

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e)Manufacture/developer of the good provided

f)Model, Serial number, Software Version, year of release as applicable for each good

g)If the good is a license or software, Contractor shall describe in what fashion was the software provided, i.e. USB, CD media, DVD media, certificate from manufacture with serial number information for registration over internet or phone.

h)Project reference documentation.

4.11 ELECTRICAL

The electrical system shall be designed to provide:

Safety for operations and maintenance personnel

Reliability and flexibility

A coordinated protection system

Equipment properly rated for continuous operations

Adequate short circuit ratings (interrupting capacity)

Adequate and coordinated insulation levels

4.11.1 Electrical Equipment

The electrical systems to be engineered, procured, constructed, and commissioned by the Contractor include:

230 kV transmission lines from Entergy’s Sandling substation interface point, including OPGW from Entergy’s demarcation point

230 kV GIS switchgear or GIS switchyard in the plant with associated equipment and interface to Entergy’s Sandling substation

230/34.5 kV Transformers

Distribution transformers (Oil filled and Dry type)

Pre-fabricated powerhouses

34.5kV, 13.8kV, 4.16kV, 480V switchgears and MCCs as applicable (All Medium Voltage and Low Voltage Switchgears and Medium Voltage MCCs are to be arc resistant equipment)

AC UPS systems

DC Systems for Electrical control and protection

Lighting / Small Power Transformers & Panelboards

Indoor and outdoor lighting, including area and street lighting

Cables

Metal enclosed Cable Bus

Raceway systems including cable trays & channel

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ENMCS system

Grounding systems

Lightning protection systems

Aircraft warning lights

Junction boxes and local control stations

Electrical heat tracing systems

Any other equipment / systems / materials required to provide safe functioning and proper interface with the plant Electrical systems.

Essential Power System

Cathodic Protection System

Power factor correction

The electrical system shall be designed to permit safe, logical and sequential energization of the system, both during initial startup of the plant and during restarting the plant after any power blackouts. An energization sequence / narrative detailing the above shall be submitted by the Contractor to the Owner for review.

4.11.2 Electrical Pre-Investment

If Owner exercises Scope Option [6], the electrical distribution will be enhanced with selected pre-investment items (or space) to allow for the future addition of Trains 3 and 4, as follows

4.11.2.1 Main Powerhouse 111B-11

•Increase the ratings of the essential bus transformers;

•Add space for future contactors in essential MCCs;

•Add space for one future incoming circuit breaker for future diesel generator;

•Increase DC charger and battery bank capacity to allow for future breakers and contactors;

•Increase UPS size, as required; and

•Increase powerhouse size to accommodate above listed items.

4.11.2.2 Ship Loading Powerhouse 107B-02

•Increase powerhouse size to allow floor space for future BOG control panel, BOG VFD and additional LV MCC for future BOG auxiliary loads.

4.11.2.3 Utility Powerhouse 112B-01

•Add two equipped spaces for contactors in 5kV MCCs and equipped spaces in low voltage MCCs for two future air compressors;

•Increase transformers rating; and

•Increase DC charger and battery bank capacity to allow for future breakers and contactors.

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4.11.3 Electrical Deliverables

Contractor shall produce all electrical engineering and design Deliverables listed in Attachment A-1 and required to accurately and sufficiently describe the distribution system layout and associated details.

4.11.4 One Line Diagrams

One-line diagrams to be developed by Contractor as part of the Work are listed in Attachment A‑1. Contractor shall develop detailed one line diagrams. The following ratings will be confirmed by study/calculations and incorporated during engineering:

• Transformer Ratings

• Switchgear and MCC Continuous Ratings

• Switchgear and MCC Short Circuit Ratings

• Essential Power System Ratings and Requirements

• Continuous Ratings and Short Circuit Ratings of Any Other Electrical Distribution System Component

Contractor shall produce overall one line diagrams delineating each powerhouse and shall consider provisions for future expansions during engineering.

4.11.5 Electrical System Study

Contractor shall carry out an electrical system studies using ETAP software.

Contractor shall ensure that the following studies/calculations are executed:

Load Flow Studies including power Factor Correction Study

Fault Current Studies

Motor Starting Conditions

Harmonic Distortion Studies

Arc-Flash Study

Grounding Studies

Cable Sizing Calculations including thermal calculations for the under-ground duct banks

Protection Coordination Study

Electrical Load List

Electrical Equipment List

CT & VT sizing calculations as needed and saturation curves as supplied by Vendors

UPS sizing in the form of a load list

Typical lighting calculations

Lightning protection risk assessment study

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Relay setting

Relay configuration files as submitted by Vendors

Battery and charger calculations as submitted by Vendors

4.11.6 Uninterruptable Power Supplies (UPS)

Contractor shall design the UPS System in accordance with PIP ELSAP04 and Project datasheets.

4.11.7 DC Power Supplies Including Switchgears

DC power supply system including switchgear will be provided by the Powerhouse / substation Supplier who shall determine the DC power supply system requirements, engineer and design, procure, install, commission and verify the operation of all DC power supply systems including those used for operating switchgears, and transformers.

The Suppliers shall prepare detailed one-line diagrams for all DC power supply systems. Suppliers shall size batteries and chargers and verify that minimum voltages are maintained as specified and required by the Suppliers. Redundant battery chargers shall be provided for DC power supply system(s).

4.11.8 Electrical Heat Tracing

Contractor shall design, procure, install and verify the correct operation of the electrical heat tracing system including dedicated distribution panels located throughout the LNG Facility.

4.11.9 Electrical Equipment Powerhouses / Buildings

Contractor shall perform engineering and develop Drawings for electrical equipment powerhouses / buildings to meet the requirements of the LNG Facility as set forth in the Agreement.

The power houses and electrical buildings shall be designed and constructed in accordance with the requirements of the Specification PIP ELSSG11 and the Project datasheets.

4.11.10 Cable Routing/Cable Trays

Contractor shall develop the cable routing/cable tray Drawings and a cable database.

Contractor shall furnish and install a complete raceway system, which shall include channel, conduits, flexible conduits, cable trays, under-ground ducts, wire-ways, cabinets and boxes, and all other materials and devices required to provide a complete system for support and protection of electrical conductors.

4.11.11 Essential Power Supply System

The essential power generation system shall provide four (4) hours of essential power battery backup for essential loads. Contractor shall develop a load list for essential users and size the system accordingly. The results of a preliminary analysis indicates that the system shall consist

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of three (3) essential power generators. These generators shall be diesel engine driven generators each with minimum nominal rating of 3MW Prime, 4160 V, 3-phase, 60 Hz and 0.8 pf, dedicated load centers, MCCs, auto transfer switches (ATS) and any other electrical components required for an operational standby power supply system. Rating of the generators shall be verified by the Contractor at the time of purchase.

Contractor shall quantify the impact of the change from thirty (30) minutes to four (4) hours of essential power battery backup for essential loads and submit to Owner for review and approval.

The essential power supply system shall be rated for operation at 4160/480 V and shall act as a hub for local essential (e.g. lighting, power, instrument, HVAC, UPS) power needs.

4.11.12 Arc-Flash Labeling

Contractor shall label all electrical enclosures/panels in accordance with Contractor’s Arc-Flash Study.

4.11.13 Electrical Interface Coordination

Contractor shall be responsible for interface activities between various systems and equipment, verifying and establishing interface processes during Vendor document review, for efficient functionality of systems after field installation and hook-up to the power supply systems.

4.12 TELECOMMUNICATIONS

Contractor shall follow and provide telecommunication systems as required in the Site Security Plan as listed in Appendix Q and the Specifications for such Work as listed in Appendix B.

Telecommunications system shall include the following sub-systems:

Telecommunication infrastructure (fiber optic cables, ethernet cables, coaxial cables, electrical cables; Electrical installations, and any other activity related to Telecommunication);

VoIP Telephone System;

Plant Business LAN;

Security LAN;

Hot-Lines;

Closed Circuit TV System (CCTV System);

Public Address and Intercom System (PA/I);

Access Control/Security System;

Intrusion Detection System;

Trunked Radio System;

Marine VHF Radio System

Contractor shall produce all Telecoms engineering and design Deliverables required to accurately and sufficiently describe the telecoms systems listed above as set forth in Attachment A-1.

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Contractor’s engineering package shall include the following types of Deliverables:

Specifications

Manufacturers’ Datasheets

Cable Schedule

Cable Routing Plans

FAT/SAT Test Procedures

Power and Heat Load Calculations

Telecom Equipment List

Site Equipment Location Plans

Equipment and Installation Details

Wiring Diagrams

General Arrangement Drawings

Telecom Equipment Location Plans

Equipment Room Layouts

Equipment Elevations

Cable Termination Diagrams

System Block Diagrams

Radio Coverage Studies

PA/I Coverage Study

Contractor shall integrate any required related system to the Telecom GPS Master Clock such as the PAGA, access control system and security systems as required in this Appendix A, Appendix B and the Site Security Plan per Appendix Q.

Contractor shall determine the locations of telecommunications outlets throughout the buildings in the LNG Facility. Wifi shall be provided inside buildings per the telecommunication block diagrams and outside as necessary to provide wifi coverage for the truck weigh station.

Contractor shall supply telecommunication systems as listed in the “Telecommunication Design Criteria” Specification as referenced and the block-diagrams in Appendix B:


Equipment
Infrastructure-All Systems
Fiber Optic Cable and Copper Cable
Conduit/Cable Tray
All Electrical Installations
All mechanical and civil works and installations related to Telecommunication systems
UPS and batteries
All Junction Boxes (indoors and outdoors)

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Equipment
Fiber Optic Patch panels
Cat6 Patch Panels
Racks/Enclosures including electrical power
Engineering and Deliverables
Telephone VoIP system
IP PBX
VoIP Switches
VoIP Servers
VoIP Phones (/Prefabricated Power Houses and Building)
Ethernet RJ45 Sockets (wall jacks) for all buildings
Conference Phones
Conference Room Equipment
Engineering and Deliverables (with input from Owner for Owner’s supplied equipment)
Networking Devices for LAN
Core Switches
Distribution Switches
Access Switches
Switches with SFP ports and STP pluggable connectors
Cisco Wireless Access Points (WAPs)
WAP Controllers
Firewalls for all Telecommunications systems provided by Contractor that interfaces with Business LAN
Racks/Enclosures for Owner use (with input from Owner)
Rack Mounted Power Distribution Units/Strips (PDUs)
Ethernet RJ45 Sockets (wall jacks, floor, ceiling for WAP and conference rooms, etc.)
Ethernet and Fiber Optic patch cable to networking devices
Master telecom GPS clock with antenna installation, software and synchronization of systems provided by Contractor
Engineering and Deliverables (with input from Owner for Owner’s supplied equipment)
Hot Lines
Hotlines and Associate Equipment
Engineering and Deliverables
CCTV
All CCTV cameras
Printers for the security CCTV system

Servers with redundant power supply and redundant storage units
Workstations for Operations (Process CCTV)
Workstations for Security and CCTV
Software Licenses
Engineering and Deliverables
PAGA

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Equipment
PAGA System
Speakers/beacons outdoor
Speakers indoor
PAGA access panels
Engineering and Deliverables
Access Control/Security System
Core Switches
Distribution Switches
Access Switches
Switches with SFP ports and STP pluggable connectors
Access control panels
Magnetic or strike locks for doors
Cards Readers
Servers and Workstations and Monitors for Access Control
Automated personnel turnstiles
Intercommunications stations
Engineering and Deliverables
Intrusion Detection System
Fiber optic intrusion detection system
Engineering and Deliverables
Permanent Radio System
Radio Tower
Antennas and Repeaters
Radio system components
Radios Handhelds with batteries, batteries chargers and accessories
Fixed Radios (for Operations)
Fixed Marine Radios
Engineering and Deliverables

4.12.1 Racks/Enclosures for Owner use

Contractor shall reserve physical space for Owner to Install their Business LAN active Equipment in all building locations where telecommunications are provided, Cabinets shall be ready to be used, fully wired and power up.

4.12.2 Fiber Optic Cable Network (FOCN)

Contractor shall engineer, design, procure, install, test, and provide all associated Deliverables for the FOCN in accordance with Attachment A-1.

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4.12.3 Telecommunication Testing

Contractor shall perform all tests as listed in the Specification for ”Installation and Testing of Telecommunications Cables” referenced in Appendix B. Contractor shall develop testing procedures for the performance of such tests.

Contractor shall also develop and submit FAT/SAT testing procedures for all telecommunication systems and components provided.

Telecommunications systems integrator personnel shall be on Site and at the shop for execution of acceptance testing as defined in Appendix T-1.

4.13 SITE SECURITY

Contractor shall design and install the Site security systems in compliance with the requirements for Site security as listed in the Site Security Plan as referenced in Appendix Q and the Specifications referenced in Appendix B.

The Site security system shall be provided that will include the following:

Intrusion Detection and Protection system

Security CCTV system (combination of fixed and Point-Tilt-Zoom cameras)

Security Access Control System (buildings, guard houses, jetty areas)

Lighting including lighting of the berm, the fence, and the surrounding area

Fence System

Biometric checking system

Gates and wedge barriers for vehicular access points

4.14 FIRE PROTECTION & SAFETY SYSTEMS

Contractor shall engineer, design, procure, install, inspect and commission all Equipment, instrumentation and materials required for the fire and gas detection, and fire protection systems for the LNG Trains and the Common Facilities in accordance with applicable Specifications and Applicable Codes and Standards, including 49 CFR 193 and NFPA 59A, and Appendix B. Contractor, as a minimum, shall complete the Vendor and DECN Hazard and Operability (HAZOP) studies, and define the required protection method during the EPC phase of the Project.

The residual risks shall be mitigated via fire & gas (FGS) system and fire protection means.

The fire detection and protection basis of engineering shall be on guidelines provided in the “Loss Prevention Philosophy” listed in Appendix B.

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FGS detector location layouts shall be designed based on identified sources and the associated cause and effect to be implemented into the facility Integrated Control and Safety System (ICSS).

Firefighting means shall be provided throughout the LNG Facility to quickly extinguish or control any fire incident at its incipient stage with the suitable agent, including but not limited to, water, foam, dry chemical, carbon dioxide or other gaseous extinguishing systems.

An underground firewater network shall be designed to supply firewater where required. The fire water network shall be sized according to the fire water demand calculated during the EDSA and verified as part of the Work. Two firewater storage tanks sized for a minimum of two (2) hours of operation each shall be provided. Two (2 x 50%) diesel firewater pumps and 1 x 50% electric motor driven fire water pump is provided. Tug boat connections shall be provided to pump river water into the system as back up to the fresh fire water system.

Firewater coverage and fire and gas detectors locations for the OSBL and ISBL areas shall be reviewed and verified in the 3D model to ensure the fire zones are protected adequately.

All fire protection equipment shall be UL/FM approved.

Contractor shall also identify the areas in which hazardous material may come in contact with personnel and provide safety shower and eyewash stations not more than 50 ft from the risk source.

Contractor shall develop P&IDs, Equipment data sheets, and location Drawings for the LNG Trains during engineering. Contractor shall verify fire water line sizes, pipe Specifications and all system hydraulics.

If Owner exercises Scope Option [6], the Work shall include a firewater tank size increase, increase of the firewater header to 24”, relocation of the plant road adjacent to the condensate and refrigerant storage area, firewater tie-in connections for the future 0T-2302 C5+ Storage Tank, and the deluge system for the 0T-2301 C5+ Storage Tank.

4.14.1 Fire & Gas Cause and Effect Diagrams

Contractor has developed Fire and Gas Cause & Effects Diagrams to incorporate interlock and shutdown logics as per the Fire Zones, Project P&IDs, Building Fire Control Panels, Equipment Process Data Sheets.

Contractor shall complete the development of the Fire and Gas cause and effect diagrams, following criteria as shown below:

a.Consistency of fire and gas protection across OSBL and ISBL.

b.Standardization between areas

c.Utilization of standard cause and effect terminology used in the LNG industry

d.Utilization of packaged Equipment fire and gas cause and effect and fire and gas detectors.

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e.Recommendations from the HAZOP and LOPA studies

4.15 LNG LOADING, WARM LNG TANKER GAS-UP AND COOL-DOWN

Contractor shall engineer, design, procure, install, and commission all necessary LNG Loading Equipment and facilities to allow for warm LNG Tanker gas-up and cool-down, on the Berth, and associated vapor handling in a safe manner.

The following scenarios are to be considered:

Preparation for ship arrival

Operation with Off-Spec Vapor Return from the LNG tanker during the Gas-Up and Cooldown Operation.

BOG management during ship loading

As part of the Liquefaction Project, the south Berth shall accommodate the gas-up and cool-down requirements as listed in this Appendix A and in Appendix B.

4.16 MARINE

Marine design shall be in accordance with the Specifications and requirements in Appendix B.

4.16.1 Marine Facilities

The marine facilities include:

LNG Loading Berth: one south Berth capable of berthing tankers from 125,000 m3 to 266,000 m3 (QMAX) capacity, with a design loading rate of 12,000 m3/hr.

Access trestle supporting a pipe rack and roadway providing access to the berths

Material Offloading Facility (MOF) consisting of a quayside structure to import Equipment and Contractor Equipment during performance of the Work

Contractor shall construct a Pioneer Dock (#2) in addition to the Pioneer Dock (#1) completed under the SWSA

Ship turning basin and LNG berthing basin, including navigational aids and dredging including pre-turnover dredging of shoaling and pre-turnover maintenance dredging. The dredging depth shall be defined as what is outlined in the Specification for “Dredging Works, Marine Facilities Design Criteria for LNG Loading Berths” and “Marine Facilities Design Criteria for Material Offloading Facility” as referenced in Appendix B.

Shore protection at the Berth pocket and MOF dredging slope.

4.16.2 Marine Analyses

The design of the marine structures for the jetties shall meet all requirements according to the Applicable Codes and Standards and shall consider the likely failure mechanisms.

As part of the marine facilities design, the following analysis shall be performed:

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Basin and berth geometry

Shore protection analysis and design

LNG berth topside equipment

Further updates to Contractor’s LNG Vessel Drifting Speed Study PAL-T0-MAR-RPT-24-GEN-0003 (26196-100-30R-R01-00007) and Hydraulic Transient Analysis for LNG Loading Line Study PAL-PJT-PIP-CAL-24-GEN-1001 (26196-100-K0R-DK-00001) completed during the EDSA to confirm the design of the loading system complies with SIGTTO guidelines and the Marine Facilities Design Criteria for LNG Loading Berths PAL-T0-MAR-DEC-24-GEN-0001 (26196-100-3DR-R04-00001).

Dredging requirement

Mooring load analysis in accordance with OCIMF – Mooring Equipment Guidelines (Fourth Edition 2018). Static and dynamic mooring studies to determine the optimum mooring arrangement for the Berth.

4.16.3 Marine Berth and LNG Loading Platform

Contractor shall engineer, design, procure, fabricate, and install the marine Berth and loading platform in accordance with the Specifications and Applicable Codes and Standards provided in Appendix B, as applicable. In addition, the platform on the jetty control building shall connect via a walkway to the platform associated with the LNG loading arm valves.

The Berth shall consist of a pile supported LNG Loading platform, breasting dolphins, mooring dolphins, and a trestle with combination pipe rack / roadway connecting to the onshore LNG Facility.

4.16.4 Ship Turning Basin and Berth Pocket Layout

The ship turning basin in the Sabine-Neches Waterway and LNG Terminal Berth basin arrangements has been assessed in the “PALNG Shiphandling Simulations”

(PAL-T0-MAR-RPT-00-GEN-0003) (based on the original turning basin configuration without consideration of the reduced turning basin configuration), the “Q-Max Full Mission Bridge Simulation Report” (PAL-T0-MAR-RPT-00-GEN-0004) (based on the original turning basin configuration without consideration of the reduced turning basin configuration), and the “SEMPRA Port Arthur LNG Ship Simulation for Navigation Basin Clearances” (PALT0-MAR-RPT-0001) (based on the reduced turning basin configuration), as referenced in Appendix B.

The adjustment to the eastern side of the ship turning basin is based on the “SEMPRA Port Arthur LNG Ship Simulation for Navigation Basin Clearances” (PALT0-MAR-RPT-0001). Contractor shall review and validate the results of the navigation simulation with respect to the Site conditions, including bathymetry, berth layout, environmental conditions and other factors. The berth pockets and turning basin shall accommodate the maximum allowable ship motion as specified in the guidelines PIANC, International Association of Ports and Harbors. The design depth of the berths should take into account various factors, in addition to the maximum draft of the design vessel and required under keel clearance.

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4.16.5 Dredging and Disposal

Contractor shall be responsible for all dredging requirements for the Berths, Berth pocket and turning basin, MOF, and Pioneer Dock(s), with the exception of the channel dredging and toe trench dredging (if applicable) at the turning basin east bank, which shall be performed by others (i.e., Army Corp of Engineers or Other Contractors). The Berth basin shall be based on the criteria specified in the in the Marine Facilities Design Criteria for LNG Loading Berths (PAL-T0-MAR-DEC-24-GEN-0001) and the Marine Facilities Design Criteria for Material Offloading Facility (PAL-T0-MAR-DEC-80-GEN-0001).

Contractor’s dredging scope at the turning basin east bank is based on a basin elevation of -46 ft and a 3(H):1(V) slope along the straight section within the limits of construction (LOC) of the turning basin east bank and excludes the toe trench dredging. Owner will confirm the slope protection design for the turning basin east bank and Contractor shall dredge accordingly, subject to Section 8.3.1(r) of the Agreement.

Contractor shall be responsible for the disposal of such dredged material in accordance with Applicable Law and the Permits and otherwise at the approved and permitted disposal locations as specified in the Project Specification for Dredging Works (PAL‐T0‐MAR‐STD‐00‐GEN‐

0001), Beneficial Use of Dredged Material Basis of Design (PALT0-MAR-BOD-0001), Beneficial Use of Dredge Material Plan Drawings (PALT0-MAR-DWG-0001), and Beneficial Use of Dredged Material Technical Specifications (PALT0-MAR-STD-0001).

4.16.6 Shore Protection Design

Shore protection shall be designed for the LNG Berth pocket (including the flared section of the pocket) and MOF dredging slope in accordance with CIRIA, PIANC, and USACE Coastal Engineering Manual guidelines.

4.16.7 Navigation Aids

Navigation aids shall be provided as required to allow safe ship navigation for the LNG Facility. The aids to navigation shall be in accordance with the International Association of Lighthouse Authorities (IALA) Maritime Buoyage System B. The location, color, and intensity for these navigation lights shall be in compliance with U.S. Coast Guard regulations.

The location of navigation sector lights and range buoys are outlined in the Marine Drawings and the “Project Specification for Aids to Navigation” identified in Appendix B and shall be confirmed with the Sabine Pilots Association.

4.16.8 Material Offloading Facility (MOF)

Contractor may elect to use the Sabine-Neches Waterway and connected water ways to bring in large Equipment and heavy construction materials to the Site during construction. Contractor shall construct a MOF at the location as shown on the overall site plan, as part of the Work. The MOF layout and function are to be designed to receive roll-on / roll-off / lift-on / lift-off vessels as approved by the U.S. Army Corps of Engineers and the U.S. Coast Guard, which will not include tug berth capability. The MOF shall be designed for use by Owner following Substantial Completion of Stage I. Contractor shall design the MOF in accordance with the Agreement, and

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shall construct the MOF, including sheet piling, dredging and piling. Contractor shall also construct a heavy haul road from the MOF location to the Site to allow transport of heavy loads.

4.17 TIE INS

If Owner exercises Scope Option [6]:

•the design of the LNG Facility shall allow for the isolation/removal of the entire scope of the LNG Tank and supporting Facility as well as the 2nd Berth and support facilities.

•the LNG Facility design shall include tie-ins for future expansion of Train 3 and 4 to ensure continuous operations of the LNG Facility, in accordance with the “Train 3 and Train 4 Pre-Investment Study – Tie-in List” 26293-100-M0X-DK-00001 (PAL-T02-MEC-LST-00-GEN-0001).

4.18 Technical Deviation and Management of change protocols

Any technical deviations shall be handled in accordance with Section 2.25.4 of the Agreement.

5.0ENGINEERING SUPPORT GROUPS

5.1 REGULATORY

Contractor shall designate a single individual to act as the coordinator to support preparation of the technical components of FERC package submissions and coordinate with Owner with respect to other Permit submissions. The coordinator shall also participate in coordination meetings with Owner, including Governmental Authorities as necessary, and manage the FERC technical package tracking sheet.

Per section 4.4.2.1 of the FEIS, Contractor shall plan for the ICWW crossing of a dredge pipeline, in accordance with the applicable Owner Permit, in the case that it becomes a requirement for the Project.

Contractor shall provide training to Contractor personnel working on the Site and/or ship canal to stop work in the vicinity of any threatened or endangered species and notify Owner’s Environmental Inspector. During the performance of the Work, Contractor must continuously observe the potential impact of the Work to the environment and wildlife. Contractor shall comply with Section 4.6.1.3 of the FEIS. Contractor shall utilize nesting inhibitors within on-site Construction parking areas such as installation of colorful pennant strings, etc. If manatees are present within the impacted Project waters, Contactor must comply with the requirements of Section 4.7.3 of the FEIS.

The Traffic Impact Assessment conducted by Contractor under the EDSA shall serve as the basis of a Traffic Management Plan. Contractor shall develop and implement a Traffic Management Plan in compliance with FERC Order condition number 23 for use in connection with the Work. Contractor shall update such plan from time to time to ensure continuing compliance with FERC requirements.

All construction activities shall be conducted in accordance with the requirements of the applicable air quality standards provided under the Owner Permits.

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In accordance with Section 2.10 of the Agreement, Contractor shall satisfy the requirements of the conditions of the FERC Order except to the extent described in Section 13 of this Appendix A or as clarified in Appendix J-3.

Without limiting the generality of the foregoing, with respect to the requirements for a quantitative analysis under Condition 106 of the FERC Order, Contractor shall, as part of the Work, prepare and submit the following Deliverables to Owner:

•Fire Protection Evaluation Report (including firewater demand calculations)

•Fire Water Layout Drawings

•Passive Fireproofing Layout

•Passive Fire Protection Schedule

These Deliverables will detail locations and Equipment utilizing active and passive fire protection, Supplier data for the thickness of passive fire protection, as well as calculations demonstrating flow rates and durations of any fire water, as well as compliance with API 2510.

5.2 IT/IS & DOCUMENT CONTROL

Contractor shall provide documentation for the Work as required by the Agreement, Appendix U and Attachment U-1 to Appendix U.

5.3 PROJECT HANDOVER

Contractor will develop a records retention and turnover plan (RRTP) that will identify the various document types and disposition of same at Project close-out with requirements, formats, and timing to comply with Appendix U, and the Document Management Plan as referenced in Appendix W.

5.4 PROJECT CONTROLS

As part of the Work, Contractor shall utilize project controls tools and personnel to appropriately monitor, track and report on the progress of the Project as set forth in the Project Controls Plan as part of Appendix W, the Project Execution Plan and Appendix S.

6.0PROCUREMENT, MATERIALS MANAGEMENT & LOGISTICS

Contractor shall requisition, bid, evaluate, purchase, inspect, expedite, customs clear, deliver, store, manage, and preserve the equipment and materials required for the complete fabrication, erection, construction, installation, commissioning, testing, and operation of the LNG Facility as defined in Agreement.

6.1 PROCUREMENT PLAN

Contractor’s Procurement & Contracting Strategy Management Plan and Logistics & Materials Management Plan, which are each part of the Project Execution Plan, Appendix W to the

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Agreement, address procurement, Supplier and Subcontractor management, expediting, materials management, logistics and related data and reporting.

Where practical, in procurement of Equipment packages, Contractor shall develop a plan to maximize the commonality of Equipment and components.

6.2 Purchase Order and Subcontracts management

Contractor shall develop a comprehensive procurement and subcontracting program, indicating planned Purchase Orders and Subcontracts together with the scope of each Purchase Order and Subcontract and the identification of critical items.

The requirements of Section 2.7 of the Agreement shall be complied with during all procurement and subcontracting activities.

6.3 Procurement and subcontracting reporting

Contractor shall provide procurement and subcontracting reporting in accordance with the Agreement, Appendix S, and Appendix W.

6.4 OWNER PARTICIPATION DURING SUPPLIER POST-AWARD MEETINGS:

Owner shall be allowed to participate in post-award kickoff meetings with selected Vendors. Such participation is only required with the Supplier that has been selected by Contractor’s bid evaluation process, are only for the significant Equipment listed below and are only for the technical portion of such meeting. The intent of such participation is to review the Supplier technical scope of work and responsibilities under the applicable Purchase Order.

Amine contactor internals

Amine regenerator internals

Molecular sieve dehydrators

Demethanizer internals

Mercury removal beds

H2S scavenger

LNG tank in-tank pumps

Expander/compressors

Booster compressors

EFG compressors

BOG compressors

Ground flare

Cold recovery exchanger

Air coolers

Thermal oxidizer

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LNG Loading Arms

Main Cryogenic Heat Exchanger

Powerhouses

Main Step-down Transformers

Distribution Transformers

230kV GIS

230kV Overhead line

6.5 EXPEDITING

Contractor shall develop an expediting plan which defines the levels of expediting, which largely depends on the type of Purchase Orders, the requirements of critical Supplier data, current market conditions and the applicable Supplier’s fabrication location. Such plan shall become part of the Project Execution Plan set forth in Appendix W.

Contractor shall report the status of purchase requisitions, inquiries, orders, shop fabrications, expediting, inspection and delivery of Equipment, instruments and materials in accordance with Appendix S. Reporting should include data on “Received on Site” dates and “Required on Site” dates to demonstrate support of the construction/installation sequence as required in Appendix S-2.

6.6 LOGISTICS AND MATERIALS MANAGEMENT

Contractor shall perform the Work in accordance with its Logistics & Materials Management Plan as included in Appendix W.

6.6.1 Logistics

The delivery location of Liquefaction Project Equipment is dependent on material type, required on Site dates, and other logistical considerations. Contractor shall ensure logistics of Equipment deliveries, fabrications, inspections, and transfers are done in a safe and timely manner.

Shipping instructions shall be prepared and issued to the extent possible as part of the applicable Purchase Orders and shall, among other things, comply with the provisions of the Agreement.

6.6.2 Home Office Materials Management

Contractor shall provide a Home Office Materials Management plan which will outline detailed planning, milestone control and monitoring of materials activities for each requisition. The plan shall be developed based on the CPM Schedule, taking into account lead times for activities and materials as well as construction priorities.

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6.6.3 Site Materials Management

Contractor shall inspect all Equipment as soon as practicable upon receipt and at delivery to the area where the Work is being performed. Contractor shall take appropriate measures for immediate repair or replacement of damaged materials.

Contractor shall address the following:

Material receiving

Material tracking (which may include using bar codes or other equivalent technology)

Equipment and material storage

Record of condition of Equipment and materials received at the Site

Preventative maintenance (further described below)

Inspection of materials upon receipt at Site

Material controls

Shortage and damage reports

Storage locations including lay down control, layout and sizing, warehousing and climate controlled storage (as necessary)

Surplus materials control

6.6.4 Inspection

Contractor shall provide a Quality Surveillance Plan and Inspection and Test Plans, that satisfies the requirements of the Project Quality Plan, codes, Specifications, Drawings, procedures and the Agreement as part of the Work. Quality is essential to the inspection process, therefore Contractor will require that all supplier documentation/records are generated, maintained and included in the details of all inspections/surveillances performed to the extent required under the Agreement. Level of Inspections shall also consider equipment criticality, order complexity, and country of origin.

6.7 EQUIPMENT PRESERVATION PLAN

Contractor shall comply with its Equipment preservation plan, as described in Appendix W. This plan identifies the requirements for preservation from purchase, through delivery to site, receipt at jobsite, storage at jobsite, installation at jobsite through LNG Facility start-up (CSU requirement). This plan shall be updated as required during the Work as detailed design activities are completed.

Contractor’s responsibilities for all Equipment includes inspections, expediting, and participation in testing, delivery, handling and preservation of Equipment in accordance with manufacturer’s Specifications while in transit, while in storage on Site, and after installation up to Substantial Completion of the Stage in which such Equipment is installed.

7.0CONSTRUCTION

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7.1 HEALTH, SAFETY, SECURITY AND ENVIRONMENT (HSSE)

Contractor is committed to an incident and injury-free environment for all personnel on the Liquefaction Project. Through education and training, the work force will be made aware of the hazards associated with constructing a facility of this magnitude and how to avoid and deal with them in a safe and productive manner. This objective shall be achieved through implementation of Contractor's approved HSSE Program as referenced in Appendix Q. Contractor’s HSSE Program will include Owner's goals of ZERO injuries. This includes a high standard of Site Safety, Occupational Health Security and Environmental Management, with these requirements also being maintained by all Subcontractors and other personnel working at the Site.

7.2 QUALITY ASSURANCE AND QUALITY CONTROL

Contractor has developed a Quality Assurance Plan as set forth in Appendix R to the Agreement. As part of the Work, Contractor shall also develop a Construction Quality Control Program which is consistent with the requirement in this Appendix A and is based on a project philosophy that stresses "doing it right the first time" and “Build it Clean, Built it Tight” concepts, as well as an aggressive inspection program coupled with the total involvement of craft personnel.

7.3 SCOPE OF CONSTRUCTION

Contractor will construct all temporary infrastructure necessary to support the construction effort including temporary off-Site roads, heavy haul roads, offices, warehouses, and other needed facilities as listed in the Construction Execution Plan set forth in Appendix W.

Contractor will construct the following temporary off-Site roads as required for Contractor’s construction execution:

•Temporary road crossings along the original Highway 87 Temporary roads for access in the on-Site laydown areas

•Temporary roads to access and within the off-Site laydown area

•Temporary roads and driveways for access to off-Site parking areas

For LNG Jetty construction, a sheet pile wall will be installed around the loading platform to allow land-based construction of the loading platform. Installation of such sheet pile wall is planned to be completed prior to commencement of the dredging of the berth pocket. The sheet pile wall will be left in place once construction of LNG Jetty is complete.

Contractor shall be responsible for mud control on Site, including use of wheel wash stations, dust control and construction debris clean-up on Site, including street sweeping equipment, to mitigate excessive mud and debris on Highway 87.

Contractor will supply all pre-construction provisions to the Site and the Work Site including preparation of the Site and the Work Site for all construction activities. Site prep work, including clearing and grubbing, raising the Site, and the construction of the pioneer dock and associated material handling equipment.

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Contractor shall identify and mark gas wells that it locates on the Site and provide high visibility Jersey concrete barriers around each such well. Existing utility lines and pipelines adjacent to the original Highway 87 will be removed by Owner’s Other Contractors. Existing and abandoned wells shall be lowered (as in the Berth area) and plugged by Owner's Other Contractors.

Contractor shall coordinate with Owner and other Third-Party utility suppliers that will provide permanent utilities to the LNG Facility, in accordance with Section 2.28 of the Agreement and the Interface Management Plan.

Contractor has developed a construction execution plan as part of the Project Execution Plan (PEP). The construction objectives of the Liquefaction Project are as follows:

a.Targeting zero lost time accidents and zero recordable injuries.

b.Creating a safe working environment through the identification and elimination of hazardous conditions and unsafe acts.

c.Emphasizing quality to produce a best in class product.

d.Minimizing impact to the environment during construction and meeting the requirements of Applicable Laws.

e.Completing all the construction activities in a safe manner within the prescribed schedule requirements and to the requisite level of quality.

f.Making full, effective use of GECP and (CECP) Construction Environmental Control Plan

g.Provide a competent and trained and motivated work force committed to the Liquefaction Project construction objectives.

h.Create a working environment that involves all members and recognizes the contribution of every individual and promotes positive employee relations.

i.Be a good neighbor in our communities throughout the construction phase and conduct our business in a professional and ethical manner at all times and in compliance with Owner policies and the Social Management Plan as included in Appendix W.

j.Employ the practice of continuous improvement throughout the course of the Liquefaction Project, fostering a practice of transparency and collaboration between Owner and Contractor, to improve Contractor’s construction team’s performance throughout and achieve the goals of the Liquefaction Project.

Contractor’s night time noise limit at the Noise Level Receptor shall be in compliance with FERC’s Guidance Manual Section 4.9.2.3. Specifically, the night-time construction noise limit would be 10 dB above the background levels at the Noise Level Receptor.

7.4 WORK PERMITS

Contractor shall make timely arrangements and be responsible for issuing the necessary work permits for any work that is conducted by Contractor, its Suppliers and their respective

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representatives. Contractor shall produce and implement a procedure for Contractor and its Suppliers compliance with the requirements of the Contractor HSSE Program and permitting process, including LOTO, PTW, Flange Isolations, etc.

Where applicable, Contractor shall ensure that no Work proceeds until the appropriate safe work permit has been issued. Contractor shall understand all aspects of the safe work permit prior to starting the Work. In addition, the Contractor shall communicate the safe work permit information to all personnel performing such Work prior to starting the Work.

Contractor shall construct the Liquefaction Project based on Contractor’s standard procedures that includes the concept of “Build it Clean/Keep it Clean” that minimizes the potential for contaminating the Equipment and piping with construction debris, abandoned tools and materials.

Contractor shall develop a Pre-Commissioning plan for blowing or flushing the piping to remove residual water and debris with acceptance criteria. The plan shall indicate spools to remove and other openings that shall remain open until the lines are flushed.

7.5 TRAFFIC PLAN AT SITE

Contractor shall develop a comprehensive Traffic Management Plan for the Liquefaction Project to assure prompt and safe access to the Site for all persons performing the Work, while minimizing disruption to regular activities or scheduled events in the surrounding areas and will be based on Traffic Impact Analysis that is approved by the applicable Governmental Authority.

The traffic management / control plan shall address the requirements of the surrounding communities, as well as other applicable considerations: (a) off-site parking for construction personnel and transport of such personnel to the Site; (b) deliveries of major Equipment to the Site; and (c) any traffic control requirements of any Governmental Authority.

The traffic management Plan includes the following:

•Recommended routings for delivery of equipment and materials to the project site.

•Heavy Equipment delivery routes and any special measures to be undertaken to prepare the route for deliveries.

•Types of equipment to be used for transportation of materials.

•It will promote safe and organized transportation of the workers to and from the site.

•Capabilities of the port loading facilities.

•Maximum shipping envelopes will be addressed for barge and road deliveries.

•Transportation companies with knowledge of the general region will be identified.

•How traffic will safely enter and exit the Site at the main entrance during peak demand periods.

Contractor will utilize temporary traffic control and a temporary light system as potential mitigations, and has excluded in this Scope of Work any other traffic mitigation measures, such as the design or construction of acceleration/deceleration or turning lanes on the existing or relocated Highway 87.

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7.6 CONSTRUCTABILITY

As part of the construction strategy, Contractor shall provide constructability support during early engineering activities and the procurement phase of the Work. Contractor shall provide constructability input to make optimal use of construction knowledge (including development of the subcontracting and construction plans, and model reviews). Plans shall describe how Contractor’s constructability input will be obtained and implemented during engineering, fabrication and on-Site construction.

A constructability program will be developed for use during the Work that incorporates elements of a traditional constructability program and is designed to embrace a broad scope of safety, cost and schedule savings ideas. The program will be construction, start-up and operations driven to help simplify the design. The reviews will focus on a design that keeps construction, operations and maintenance activities in mind but meets the Specifications.

The program will promote and encourage creativity, innovation and teamwork among the participants. Construction personnel from Contractor will actively participate in the engineering design review optimizing constructability, safety, ease of construction, rate of construction, etc. Contractor shall consider items such as:

•Shop fireproofing vs. field fireproofing

•Vessel internals assembly in shop

•Installation of all paint coating of Equipment in shop

•Determine amount of vessel insulation prior to erection

•Pipe and platform installation on vessels prior to erection

•Maximize the extent of shop fabrication and testing of piping

•Consider semi-automatic welding process on straight run pipe and on fabricated spools where feasible

•Standardize foundation sizes for reuse of forms

•Prefabrication of concrete manholes or sumps prior to installation

•Standardize bottom of foundation elevations

•Minimize or eliminate irregular foundation shapes

•Identify the type and extent of grouting for vessels, skids and compressors, considering supplier recommendations.

•Consider prefabrication of manholes, valve boxes, sumps etc.

•Where practical perform dissimilar welds in the shop

•Design and order valves early to avoid delays

•Reduce number of welding procedures and qualifications

•Provide anchor bolt templates from Suppliers on vessels over 12 ft in diameter

•Ship air coolers preassembled, with instructions and necessary provisions for field installation.

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•Standardize size of rebar to reduce number of sizes

•Use of embedded plates on vertical concrete surfaces instead of anchor bolts to eliminate precise bolting positions

•Prefabrication of analyzer houses

•Locate column splices just above platforms to eliminate scaffolding installation

•Standardize pipe supports for ease of installation

•Locate spring supports for installation at platform levels to avoid scaffolding installation

•Consider special internal cleaning, prior to erection, of pipe to lube oil flushed to reduce the flushing time

•Review lessons learned from similar projects of this nature

•Consider use of common scaffold supplier and erector

Contractor shall hold regular constructability meetings during the design phase.

7.7 LABOR SURVEY AND LABOR RELATIONS

Contractor delivered a Labor Study as listed in Attachment A-3. Such study surveyed workforce and crafts that are forecasted to be available during the time of construction and included Contractor’s analysis of potential labor concerns. The study identified the available qualified labor in the area, the expected regions from which the labor would be sourced, the specific crafts and numbers of qualified available personnel or anticipated shortages. As part of the Work, the study shall be updated by Contractor at least annually.

Contractor shall use a suitable screening method in the recruitment of all labor so that personnel on the Site and the Work Site are in good health, are suitable for their planned work duties and can successfully participate in the Site safety and Injury free programs. Contractor shall maintain records at the Work Site of all persons screened for work.

7.8 SECURITY

Contractor has established appropriate security measures to maintain the security of the Site and the Work Site and protect the Work in accordance with the “Site Security Plan” as part of Appendix Q. Contractor shall comply with the Site Security Plan.

Contractor’s Site Security Plan addresses site entry and identification requirements; temporary and permanent fencing; code of conduct on Site employee termination and removal; guard services.

7.8 FIELD CHANGES; DEFECTS

Contractor shall implement a “design change proposal” procedure for the identification and resolution of any proposed changes to the design during the construction phase of the Work. This Field Design Change Control procedure shall identify the reasons why the change is required and the proposed change. The Field Design Change Control procedure shall describe how all changes are controlled through engineering and how all agreed changes are incorporated into the Drawings. A register of design changes and design queries shall be

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maintained during the construction phase. All design changes implemented at Site shall be captured in the As-Built documentation and submitted to Owner for record as required in Appendix U.

During prefabrication, pre-assembly and installation of goods at the Site, Contractor shall keep a register of Defects identified by its own QA/QC inspection team, or by Owner or any other Person in accordance with Contractor’s procedures. All such identified Defects shall be rectified in accordance with the Section 2.21 and Article 10 of the Agreement.

7.10 HSSE RISK ASSESSMENT

Risk Assessment Hazard and Effects Management Process methodology shall be used to identify and assess Health & Safety and Environmental Hazards during field erection and testing up to start up. These hazards may be identified at any stage of the Work; e.g., Owner data, existing Drawings, site survey investigations, design and constructability reviews, or information that may emerge during the construction, commissioning and start-up phases.

Once potential hazards are identified, the health and safety risks must be assessed. The assessment shall characterize the risk in terms of severity and probability.

From the risk assessment, a method statement shall be developed, which at best would eliminate the risk or would contain the risk to an acceptable level. If the Work is similar to other Work that has already been assessed for risk, the original assessment may be modified to suit the specific circumstances. The Project Risk Register shall be maintained by the Contractor through all phases and shall be made accessible to the Owner.

All risk assessments, (together with associated job specific method statements) generated throughout the duration of the Work shall be retained by:

Contractor’s jobsite manager; and

Contractor safety management

Contractor shall carry out full risk assessments in regard to all of its construction operations.

7.11 HEAVY LIFT AND TRANSPORTATION

Contractor shall conduct rigging studies for all lifts over 50 tons, multiple crane lifts, or lifts exceeding 90% of the crane capacity unless a lower % capacity is required in accordance with Applicable Law. Each such study shall be prepared by Contractor and made available to Owner at its request. The rigging studies for all lifts over 50 tons, multiple crane lifts, or lifts exceeding 90% of the crane capacity (unless a lower % capacity is required in accordance with Applicable Law) shall be prepared and certified by a competent Rigging Engineer. The study shall include the following:

a.Check and verify certified weight and dimensions of the load to be lifted.

b.Cranes shall be inspected and certified for the purpose for which they will be used.

c.Dimensional plan and elevation Drawings, showing all stages of movement of the load from initial to final installed position.

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d.Angles of chain blocks or wire rope slings during the operation and method of attachment to the load and supporting steelwork or structure.

e.Details of skid beams, channels and packing arrangements under beams or channels.

f.Method statement for entire lifting operation, indicating how the Construction Equipment will be installed, load erected and Construction Equipment removed.

g.Itemized check list for the entire lifting operation.

h.Center of gravity calculations for Equipment.

i.Crane model.

j.Crane configuration.

k.Crane capacity at working radius and required boom length including copy of the crane chart for which information was taken.

l.Required sizes and capacities of slings, shackles and lifting beams including all certifications for these items.

m.Verification of lifting points on the load to be lifted.

n.Structural calculations if lifting frames/beams are to be used.

o.Crane accessibility and placement for the lift.

p.Possible interference from erected items and structures.

q.Load bearing of the crane and bearing capacity of the ground.

r.Underground and/or overhead installations that may affect lift and protective measures as required.

7.12 SITE FACILITIES AND LOGISTICS

7.12.1 Temporary Sanitation Facilities

Contractor shall provide adequate toilets and washing facilities for all visitors, employees, Owner and Suppliers at the Work Site. These facilities shall be strategically located close to Contractor designated major Work areas and / or parking lots, office buildings, trailers, and tents. Waste from these facilities shall be collected and transported to an offsite treatment plant. Contractor shall establish and maintain clean conditions on the Site and the Work Site during the Project for all visitors, employees, Owner / Contractor personnel and the Subcontractors. Temporary sanitation facilities will include maintained hand washing stations adequately replenished with water, hand cleaner and paper towels, and emptied trash receptacle. Contractor will maintain a clean work site with temporary sanitation facilities well-organized trash collection and removal. Contractor shall provide segregated male and female facilities with locks for privacy.

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7.12.2 Temporary Construction Power and Utilities

Contractor shall provide temporary distribution facilities to extend utilities from the point(s) of outlet designated by the applicable utility service provider to the point(s) of use required by the Contractor to perform any construction activities or the support thereof.

Upon Substantial Completion of each Stage of the Work, Contractor shall remove all temporary and/or construction power, materials, facilities and equipment used in connection with the extension of any permanent utilities and repair any damage caused as a result in accordance with the Agreement. Underground utilities (i.e., temporary power cable and temporary water lines) shall be de-commissioned, capped and left in place. Contractor shall maintain records of all utilities both above and underground throughout the construction phase. Any temporary underground piping and electrical cabling not removed after completion of work, shall be de-energized, capped, and marked on Underground Drawings to indicate the As-Built version of the system left in place.

The temporary construction power distribution system shall be designed, paid for and installed by Contractor.

Contractor shall provide and maintain all temporary electrical facilities on the Site and the Work Site.

Contractor shall design, provide, and install all necessary generation, transformation, and distribution of construction power required to perform the Work.

All cords leads or electric power equipment shall be designed and maintained in accordance with the Applicable Codes and Standards and shall be used in accordance with the Contractor HSSE Program.

Water from the Sabine-Neches waterway will be used by Contractor and/or its Subcontractors as “construction water” for dust control, cement slurry, earthwork and the LNG tank hydrotest provided that such use is approved and permitted by Governmental Authorities.

7.13 TEMPORARY FACILITIES

Contractor shall provide all temporary facilities used during the Work, as required by the Agreement. The temporary facilities for the Liquefaction Project shall be designed to adequately support the needs of Contractor, Subcontractors and the Liquefaction Project. Access, egress, drainage, utilities, parking, cool down zones, lunch areas, lightning protection areas, lay down areas, off or on-site temporary laydown yards, temporary climate controlled building, warehouse and temporary utility routings shall all be reviewed for a safe, functional, and environmentally sensitive installation. Planning associated with the erection of these facilities must receive a high priority at the outset of the Project.

A temporary facilities plan has been developed by Contractor and is referenced in Appendix W. Such plan addresses offices and facilities, underground utilities, parking, construction water, construction waste, temporary laydowns, and removal of facilities. Contractor shall comply with its temporary facilities plan.

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Contractor shall maintain the temporary facilities areas in accordance with GECP and the applicable provisions of the Environmental Plan until care, custody and control of the area in which such temporary facilities areas are located is turned over to Owner in connection with Substantial Completion of a Stage. The drainage of these temporary areas shall continue to function as designed throughout this period.

Contractor shall supply the following Temporary facilities to accommodate Owner’s field personnel (peak at 94 personnel) in accordance with Contractor’s Temporary Facilities Plan (PAL-PJT-CON-PLN-00-GEN-0003; 26196-100-G90-GAM-00002):

- one main office complex;

- two satellite field offices; and

- related communication infrastructure (open internet connection).

7.14 TOOLS AND EQUIPMENT

All construction Equipment and tools shall be supplied by Contractor. A “Tools and Construction Equipment Inspection Program” shall be developed as part of the Work which shall meets all statutory requirements, the Specifications listed in Appendix B, be in good working condition, be well maintained and be protected in accordance with the Agreement.

Safety harnesses, safety lines, Self-Retracting lines shall also be subject to the inspection program.

7.15 FIELD EXECUTION

Contractor shall be responsible for the management of all activities at the Site and the Work; in particular for safety, construction progress, and the quality of the Work performed by Contractor, its Subcontractors, and all Supplier personnel.

Pipe pressure testing will be conducted in accordance with the Specification except where pneumatic testing has been accepted by Owner in accordance with RFD PAL-PJT-PIP-RFD-00-GEN-5143 (26196-100-3UD-G01-00143).

In addition, to minimize risk of corrosion, Contractor’s execution strategy for both field weld joints and shop weld joints is to maintain accessibility to such joints and apply full painting to the joints as soon as weld is accepted by applicable NDE (nondestructive examination) test, prior to leak test, except as otherwise provided in RFD PAL-PJT-PIP-RFD-00-GEN-5132 (26196-100-3UD-G01-00132).

7.16 BORROW PITS

Contractor shall prepare a Site Fill Materials Plan. Contractor shall also identify any borrow pits identified for use and/or the proposed supplier of fill materials for the Site or the Work Site as needed to meet the Liquefaction Project’s design requirements. Contractor is responsible to assure the borrow pit is permitted for use by applicable Governmental Authorities. Contractor is to make any necessary contractual arrangements, including for mud management, with borrow pit Suppliers and shall pay all costs therewith.

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7.17 DISPOSAL SITES

Contractor will maintain options to dispose stripped materials. The disposal locations will be either the laydown area 2 on the Site or at off-site locations. Contractor shall prepare a Spoils Disposal Plan as part of the Work. Contractor shall also identify all offsite locations proposed for spoils disposal of materials for Site or Work Site preparation. Contractor is responsible to assure any offsite disposal location utilized by Contractor is permitted for use by applicable Governmental Authorities. Contractor’s storm water pollution prevention plan (SWPPP) shall be implemented at the onsite disposal area.

7.18 LINE AND EQUIPMENT LABELING

Contractor shall label all lines and Equipment in accordance with the PAL0-PIP-SPE-0021 – Identification and Labeling of Piping Systems.

8.0COMMISSIONING, COMPLETION, AND ACCEPTANCE

Contractor shall prepare and submit a detailed commissioning and start-up plan to Owner for review and comments as required by the Agreement.

Contractor shall develop procedures that define Contractor’s strategy to limit flaring of natural gas during pre-commissioning, commissioning and start-up phases. GECP shall be applied by the Contractor in developing these procedures.

Contractor’s commissioning and start-up plan may utilize Contractor’s standard procedures and work processes to execute commissioning and start-up activities, as modified to address all project specific requirements, and in any event shall include detailed procedures for all, commissioning and start-up activities for each system and subsystem. Pre-commissioning includes inspections, cleaning and other activities which are carried out after construction completion for a given system/subsystem is achieved, at ambient temperature and without the presence of process fluids. Catalyst and chemicals will be charged where practical to do so. Commissioning includes tests, inspections and adjustments carried out after pre-commissioning activities for a given system/subsystem are completed, as far as practical, and prior to the introduction of hydrocarbons (Feed Gas) in accordance with the Agreement. Contractor’s commissioning and start-up plan shall include forms, document flow, schedule, certification scheme, status monitoring method and commissioning and start-up requirements checklists for each system and subsystem.

Prior to Ready for Start-Up (RFSU), Contractor and Owner shall jointly conduct a pre-safety start-up review. Procedures should also be made available that clearly define the HSSE, compliance, emergency response requirements and the roles and responsibilities of all team Members at Site, which also includes Owner personnel.

Any temporary piping and instrumentation shall be removed prior to conducting Performance and Functional Tests.

8.1 TRAINING OF O&M PERSONNEL

During the EPC period, the Contractor will develop a Training Program in accordance with Appendix P.

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The Contractor shall develop O&M related documentation required for pre-commissioning, commissioning, start-up and operations of all system and sub-systems of the LNG Facility as required by the Agreement.

Contractor shall develop and provide an Operator Training Simulator (OTS) suitable for training Owner’s Operating Personnel in accordance with Section 4.10.23 of this Appendix A and Appendix P.

8.2 COMMENCEMENT OF COMMISSIONING & START-UP

Contractor shall commence commissioning and start-up activities in accordance with the Agreement. Contractor shall execute all Work required for commissioning and start-up of each Stage.

Contractor shall provide a commissioning manager and a commissioning team. The commissioning team shall have a major interface with the construction team so that commissioning is completed in the correct sequence by system, all commissioning inspections and tests are conducted in accordance with the Agreement, and all required certificates and documents are completed for turnover.

After the completion of the Training Program, the Owner’s Operating Personnel will work under the supervision of the Contractor’s Commissioning & Start-Up team to participate in pre-commissioning, commissioning, start-up and subsequent operations activities, until Substantial Completion and handover of each Stage of the LNG Facility to the Owner.

Prior to the introduction of Hydrocarbons or other operating fluids, the Contractor and Owner’s Operating Personnel will conduct a Pre-Start-up Safety Review (PSSR) for the facility to ensure that all Systems and Sub-Systems are ready for Operation.

9.0OPERATIONAL INTERFACES

Contractor shall familiarize itself with all construction interfaces and carry out the on-site activities, including construction, hot taps, start-up, commissioning and testing, in a safe and efficient manner.

Key Interfaces and Tie-ins

- Feed Gas Supply

- Imported Power Supply

- Potable Water Supply (including piping components shown on UPI Drawing 24150-540-DTL-44010)

- Nitrogen Supply

- Sanitary waste disposal

- Telecommunications

10.0SIMOPS

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Contractor shall Implement a SIMOPS process, in accordance with the SIMOPS plan in Appendix W, including a SIMOPS risk screening workshop, in the early phases of the Liquefaction Project to allow planning and sequencing of activities to eliminate risks associated with performing certain activities simultaneously. The early planning shall give an insight as to which activities shall be more suited to work together.

The following steps shall be considered to document hazards and associated mitigation measures:

–SIMOPS Risk screening workshop

–SIMOPS Activity Hazard Identification and Risk Assessment

–Risk Management

Contractor shall develop SIMOPS activity specific work plans for each specific work activities identified in the SIMOPS risk screening workshop. The SIMOPS activity specific work plan shall include, but not be limited to, the following:

–Description of the scope of work to be covered by their organization relative to the SIMOPS

–Roles and responsibilities – including organization and reporting lines/ requirements

–Procedures and controls

–SIMOPS risk and mitigations

–Work Method Statements as required

–JHA / STARRT card requirements

–Contingency plans

–Emergency response Plan

–Establishment of who has overall charge of the work

An Activity Specific Work Package shall be prepared for activities recorded on a SIMOPS register. The work package shall contain the pertinent activity-specific information for each of the SIMOPS.

11.0PERFORMANCE TESTING

Please refer to Appendix G and Section 9.7 of the Agreement

12.0SHIP ARRIVAL & CARGO TRANSFER

Contractor may have to cease all construction activities on the Berth when an LNG Tanker is approaching, or is in the process of being loaded or unloaded, and departing.

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When an LNG Tanker approaches the Berth, an announcement will be made via the LNG Facility’s paging system to warn personnel of the approaching LNG Tanker and to stop performing all Work in the affected areas. Contractor will be advised of the practicality and timing of resuming such Work.

13.0SCOPE OF WORK EXCLUSIONS

The below listed items are excluded from Contractor’s Scope of Work:

•Entergy substation pad and access road;

•Landscaping associated with the completed LNG Facility;

•Shoreline protection between the MOF and the North Berth and between the South Berth and the south end of LNG Facility;

•Any required vapor cloud dispersion modelling;

•Acquisition of frequency license of the ship/marine radios for communication between ship and shore in the jetty marine building;

•After Substantial Completion of a Stage, the supply of finished surface gravel fill to maintain such Stage and drainage through the stormwater system of such Stage;

•Supply of general office furniture, cubicles, and office tools required for the workshop and warehouse for the LNG Facility;

•Removal and disposal of the concrete bridge, foundations and cutoff piling (where required) within the TPWD area near the BUDM;

•Supply of all laboratory equipment and laboratory instrument management systems (LIMS) for the laboratory;

•Supply of permanent equipment toolboxes, permanent mobile lifting equipment (such as mobile cranes, forklifts, trucks, runway beam trolleys, platform trolleys, A-frames, abbey hoists, block and tackle, etc.) to be used for operations and maintenance activities by Owner after Substantial Completion;

•Compensation to Texas Parks and Wildlife Department for lost recreational opportunities related to seasonal hunting and the relocation of the existing WMA access road and construction of the alternate access road connecting to the relocated SH 87;

•Implementation of any recommendations resulting from the Baker-Hughes study report performed pursuant to Section 4.1.13 of this Appendix A;

•Implementation of any design changes that may result from Contractor’s updates to the LNG Vessel Drifting Speed Study and Hydraulic Transient Analysis for LNG Loading Line Study completed pursuant to Section 4.16.2 of this Appendix A;

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•Design package, which includes calculations, issued for construction (IFC) plan/profile drawings and material takeoffs of the turning basin east bank dredge slope and associated slope protection (if applicable) and design package verification;

•Procurement and installation of slope protection (if applicable) for the turning basin east bank;

•Dredging of toe trench (if applicable) based on design of the turning basin east bank dredge slope and associated slope protection (Contractor’s dredging will be up to -46 ft); and

•Maintenance of the dredge slope and toe trench (if applicable) after completion of Contractor’s dredging scope of work and turnover to Owner for the slope protection installation (if applicable) to be performed by Other Contractors.

With respect to the following items as required under the referenced FERC Order conditions:

[***].

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Document

Exhibit 10.38

SEMPRA ENERGY
SEVERANCE PAY AGREEMENT

THIS AGREEMENT (this “Agreement”), dated as of January 1, 2023 (the “Effective Date”), is made by and between SEMPRA ENERGY, a California corporation (“Sempra Energy”), and Jeffrey W. Martin (the “Executive”).

WHEREAS, the Executive is currently employed by Sempra Energy or another corporation or trade or business which is a member of a Controlled Group of Corporations (Sempra Energy and such other controlled group members, collectively, the “Company”);

WHEREAS, Sempra Energy and the Executive desire to enter into this Agreement as may be restated from time to time in order to provide reasonable assurances to the Executive and maintain a constructive relationship following the termination of Executive’s employment with Company; and

WHEREAS, the Board of Directors of Sempra Energy (the “Board”) or an authorized committee thereof has authorized the terms of this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, Sempra Energy and the Executive hereby agree as follows:

Section 1.Definitions. For purposes of this Agreement, the following capitalized terms have the meanings set forth below:

“AAA” has the meaning assigned thereto in Section 13(c) hereof.

“Accounting Firm” has the meaning assigned thereto in Section 8(e) hereof.

“Accrued Obligations” means the sum of (a) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (b) an amount equal to any annual Incentive Compensation Awards earned with respect to fiscal years ended prior to the year that includes the Date of Termination to the extent not theretofore paid, (c) any accrued and unpaid vacation, and (d) reimbursement for unreimbursed business expenses, if any, properly incurred by the Executive in the performance of the Executive’s duties in accordance with Company policies applicable to the Executive from time to time, in each case to the extent not theretofore paid.

“Affiliate” has the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.

“Annual Base Salary” means the Executive’s annual base salary from the Company.

“Asset Purchaser” has the meaning assigned thereto in Section 16(e).

“Asset Sale” has the meaning assigned thereto in Section 16(e).

“Average Annual Bonus” means the average of the annual bonuses from the Company earned by the Executive with respect to the three (3) fiscal years of Sempra Energy ending immediately preceding the Date of Termination (the “Bonus Fiscal Years”); provided, however, that, if the Executive was employed by the Company for less than three (3) Bonus Fiscal Years, “Average Annual Bonus” means the average of the annual bonuses (if any) from the Company earned by the Executive with respect to the Bonus Fiscal Years during which the

Executive was employed by the Company; and, provided, further, that, if the Executive was not employed by the Company during any of the Bonus Fiscal Years, “Average Annual Bonus” means zero ($0).

“Cause” means:

(a)Prior to a Change in Control, (i) the Executive’s willful failure to substantially perform the Executive’s job duties, (ii) Executive’s grossly negligent performance of the Executive’s duties, (iii) the Executive’s gross insubordination; (iv) the Executive’s commission of one or more acts of significant dishonesty or moral turpitude (including but not limited to criminal acts involving one or more acts of moral turpitude) which have or result in an adverse effect on the Company, monetarily or otherwise; and/or (v) the Executive’s serious violation of a material policy of Sempra Energy or its Affiliates that is applicable to the Executive. For purposes of clause (i) of this subsection (a), no act, or failure to act, on the Executive’s part shall be deemed “willful” if due to the Executive’s incapacity due to physical or mental illness, or if the Executive acted in good faith and with reasonable belief that the Executive’s act, or failure to act, was in the best interests of the Company.

(b)From and after a Change in Control (or in connection with a termination occurring pursuant to Section 5(g)), (i) the Executive’s willful and continued failure to substantially perform the Executive’s duties with the Company (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness or other than any such actual or anticipated failure after the issuance by the Executive of a Notice of Termination for Good Reason pursuant to Section 2 hereof and after the Company’s cure period relating to the event on which Good Reason is based, if any and if applicable, has expired) and/or (ii) the Executive’s commission of one or more acts of moral turpitude that constitute a violation of applicable law (including but not limited to a felony involving one or more acts of moral turpitude) which have or result in an adverse effect on the Company, monetarily or otherwise, or one or more significant acts of dishonesty. For purposes of clause (i) of this subsection (b), no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed terminated for Cause pursuant to clause (i) of this subsection (b) unless and until the Executive shall have been provided with reasonable notice of and, if possible, a reasonable opportunity to cure the facts and circumstances claimed to provide a basis for termination of the Executive’s employment for Cause.

“Change in Control” shall be deemed to have occurred on the date that a change in the ownership of Sempra Energy, a change in the effective control of Sempra Energy, or a change in the ownership of a substantial portion of assets of Sempra Energy occurs (each, as defined in subsection (a) below), except as otherwise provided in subsections (b), (c) and (d) below:

(a) (i) a “change in the ownership of Sempra Energy” occurs on the date that any one Person, or more than one Person acting as a Group, acquires ownership of stock of Sempra Energy that, together with stock held by such Person or Group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Sempra Energy,

(ii) a “change in the effective control of Sempra Energy” occurs only on either of the following dates:

(1)the date any one Person, or more than one Person acting as a Group, acquires (or has acquired during the twelve (12) month period ending on

the date of the most recent acquisition by such Person or Persons) ownership of stock of Sempra Energy possessing thirty percent (30%) or more of the total voting power of the stock of Sempra Energy, or

(2)the date a majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of appointment or election, and

(iii) a “change in the ownership of a substantial portion of assets of Sempra Energy” occurs on the date any one Person, or more than one Person acting as a Group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person or Persons) assets from Sempra Energy that have a total gross fair market value equal to or more than eighty-five percent (85%) of the total gross fair market value of all of the assets of Sempra Energy immediately before such acquisition or acquisitions.

(b) A “change in the ownership of Sempra Energy” or “a change in the effective control of Sempra Energy” shall not occur under clause (a)(i) or (a)(ii) by reason of any of the following:

(i)an acquisition of ownership of stock of Sempra Energy directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business,

(ii)a merger or consolidation which would result in the voting securities of Sempra Energy outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least sixty percent (60%) of the combined voting power of the securities of Sempra Energy or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or

(iii)a merger or consolidation effected to implement a recapitalization of Sempra Energy (or similar transaction) in which no Person is or becomes the “beneficial owner” (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Sempra Energy (not including the securities beneficially owned by such Person any securities acquired directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business) representing twenty percent (20%) or more of the combined voting power of Sempra Energy’s then outstanding securities.

(c)A “change in the ownership of a substantial portion of assets of Sempra Energy” shall not occur under clause (a)(iii) by reason of a sale or disposition by Sempra Energy of the assets of Sempra Energy to an entity, at least sixty percent (60%) of the combined voting power of the voting securities of which are owned by shareholders of Sempra Energy in substantially the same proportions as their ownership of Sempra Energy immediately prior to such sale.

(d)This definition of “Change in Control” shall be limited to the definition of a “change in control event” with respect to the Executive and relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5). A Change in Control shall only occur if there is a Change in Control (as determined by the definition of Change in Control of this Agreement

without regard to this subsection (d)) and a “change in control event” relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5) with respect to the Executive.

“Change in Control Date” means the date on which a Change in Control occurs.

“COBRA” means coverage required by Section 4980B of the Code.

“COBRA Premium” means, with respect to the type and level of coverage provided to the Executive and his/her dependents pursuant to COBRA, the employer-paid portion of the monthly premium for such coverage as applicable for similarly-situated active employees.

“Code” means the Internal Revenue Code of 1986, as amended.

“Compensation Committee” means the compensation committee (however designated) of the Board.

“Consulting Payment” has the meaning assigned thereto in Section 14(e) hereof.

“Consulting Period” has the meaning assigned thereto in Section 14(f) hereof.

“Continued Benefits” has the meaning assigned thereto in Section 5(d) hereof.

“Controlled Group of Corporations” means a group of companies within the meaning of Section 414(b) or (c) of the Code) of which Sempra Energy is a component member, determined by applying an ownership threshold of 50%.

“Date of Termination” has the meaning assigned thereto in Section 2(b) hereof.

“Disability” has the meaning set forth in the long-term disability plan or its successor maintained by the Company entity that is the employer of the Executive; provided, however, that the Executive’s employment hereunder may not be terminated by reason of Disability unless (a) at the time of such termination there is no reasonable expectation that the Executive will return to work within the next ninety (90) day period and (b) such termination is permitted by all applicable disability laws.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder.

“Excise Tax” has the meaning assigned thereto in Section 8(a) hereof.

“Good Reason” means:

(a)Prior to a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):

(i)the assignment to the Executive of any duties materially inconsistent with the range of duties and responsibilities appropriate to an executive of comparable rank within the Company (such range determined by reference to past, current and reasonable practices within the Company);

(ii)a material reduction in the Executive’s overall standing and responsibilities within the Company, not including a mere change in title or a transfer within the Company, which change in title or transfer does not adversely affect the Executive’s overall status within the Company in any material respect;

(iii)a material reduction by the Company in the Executive’s aggregate annualized compensation and benefits opportunities, except for across-the-board reductions (or modifications of benefit plans) similarly affecting all similarly situated executives of the Company of comparable rank with the Executive;

(iv)the failure by the Company to pay to the Executive any portion of the Executive’s current compensation and benefits or any portion of an installment of deferred compensation under any deferred compensation program of the Company within thirty (30) days of the date such compensation is due;

(v)any purported termination of the Executive’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2 hereof;

(vi)the failure by Sempra Energy to perform its obligations under Section 16(c) or (d) hereof;

(vii)the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or

(viii)the failure by Sempra Energy (or any of the entities comprising the Company, as applicable) to comply with any material provision of this Agreement.

(b)From and after a Change in Control (or in connection with a termination occurring pursuant to Section 5(g)), the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):

(i)an adverse change in the Executive’s title, authority, duties, responsibilities or reporting lines as in effect immediately prior to the Change in Control;

(ii)a reduction by the Company in the Executive’s aggregate annualized compensation opportunities, except for across-the-board reductions in base salaries, annual bonus opportunities or long-term incentive compensation opportunities of less than ten percent (10%) similarly affecting all similarly situated executives (including, if applicable, of the Person then in control of Sempra Energy) of comparable rank with the Executive; or the failure by the Company to continue in effect any material benefit plan in which the Executive participates immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change in Control;

Executive’s business travel obligations outside of the Southern California area as of immediately prior to the Change in Control (without regard to any changes therein in anticipation of the Change in Control) other than any such increase that (A) arises in connection with extraordinary business activities of the Company of limited duration and (B) is understood not to be part of the Executive’s regular duties with the Company;

(v)any purported termination of the Executive’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2 hereof;

(vi)the failure by Sempra Energy to perform its obligations under Section 16(c) or (d) hereof;

(vii)the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or

(viii)the failure by Sempra Energy (or any of the entities comprising the Company, as applicable) to comply with any material provision of this Agreement.

Following a Change in Control, the Executive’s determination that an act or failure to act constitutes Good Reason shall be presumed to be valid unless such determination is deemed to be unreasonable by an arbitrator pursuant to the procedure described in Section 13 hereof. The Executive’s right to terminate the Executive’s employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. The Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

“Group” shall have the meaning of such term as used in Rule 13d-5(b)(1) promulgated under the Exchange Act.

“Incentive Compensation Awards” means awards granted under Incentive Compensation Plans providing the Executive with the opportunity to earn, on a year-by-year basis, annual and long-term incentive compensation.

“Incentive Compensation Plans” means annual incentive compensation plans and long-term incentive compensation plans of the Company, which long-term incentive compensation plans may include plans offering stock options, restricted stock, units and other long-term incentive compensation.

“Involuntary Termination” means (a) the Executive’s Separation from Service by reason other than for Cause, death, Disability, or Mandatory Retirement, or (b) the Executive’s Separation from Service by reason of resignation of employment for Good Reason.

“JAMS” has the meaning assigned thereto in Section 13(c) hereof.

“Mandatory Retirement” means termination of employment pursuant to the Company’s mandatory retirement policy.

“Medical Continuation Benefits” has the meaning assigned thereto in Section 4(c) hereof.

“Notice of Termination” has the meaning assigned thereto in Section 2(a) hereof.

“Payment” has the meaning assigned thereto in Section 8(a) hereof.

“Payment in Lieu of Notice” has the meaning assigned thereto in Section 2(b) hereof.

“Person” means any individual, corporation, partnership limited liability company, estate, trust, or other entity, including a “Group”.

“Post-Change in Control Severance Payment” has the meaning assigned thereto in Section 5 hereof.

“Pre-Change in Control Severance Payment” has the meaning assigned thereto in Section 4 hereof.

“Principal Location” has the meaning assigned thereto in clause (b)(iii) of the definition of Good Reason, above.

“Proprietary Information” has the meaning assigned thereto in Section 14(a) hereof.

“Pro Rata Bonus” means a severance amount equal to the greater of (a) the Executive’s Target Bonus as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, or (b) the Executive’s Average Annual Bonus, multiplied by a fraction, (X) the numerator of which shall be the number of days from the beginning of such fiscal year to and including the Date of Termination and (Y) the denominator of which shall be three hundred sixty-five (365).

“Release” has the meaning assigned thereto in Section 4 hereof. The Release is not a condition of employment or continued employment or a condition of receiving a raise or a bonus.

“Release Requirements” has the meaning assigned thereto in Section 4 hereof.

“Section 409A Payments” means any payments under this Agreement which are subject to Section 409A of the Code.

“Sempra Energy Control Group” means Sempra Energy and all Persons with whom Sempra Energy would be considered a single employer under Section 414(b) or (c) of the Code, as determined from time to time.

“Separation from Service” has the meaning set forth in Treasury Regulation Section 1.409A-1(h).

“SERP” has the meaning assigned thereto in Section 5(b) hereof.

“Specified Employee” shall be determined in accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation Section 1.409A-1(i).

“Target Bonus” as of the Date of Termination shall be equal to the target annual bonus, if any, for the immediately preceding fiscal year of Sempra Energy.

For purposes of this Agreement, references to any “Treasury Regulation” shall mean such Treasury Regulation as in effect on the date hereof.

Section 2.Notice and Date of Termination.

(a) Any termination of the Executive’s employment by the Company or by the Executive shall be communicated by a written notice of termination to the other party (the “Notice of Termination”). Where applicable, the Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated. Unless the Board or a committee thereof, in writing, provides a longer notice period, a Notice of Termination by the Executive alleging a termination for Good Reason must be made within one hundred eighty (180) days of the act or failure to act that the Executive alleges to constitute Good Reason.

(b)The date of the Executive’s termination of employment with the Company (the “Date of Termination”) shall be determined as follows: (i) if the Executive’s Separation from Service is at the volition of the Company, then the Date of Termination shall be the date specified in the Notice of Termination (which, in the case of a termination by the Company other than for Cause, shall not be less than two (2) weeks from the date such Notice of Termination is given unless the Company elects to pay the Executive, in addition to any other amounts payable hereunder, an amount (the “Payment in Lieu of Notice”) equal to two (2) weeks of the Executive’s Annual Base Salary in effect on the Date of Termination), and (ii) if the Executive’s Separation from Service is by the Executive for Good Reason, the Date of Termination shall be determined by the Executive and specified in the Notice of Termination, but in no event be less than fifteen (15) days nor more than sixty (60) days after the date such Notice of Termination is given. The Payment in Lieu of Notice shall be paid on such date as is required by law, but no later than thirty (30) days after the date of the Executive’s Separation from Service.

Section 3.Termination from the Board. Upon the termination of the Executive’s employment for any reason, the Executive’s membership on the Board, the board of directors of any Affiliates of Sempra Energy, any committees of the Board and any committees of the board of directors of any of the Affiliates of Sempra Energy, if applicable, shall be automatically terminated and the Executive agrees to promptly take any and all actions (including resigning) required by Sempra Energy or any of its Affiliates to evidence and effect such termination of membership.

Section 4.Severance Benefits upon Involuntary Termination Prior to Change in Control. Except as provided in Sections 5(g) and 19(i) hereof, in the event of the Involuntary Termination of the Executive prior to a Change in Control, Sempra Energy shall, or shall cause one of its Affiliates that is the employer of the Executive to, pay the Executive, in one lump sum cash payment, an amount (the “Pre-Change in Control Severance Payment”) equal to the sum of (X) the Executive’s Annual Base Salary as in effect on the Date of Termination plus (Y) an amount equal to the greater of (I) his/her Average Annual Bonus or (II) the Target Bonus in effect on the Date of Termination. In addition to the Pre-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in Section 4(a) through (e). The Company's obligation to pay the Pre-Change in Control Severance Payment or provide the benefits set forth in Section 4(c), (d) and (e) is subject to and conditioned upon the Executive’s satisfaction of the Release Requirements. The Pre-Change in Control Severance Payment shall be paid on the sixtieth (60th) day (or if the sixtieth (60th) day falls on a weekend or banking holiday, the next succeeding business day) after the date of the Involuntary Termination

(the “Payment Date”), provided that the Release Requirements are satisfied on or before the Payment Date and remain satisfied on the Payment Date. If the Release Requirements are not satisfied on the Payment Date, no Pre-Change in Control Severance Payment shall be paid hereunder and none of the benefits described in Section 4(c), (d) or (e) shall be provided, and the Executive shall have no right to the Pre-Change in Control Severance Payment or the applicable benefits. The “Release Requirements” will be satisfied if, on the Payment Date, the Executive has executed a release of all claims substantially in the form attached hereto as Exhibit A (the “Release”), the revocation period required by applicable law has expired, and the Executive has not revoked the Release and the Release is effective. If the Release Requirements are satisfied on a date prior to the Payment Date, any portion of the Pre-Change in Control Severance Payment or the applicable benefits that are not subject to Section 409A of the Code can be paid on a date prior to the Payment Date, as determined in the sole discretion of Sempra Energy (and in no event shall the Executive be able to elect the date of payment). If the period in which the Release Requirements could be satisfied spans more than one taxable year, then the Pre-Change in Control Severance Payment shall not be made until the later taxable year.

(a)Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to Accrued Obligations within the time prescribed by law.

(b)Equity-Based Compensation. The Executive shall retain all rights to any equity-based compensation awards to the extent set forth in the applicable plan and/or award agreement.

(c)Welfare Benefits. Subject to the terms and conditions of this Agreement, if the Executive (and, to the extent applicable, his/her eligible dependents) is eligible to and elects COBRA coverage in connection with the Executive’s Involuntary Termination, then the Executive (and the Executive’s dependents who have elected COBRA coverage) shall be provided with group medical benefits as required by COBRA (“Medical Continuation Benefits”) on substantially the same terms and conditions and at the same cost to the Executive as apply to similarly-situated active employees of the Company for the same type and level of coverage. The Medical Continuation Benefits shall be provided for a period of up to twelve (12) months following the date of the Involuntary Termination (and up to an additional twelve (12) months if the Executive provides consulting services under Section 14(f) hereof); provided, however, that (i) the Medical Continuation Benefits (including any Medical Continuation Benefits that are provided pursuant to this Section 4(c) for periods after the maximum COBRA coverage period) shall be provided on the same terms and conditions that apply to COBRA coverage (including termination thereof), (ii) if the Medical Continuation Benefits are to be provided pursuant to this Section 4(c) past the maximum COBRA coverage period, Sempra Energy may, in its sole discretion, provide or cause to be provided to the Executive, in lieu of the Medical Continuation Benefits for any period in excess of the maximum COBRA coverage period, a taxable monthly cash payment in an amount equal to the COBRA Premium, and (iii) the Medical Continuation Benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if Sempra Energy determines in its sole discretion that the Medical Continuation Benefits cannot be provided without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or that the provision of Medical Continuation Benefits under this Agreement would subject Sempra Energy or any of its Affiliates to a material tax or penalty, (A) the Executive shall be provided, in lieu thereof, with a taxable monthly payment in an amount equal to the COBRA Premium or (B) Sempra Energy shall have the authority to amend the Agreement to the limited extent reasonably necessary to avoid such violation of law or tax or penalty and shall use all reasonable efforts to provide the Executive with a comparable benefit that does not violate applicable law or subject Sempra Energy or any of its Affiliates to such tax or penalty. Any Medical Continuation Benefits provided pursuant to this Section 4(c) shall be co-extensive with

(and not in addition to) any benefits to which the Executive (and the Executive’s covered dependents) may be entitled under COBRA or similar provisions of applicable state law.

(d)Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to the Executive’s position and directly related to the Executive’s Involuntary Termination, for a period of twenty-four (24) months following the date of the Involuntary Termination, in an aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).

(e)Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of twenty-four (24) months following the Date of Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial planning services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed $25,000. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executive’s right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv).

Section 5.Severance Benefits upon Involuntary Termination in Connection with and after Change in Control. Notwithstanding the provisions of Section 4 above, and except as provided in Section 19(i) hereof, in the event of the Involuntary Termination of the Executive on or within two (2) years following a Change in Control, in lieu of the payments described in Section 4 above, Sempra Energy shall, or shall cause one of its Affiliates that is the employer of the Executive to, pay the Executive, in one lump sum cash payment, an amount (the “Post-Change in Control Severance Payment”) equal to (a) the Pro Rata Bonus plus (b) two times the sum of (X) the Executive’s Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, plus (Y) an amount equal to the greater of (I) the Executive’s Target Bonus determined immediately prior to the Change in Control or the Date of Termination, whichever is greater and (II) the Executive’s Average Annual Bonus. In addition to the Post-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in Section 5(a) through (f). The Company's obligation to pay the Post-Change in Control Severance Payment or provide the benefits set forth in Section 5(b),(c), (d), (e), and (f) is subject to and conditioned upon the Executive’s satisfaction of the Release Requirements. Except as provided in Section 5(g), the Post-Change in Control Severance Payment and the payments under Section 5(b) shall be paid on the Payment Date provided that the Release Requirements are satisfied on or before the Payment Date and remain satisfied on the Payment Date. If the Release Requirements are not satisfied on the Payment Date, no Post-Change in Control Severance Payment shall be paid hereunder and none of the benefits described in Section 5(b), (c), (d), (e) or (f) shall be provided, and the Executive shall have no right to the Pre-Change in Control Severance Payment or the applicable benefits. If the Release Requirements are satisfied on a date prior to the Payment Date, any portion of the Post-Change in Control Severance Payment or the applicable benefits that are not subject to Section 409A of the Code can be paid on a date prior to the Payment Date, as determined in the sole discretion of Sempra Energy (and in no event shall the Executive be

able to elect the date of payment). If the period in which Release Requirements could be satisfied spans more than one taxable year, then the Post-Change in Control Severance Payment and applicable benefits shall not be made until the later taxable year.

(a)Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Accrued Obligations within the time required by law and, to the extent applicable, in accordance with the applicable plan, policy or arrangement pursuant to which such payments are to be made.

(b)Pension Supplement. The Executive shall be entitled to receive a “Supplemental Retirement Benefit” under the Sempra Energy Supplemental Executive Retirement Plan, as in effect from time to time (“SERP”), determined in accordance with this Section 5(b), in the event that the Executive is a “Participant” (as defined in the SERP) as of the Date of Termination. Such Supplemental Retirement Benefit shall be determined by crediting the Executive with additional months of “Service” (as defined in the SERP) (if any) equal to the number of full calendar months from the Date of Termination to the date on which the Executive would have attained age sixty-two (62). The Executive shall be entitled to receive such Supplemental Retirement Benefit without regard to whether the Executive has attained age fifty-five (55) or completed five (5) years of Service as of the Date of Termination. The Executive shall be treated as qualified for “Retirement” (as defined in the SERP) as of the Date of Termination, and the Executive’s “Vesting Factor” with respect to the Supplemental Retirement Benefit shall be one hundred percent (100%). The Executive’s Supplemental Retirement Benefit shall be calculated based on the Executive’s actual age as of the date of commencement of payment of such Supplemental Retirement Benefit (the “SERP Distribution Date”), and by applying the applicable early retirement factors under the SERP, if the Executive has not attained age sixty-two (62) but has attained age fifty-five (55) as of the SERP Distribution Date. If the Executive has not attained age fifty-five (55) as of the SERP Distribution Date, the Executive’s Supplemental Retirement Benefit shall be calculated by applying the applicable early retirement factor under the SERP for age fifty-five (55), and the Supplemental Retirement Benefit otherwise payable at age fifty-five (55) shall be actuarially adjusted to the Executive’s actual age as of the SERP Distribution Date using the following actuarial assumptions: (i) the applicable mortality table promulgated by the Internal Revenue Service under Section 417(e)(3) of the Code, as in effect on the first (1st) day of the calendar year in which the SERP Distribution Date occurs, and (ii) the applicable interest rate promulgated by the Internal Revenue Service under Section 417(e)(3) of the Code for the November next preceding the first day of the calendar year in which the SERP Distribution Date occurs. The Executive’s Supplemental Retirement Benefit shall be determined in accordance with this Section 5(b), notwithstanding any contrary provisions of the SERP and, to the extent subject to Section 409A of the Code, shall be paid in accordance with Treasury Regulation Section 1.409A-3(c)(1). The Supplemental Retirement Benefit paid to or on behalf of the Executive in accordance with this Section 5(b) shall be in full satisfaction of any and all of the benefits payable to or on behalf of the Executive under the SERP.

(c)Equity-Based Compensation. Notwithstanding the provisions of any applicable equity-based compensation plan or award agreement to the contrary, all equity-based Incentive Compensation Awards (including, without limitation, stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance share awards, and dividend equivalents) held by the Executive shall immediately vest and become exercisable or payable, as the case may be, as of the Date of Termination, to be exercised or paid, as the case may be, in accordance with the terms of the applicable Incentive Compensation Plan and Incentive Compensation Award agreement, and any restrictions on any such Incentive Compensation Awards shall automatically lapse; provided, however, that, in the case of any stock option or stock appreciation rights awards that remain outstanding on the Date of Termination, such stock options and stock appreciation rights shall remain exercisable until the earlier of (i) the later of

eighteen (18) months following the Date of Termination or the period specified in the applicable Incentive Compensation Award agreement or (ii) the expiration of the original term of such Incentive Compensation Award (or, if earlier, the tenth (10th) anniversary of the original date of grant) (it being understood that all Incentive Compensation Awards shall remain outstanding and exercisable for a period that is no less than that provided for in the applicable agreement in effect as of the date of grant).

(d)Welfare Benefits. Subject to the terms and conditions of this Agreement, the Executive and the Executive’s dependents shall be provided with life, disability, accident and Medical Continuation Benefits (which benefits are collectively referred to herein as “Continued Benefits”) which are substantially similar to those provided to the Executive and the Executive’s dependents immediately prior to the date of Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive; provided, however, that the Medical Continuation Benefits shall be provided pursuant to this Section 5(d) only if the Executive (and, to the extent applicable, his/her eligible dependents) is eligible to and elects COBRA coverage in connection with the Executive’s Involuntary Termination, the Medical Continuation Benefits shall be provided in accordance with COBRA, and the Medical Continuation Benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as apply to similarly-situated active employees of the Company for the same type and level of coverage. The Continued Benefits shall be provided for a period of up to twenty-four (24) months following the date of the Involuntary Termination (and up to an additional twelve (12) months if the Executive provides consulting services under Section 14(f) hereof); provided, however, that (i) the Medical Continuation Benefits (including any Medical Continuation Benefits that are provided pursuant to this Section 5(d) for periods after the maximum COBRA coverage period) shall be provided on the same terms and conditions that apply to COBRA coverage (including termination thereof), (ii) if the Medical Continuation Benefits are to be provided pursuant to this Section 5(d) past the maximum COBRA coverage period, Sempra Energy may, in its sole discretion, provide or cause to be provided to the Executive, in lieu of the Medical Continuation Benefits for any period in excess of the maximum COBRA coverage period, a taxable monthly cash payment in an amount equal to the COBRA Premium, and (iii) the Medical Continuation Benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5) and the Continued Benefits will be provided in a manner that complies with Section 409A of the Code. Notwithstanding the foregoing, if Sempra Energy determines in its sole discretion that the Medical Continuation Benefits cannot be provided without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or that the provision of Medical Continuation Benefits under this Agreement would subject Sempra Energy or any of its Affiliates to a material tax or penalty, (A) the Executive shall be provided, in lieu thereof, with a taxable monthly payment in an amount equal to the COBRA Premium or (B) Sempra Energy shall have the authority to amend the Agreement to the limited extent reasonably necessary to avoid such violation of law or tax or penalty and shall use all reasonable efforts to provide the Executive with a comparable benefit that does not violate applicable law or subject Sempra Energy or any of its Affiliates to such tax or penalty. Any Medical Continuation Benefits provided pursuant to this Section 5(d) shall be co-extensive with (and not in addition to) any benefits to which the Executive (and the Executive’s covered dependents) may be entitled under COBRA or similar provisions of applicable state law.

(e)Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to the Executive’s position and directly related to the Executive’s Involuntary Termination, for a period of thirty-six (36) months following the date of Involuntary Termination (but in no event beyond the last day of the Executive’s second (2nd) taxable year following the Executive’s taxable year in which the Involuntary Termination occurs), in the aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement

services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).

(f)Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of thirty-six (36) months following the date of Involuntary Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed $25,000. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executive’s right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Section 1.409A-3(i)(1)(iv).

(g)Involuntary Termination in Connection with a Change in Control. Notwithstanding anything contained herein, in the event of an Involuntary Termination prior to a Change in Control, if the Involuntary Termination (i) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (ii) otherwise arose in connection with or in anticipation of such Change in Control, then the Executive shall, in lieu of the payments described in Section 4 hereof, be entitled to the Post-Change in Control Severance Payment and the additional benefits described in this Section 5 as if such Involuntary Termination had occurred within two (2) years following the Change in Control. The amounts specified in Section 5 that are to be paid under this Section 5(g) shall be reduced by any amount previously paid under Section 4. The amounts to be paid under this Section 5(g) shall be paid within sixty (60) days after the Change in Control Date of such Change in Control unless otherwise required by Section 409A of the Code.

Section 6.Severance Benefits upon Termination by the Company for Cause or by the Executive Other than for Good Reason. If the Executive’s employment shall be terminated for Cause, or if the Executive terminates employment other than for Good Reason, the Company shall have no further obligations to the Executive under this Agreement other than the pre-Change in Control Accrued Obligations and any amounts or benefits described in Section 10 hereof.

Section 7.Severance Benefits upon Termination due to Death or Disability. If the Executive has a Separation from Service by reason of death or Disability, the Company shall pay the Executive or the Executive’s estate, as the case may be, the Accrued Obligations and a severance amount equal to the Pro Rata Bonus (without regard to whether a Change in Control has occurred) and any amounts or benefits described in Section 10 hereof. Such payments shall be in addition to those rights and benefits to which the Executive or the Executive’s estate may be entitled under the relevant Company plans or programs. The Company's obligation to pay the severance amount pursuant to this Section 7 is conditioned upon satisfaction of the Release Requirements by the Executive, the Executive's representative or the Executive's estate, as the case may be. The Accrued Obligations shall be paid within the time required by law and the severance amount payable pursuant to this Section 7 shall be paid on the Payment Date provided that the Release Requirements are satisfied on or prior to the Payment Date. If the Release Requirements are not satisfied on or prior to the Payment Date, no severance payment shall be provided hereunder and neither the Executive nor the Executive’s estate, as the case may be, will have any right to the severance payment. If the Release Requirements are satisfied on a date prior to the Payment Date, any portion of the severance benefit pursuant to this Section 7 that is not subject to Section 409A of the Code can be paid on a date prior to the Payment Date, as determined in the sole discretion of Sempra Energy (and in no event shall the Executive or the Executive’s estate, as applicable, be able to elect the date of payment). If the period in which Release Requirements could be satisfied spans more than one taxable year, then the severance payment pursuant to this Section 7 shall not be made until the later taxable year.

Section 8.Limitation on Payments by the Company.

(a)Anything in this Agreement to the contrary notwithstanding and except as set forth in this Section 8 below, in the event it shall be determined that any payment or distribution “in the nature of compensation” (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise (the “Payment”) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, (the “Excise Tax”), then, subject to Section 8(b), the Pre-Change in Control Severance Payment or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall be reduced under this Section 8(a) to the amount equal to the Reduced Payment. For such Payment payable under this Agreement, the “Reduced Payment” shall be the amount equal to the greatest portion of the Payment (which may be zero ($0)) that, if paid, would result in no portion of any Payment being subject to the Excise Tax.

(b)The Pre-Change in Control Severance Payment or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall not be reduced under Section 8(a) if:

(i)such reduction in such Payment is not sufficient to cause no portion of any Payment to be subject to the Excise Tax, or

(ii)the Net After-Tax Unreduced Payments (as defined below) would equal or exceed one hundred five percent (105%) of the Net After-Tax Reduced Payments (as defined below).

For purposes of determining the amount of any Reduced Payment under Section 8(a), and the Net-After Tax Reduced Payments and the Net After-Tax Unreduced Payments, the Executive shall be considered to pay federal, state and local income and employment taxes at the Executive’s applicable marginal rates taking into consideration any reduction in federal income taxes which could be obtained from the deduction of state and local income taxes, and any

reduction or disallowance of itemized deductions and personal exemptions under applicable tax law). The applicable federal, state and local income and employment taxes and the Excise Tax (to the extent applicable) are collectively referred to as the “Taxes.”

(c)For purposes of determining the amount of any Reduced Payment under this Section 8, the amount of any Payment shall be reduced in the following order:

(i)first, by reducing the amounts of parachute payments that would not constitute deferred compensation subject to Section 409A of the Code;

(ii)next, if after the reduction described in Section 8(c)(i), additional reductions are required, then by reducing the cash portion of the Payment that constitutes “deferred compensation” (within the meaning of Section 409A) subject to Section 409A, with the reductions to be applied first to the portion of the Payment scheduled for the latest distribution date, and then applied to distributions scheduled for progressively earlier distribution dates, to the extent necessary to decrease the Payment as required under this Section 8; and

(iii)next, if after the reduction described in Section 8(c)(ii), additional reductions are required, then, by reducing the non-cash portion of the Payment that constitutes deferred compensation (within the meaning of Section 409A) subject to Section 409A, with the reductions to be applied first to the portion of the Payment scheduled for the latest distribution date, and then applied to distributions scheduled for progressively earlier distribution dates, to the extent necessary to decrease the Payment as required under this Section 8.

(d)The following definitions shall apply for purposes of this Section 8:

(i)“Net After-Tax Reduced Payments” shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are reduced pursuant to Section 8(a).

(ii)“Net After-Tax Unreduced Payments” shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are not reduced pursuant to Section 8(a).

(iii)“Net After-Tax Basis” shall mean, with respect to the Payments, either with or without reduction under Section 8(a) (as applicable), the amount that would be retained by the Executive from such Payments after the payment of all Taxes.

which, in the written opinion of the Accounting Firm, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Payments shall be taken into account which, in the opinion of the Accounting Firm, constitutes “reasonable compensation” for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Payments shall be determined by the Accounting Firm in accordance with the principles of Section 280G(d)(3) and (4) of the Code.

Section 9.Delayed Distribution under Section 409A of the Code. Notwithstanding any other provision of this Agreement to the contrary, if the Executive is a Specified Employee on the date of the Executive’s Involuntary Termination (or on the date of the Executive’s Separation from Service by reason of Disability), the Section 409A Payments which are payable upon Separation from Service shall be delayed to the extent necessary in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, and such delayed payments or benefits shall be paid or distributed to the Executive during the thirty (30) day period commencing on the earlier of (a) the expiration of the six (6) month period measured from the date of the Executive’s Separation from Service or (b) the date of the Executive’s death. Upon the expiration of the applicable six (6) month period, all payments deferred pursuant to this Section 9 (excluding in-kind benefits) shall be paid in a lump sum payment to the Executive, plus interest thereon from the date of the Executive’s Involuntary Termination through the payment date at an annual rate equal to Moody’s Rate. The “Moody’s Rate” shall mean the average of the daily Moody’s Corporate Bond Yield Average – Monthly Average Corporates as published by Moody’s Investors Service, Inc. (or any successor) for the month next preceding the Date of Termination. Any remaining payments due under the Agreement shall be paid as otherwise provided herein.

Section 10.Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, plan, program, policy or practice provided by the Company and for which the Executive may qualify (except with respect to any benefit to which the Executive has waived the Executive’s rights in writing), including, without limitation, any and all indemnification arrangements in favor of the Executive (whether under agreements or under the Company’s charter documents, bylaws, or otherwise), and insurance policies covering the Executive, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement entered into after the Effective Date with the Company. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any benefit, plan, policy, practice or program of, or any contract or agreement entered into with, the Company shall be payable in accordance with such benefit, plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. At all times during the Executive’s employment with the Company and thereafter, the Company shall provide (to the extent permissible under applicable law) the Executive with indemnification and D&O insurance insuring the Executive against insurable events which occur or have occurred while the Executive was a director or officer of the Company, that with respect to such insurance is on terms and conditions that, to the extent reasonably practical, are at least as generous as that then currently provided to any other similarly situated current or former director or officer of the Company or any Affiliate. Such indemnification and D&O insurance shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(10).

Section 11.Clawbacks. Notwithstanding anything herein to the contrary, (a) if Sempra Energy determines prior to a Change in Control, in its good faith judgment, that the Executive is required to forfeit or to make any repayment of any compensation or benefit(s) to

the Company under the Sarbanes-Oxley Act of 2002 or pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other law or listing standards of the national securities exchange that maintains the principal listing for any class of Sempra Energy’s common equity or pursuant to any formal policy of Sempra Energy, or (b) if an arbitrator or court determines following a Change in Control that the Executive is required to forfeit or to make any repayment of any compensation or benefit(s) to the Company under the Sarbanes-Oxley Act of 2002 or pursuant to the Dodd Frank Wall Street Reform and Consumer Protection Act or any other law or listing standards of the national securities exchange that maintains the principal listing for any class of Sempra Energy’s common equity, such forfeiture or repayment shall not constitute Good Reason.

Section 12.Full Settlement; Mitigation. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others, provided that nothing herein shall preclude the Company from separately pursuing recovery from the Executive based on any such claim. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts (including amounts for damages for breach) payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.

Section 13.Dispute Resolution and Arbitration.

(a)If any dispute arises between the Executive and Sempra Energy or any of its Affiliates, including, but not limited to, disputes relating to or arising out of this Agreement, disputes relating to or arising out of the Executive’s employment and/or the termination thereof, and/or disputes regarding the interpretation, enforceability, or validity of this Agreement (“Arbitrable Dispute”), the Executive and Sempra Energy mutually agree to waive their respective rights to resolution of disputes through litigation in a judicial forum and agree to resolve any Arbitrable Dispute through final and binding arbitration as set forth below, except as prohibited by law. Arbitration shall be the exclusive remedy for any Arbitrable Dispute. Accordingly, this agreement to arbitrate applies with respect to all Arbitrable Disputes, whether initiated by Executive or Sempra Energy. Any Arbitrable Dispute will be decided by an arbitrator through individual arbitration and not by way of court or jury trial. Sempra Energy and the Executive waive any right to a jury trial or a court bench trial.

(b)Sempra Energy and the Executive agree to bring any dispute in arbitration in an individual capacity only:

Sempra Energy and the Executive hereby waive any right for any dispute to be brought, maintained, heard, decided or arbitrated as a class and/or collective action and the arbitrator will have no authority to hear or preside over any such action (“Class Action Waiver”). The Executive understands and agrees that the Executive and Sempra Energy are waiving the right to pursue or have a dispute resolved as a plaintiff or class member in any purported class, collective or representative proceeding. To the extent the Class Action Waiver is determined to be invalid, unenforceable, or void, any class and/or collective action must proceed in a court of law and not in arbitration.

Notwithstanding any other provision of this Agreement, to the fullest extent permitted by law, the Executive and Sempra Energy (1) agree not to bring a representative action on behalf of others under the Private Attorneys General Act of 2004 (“PAGA”), California Labor Code § 2698 et seq., in any court or in arbitration, and (2) agree that, for any claim brought on a private attorney general basis, including under the California PAGA, any such dispute shall be resolved in arbitration on an individual basis only (i.e., to resolve whether the Executive has personally

been aggrieved or subject to any violations of law), and that such an action may not be used to resolve the claims or rights of other individuals in a single or collective proceeding (collectively, “Representative PAGA Waiver”). Notwithstanding any other provision of this agreement to arbitrate or the JAMS Rules, the scope, applicability, enforceability, revocability or validity of this Representative PAGA Waiver may be resolved only by a court of competent jurisdiction and not by an arbitrator. If any provision of this representative PAGA Waiver is found to be unenforceable or unlawful for any reason, the unenforceable provision shall be severed from this Dispute Resolution provision, and any such representative PAGA claims or other representative private attorneys general act claims must be litigated in a court of competent jurisdiction and not in arbitration. To the extent that there are any Arbitrable Disputes to be litigated in a court of competent jurisdiction because a court determines that the Representative PAGA Waiver is unenforceable with respect to those disputes, the Parties agree that litigation of those Arbitrable Disputes shall be stayed pending the outcome of any individual disputes in arbitration.

(c)Arbitration shall take place at the office of JAMS (or, if the Executive is employed outside of California, the American Arbitration Association (“AAA”)) nearest to the location where the Executive last worked for the Company. Except to the extent it conflicts with the rules and procedures set forth in this Agreement, arbitration shall be conducted in accordance with the JAMS Employment Arbitration Rules & Procedures then in effect (“JAMS Rules”) (if the Executive is employed outside of California, the AAA Employment Arbitration Rules & Mediation Procedures (“AAA Rules”)), copies of which are available at www.jamsadr.com; tel: 800.352.5267 and www.adr.org; tel: 800.778.7879, before a single experienced, neutral employment arbitrator selected in accordance with those rules.

(d)Sempra Energy will be responsible for paying any filing fee and the fees and costs of the arbitrator. However, the Executive will be responsible for contributing up to any amount equal to the filing fee that would be paid to initiate the claim in a court of general jurisdiction in the state in which the Executive is employed, unless a lower fee amount would be owed by the Executive pursuant to the JAMS Rules (or AAA rules, as applicable) or applicable law. Subject to Section 15 of this Agreement, each party shall pay its own attorneys’ fees and pay any costs that are not unique to arbitration (i.e., costs that each party would incur if the claim(s) were litigated in a court, such as costs to subpoena witnesses and/or documents, take depositions and purchase deposition transcripts, copy documents, etc.). However, subject to Section 15 of this Agreement, if any party prevails on a statutory claim that authorizes an award of attorneys’ fees to the prevailing party, or if there is a written agreement providing for attorneys’ fees, the arbitrator may award reasonable attorneys’ fees to the prevailing party, applying the same standards a court would apply under the law applicable to the claim.

(e)The arbitrator shall apply the Federal Rules of Evidence, shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party, and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator is required to issue a written award and opinion setting forth the essential findings and conclusions on which the award is based, and any judgment or award issued by an arbitrator may be entered in any court of competent jurisdiction. The arbitrator does not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action. In addition, unless all parties agree in writing otherwise, the arbitrator shall not consolidate or join the arbitrations of one or more than one individual. Neither party may seek, nor may the arbitrator award, any relief that is not individualized to the claimant or that affects other individuals. The arbitrator may award declaratory or injunctive relief only in favor of the individual party seeking relief and only to the extent necessary to provide relief warranted by that party’s individual claims. Sempra Energy and the Executive recognize that this agreement to arbitrate arises out of or concerns interstate commerce and that the Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this Agreement or any arbitration award.

(f)If a court decides that applicable law does not permit the enforcement of any of this section’s limitations as to a particular claim or any particular remedy for a claim, then that claim or particular remedy (and only that claim or particular remedy) must be severed from the arbitration and may be brought in court.

Section 14.Executive’s Covenants.

(a)Confidentiality. The Executive acknowledges that in the course of the Executive’s employment with the Company, the Executive has acquired non-public privileged or confidential information and trade secrets concerning the operations, future plans and methods of doing business (“Proprietary Information”) of Sempra Energy and its Affiliates; and the Executive agrees that it would be extremely damaging to Sempra Energy and its Affiliates if such Proprietary Information were disclosed to a competitor of Sempra Energy and its Affiliates or to any other Person. The Executive understands and agrees that all Proprietary Information has been divulged to the Executive in confidence and further understands and agrees to keep all Proprietary Information secret and confidential (except for such information which is or becomes publicly available other than as a result of a breach by the Executive of this provision or information the Executive is required by law or any governmental, administrative or court order to disclose) without limitation in time. In view of the nature of the Executive’s employment and the Proprietary Information the Executive has acquired during the course of such employment, the Executive likewise agrees that Sempra Energy and its Affiliates would be irreparably harmed by any disclosure of Proprietary Information in violation of the terms of this Section 14(a) and that Sempra Energy and its Affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting the Executive from engaging in any activity or threatened activity in violation of the terms of this Section 14(a) and to any other relief available to them. Inquiries regarding whether specific information constitutes Proprietary Information shall be directed to the Company’s most senior officer of Human Resources (or, if such position is vacant, the Company’s then Chief Executive Officer); provided, that the Company shall not unreasonably classify information as Proprietary Information.

(b)Governmental Reporting. Nothing in this Agreement is intended to interfere with or discourage the Executive’s good faith disclosure related to a suspected violation of federal or state law or regulation to any governmental agency or entity or making other disclosures that are protected under the whistleblower provisions of federal or state law or regulation. The Executive cannot and will not be held criminally or civilly liable under any federal or state trade secret law for disclosing otherwise protected trade secrets and/or confidential or proprietary information so long as the disclosure is made in (i) confidence to a federal, state, or local government official, directly or indirectly, or to an attorney and solely for the purpose of reporting or investigating a suspected violation of law; or (ii) a complaint or other document filed in a lawsuit or other proceeding, so long as such filing is made under seal. The Company will not retaliate against the Executive in any way for a disclosure made pursuant to this Section 14(b). Further, in the event the Executive makes such a disclosure, and files a lawsuit against the Company alleging that the Company retaliated against the Executive because of the disclosure, the Executive may disclose the relevant trade secret or confidential information to the Executive’s attorney, and may use the same in the court proceeding only if (X) the Executive ensures that any court filing that includes the trade secret or confidential information at issue is made under seal; and (Y) the Executive does not otherwise disclose the trade secret or confidential information except as required by court order.

and benefits, and inter-personal relationships with customers of Sempra Energy and its Affiliates. The Executive recognizes that the information the Executive possesses and will possess about these other employees is not generally known, is of substantial value to Sempra Energy and its Affiliates in developing their business and in securing and retaining customers, and has been and will be acquired by the Executive because of the Executive’s business position with Sempra Energy and its Affiliates. The Executive agrees that at all times during the Executive’s employment with the Company and for a period of one (1) year thereafter, the Executive will not use such information to directly or indirectly solicit or recruit any employee of the Company or its Affiliates for the purpose of being employed by the Executive or by any competitor of the Company or its Affiliates on whose behalf the Executive is acting as an agent, representative or employee and that the Executive will not convey any such confidential information or trade secrets about other employees of Sempra Energy and its Affiliates to any other Person; provided, however, that it shall not constitute a solicitation or recruitment of employment in violation of this Section 14(c) to discuss employment opportunities with any employee of the Company or its Affiliates who has either first contacted the Executive or regarding whose employment the Executive has discussed with and received the written approval of the Company’s most senior officer of Human Resources (or, if such position is vacant, the Company’s then Chief Executive Officer), prior to making such solicitation or recruitment. In view of the nature of the Executive’s employment with the Company, the Executive likewise agrees that Sempra Energy and its Affiliates would be irreparably harmed by any solicitation or recruitment in violation of the terms of this Section 14(c) and that Sempra Energy and its Affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting the Executive from engaging in any activity or threatened activity in violation of the terms of this Section 14(c) and to any other relief available to them.

(d)Survival of Provisions. The obligations contained in Section 14(a), (b) and (c) above shall survive the termination of the Executive’s employment within the Company and shall be fully enforceable thereafter to the same extent that it was enforceable prior to such termination. If it is determined by a court of competent jurisdiction in any state that any restriction in Section 14(a) or (c) above is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.

(e)Consulting Payment. In the event of the Executive’s Involuntary Termination, if (i) the Executive reconfirms and agrees to abide by the covenants described in Section 14(a) and (c) above, (ii) the Release Requirements are satisfied by the Payment Date, and (iii) the Executive agrees to provide the consulting services described in Section 14(f) below, then in consideration for such covenants and consulting services, the Company shall pay the Executive, in one (1) cash lump sum, an amount (the “Consulting Payment”) in cash equal to the sum of (X) the Executive’s Annual Base Salary as in effect on the Date of Termination, plus (Y) the greater of the Executive’s Average Annual Bonus or the Executive’s Target Bonus on the Date of Termination. If the requirements of this Section 14(e) are satisfied, the Consulting Payment shall be paid during the thirty (30) day period commencing on the earlier of (i) the expiration of the six (6) month period measured from the date of the Executive’s Separation from Service or (ii) the date of the Executive’s death.

consulting services rendered by the Executive during the Consulting Period shall not exceed twenty (20) hours each month; and, provided, further, that the consulting services rendered by the Executive during the Consulting Period shall in no event exceed twenty percent (20%) of the average level of services performed by the Executive for the Company over the thirty-six (36) month period immediately preceding the Executive’s Separation from Service (or the full period of services to the Company, if the Executive has been providing services to the Company for less than thirty-six (36) months). The Company agrees to use its best efforts during the Consulting Period to secure the benefit of the Executive’s consulting services so as to minimize the interference with the Executive’s other activities, including requiring the performance of consulting services at the Company’s offices only when such services may not be reasonably performed off-site by the Executive.

Section 15.Legal Fees.

(a)Reimbursement of Legal Fees. Subject to Section 15(b), in the event of the Executive’s Separation from Service either (i) prior to a Change in Control, or (ii) on or within two (2) years following a Change in Control, the Company shall reimburse the Executive for all legal fees and expenses (including but not limited to fees and expenses in connection with any legal proceeding) incurred by the Executive in disputing any issue arising under this Agreement relating to the Executive’s Separation from Service or in seeking to obtain or enforce any benefit or right provided by this Agreement.

(b)Requirements for Reimbursement. The Company shall reimburse the Executive’s legal fees and expenses pursuant to Section 15(a) above only to the extent the arbitrator or court determines (i) in the case of Section 15(a)(ii) that the Executive had a reasonable basis for such claim and (ii) in the case of Section 15(a)(i) that the Executive disputed such issue, or sought to obtain or enforce such benefit or right, in good faith, the Executive had a reasonable basis for such claim, and the Executive is the prevailing party. In addition, the Company shall reimburse such legal fees and expenses, in each case only if such legal fees and expenses are incurred during the twenty (20) year period beginning on the date of the Executive’s Separation from Service. The legal fees and expenses paid to the Executive for any taxable year of the Executive shall not affect the legal fees and expenses paid to the Executive for any other taxable year of the Executive. The legal fees and expenses shall be paid to the Executive as soon as practicable following the date on which documentation relating to the incurred expenses is provided by the Executive to the Company; provided, however, that any such reimbursement shall occur on or before the last day of the Executive’s taxable year following the taxable year in which the fees or expenses are determined to be payable pursuant to this Agreement. The Executive’s right to reimbursement of legal fees and expenses shall not be subject to liquidation or exchange for any other benefit. Such right to reimbursement of legal fees and expenses shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv).

Section 16.Successors.

(a)Assignment by the Executive. This Agreement is personal to the Executive and without the prior written consent of Sempra Energy shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b)Successors and Assigns of Sempra Energy. This Agreement shall inure to the benefit of and be binding upon Sempra Energy and its successors and assigns. Sempra Energy may not assign this Agreement to any Person (except for a successor described in Section 16(c), (d) or (e) below) without the Executive’s written consent.

(c)Assumption. Sempra Energy shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Sempra Energy to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities of this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement if no such succession had taken place, and Sempra Energy shall have no further obligations and liabilities under this Agreement. Upon such assumption, references to Sempra Energy in this Agreement shall be replaced with references to such successor.

(d)Sale of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy that is a member of the Sempra Energy Control Group, (ii) Sempra Energy, directly or indirectly through one or more intermediaries, sells or otherwise disposes of such subsidiary, and (iii) such subsidiary ceases to be a member of the Sempra Energy Control Group, then if, on the date such subsidiary ceases to be a member of the Sempra Energy Control Group, the Executive continues in employment with such subsidiary and the Executive does not have a Separation from Service, Sempra Energy shall require such subsidiary or any successor (whether direct or indirect, by purchase merger, consolidation or otherwise) to such subsidiary, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if such subsidiary had not ceased to be part of the Sempra Energy Control Group, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, references to Sempra Energy in this Agreement shall be replaced with references to such subsidiary, or such successor or parent thereof, assuming this Agreement, and subsection (b) of the definition of “Cause” and subsection (b) of the definition of “Good Reason” shall apply thereafter, as if a Change in Control had occurred on the date of such cessation.

(e)Sale of Assets of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) such subsidiary sells or otherwise disposes of substantial assets of such subsidiary to an unrelated service recipient, as determined under Treasury Regulation Section 1.409A-1(f)(2)(ii) (the “Asset Purchaser”), in a transaction described in Treasury Regulation Section 1.409A-1(h)(4) (an “Asset Sale”), then if, on the date of such Asset Sale, the Executive becomes employed by the Asset Purchaser, Sempra Energy and the Asset Purchaser may specify, in accordance with Treasury Regulation Section 1.409A-1(h)(4), that the Executive shall not be treated as having a Separation from Service, and in such event, Sempra Energy may require such Asset Purchaser, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that the Company would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if the Asset Sale had not taken place, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, references to Sempra Energy in this Agreement shall be replaced with references to the Asset Purchaser or the parent thereof, as applicable, and subsection (b) of the definition of “Cause” and subsection (b) of the definition of “Good Reason” shall apply thereafter, as if a Change in Control had occurred on the date of the Asset Sale.

necessary or advisable for the administration or implementation of this Agreement. All determinations made under this Agreement by the Compensation Committee shall be final, conclusive and binding on all interested Persons. Prior to a Change in Control, the Compensation Committee may delegate responsibilities for the operation and administration of this Agreement to one or more officers or employees of the Company. The provisions of this Section 17 shall terminate and be of no further force and effect upon the occurrence of a Change in Control.

Section 18.Compliance with Section 409A of the Code. All payments and benefits payable under this Agreement (including, without limitation, the Section 409A Payments) are intended to comply with the requirements of Section 409A of the Code. Certain payments and benefits payable under this Agreement are intended to or may be exempt from the requirements of Section 409A of the Code. This Agreement shall be interpreted in accordance with the applicable requirements of, and exemptions from, Section 409A of the Code, the Treasury Regulations thereunder and other guidance of general applicability. If the Company determines that any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Section 409A of the Code do not comply with Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, to the extent permitted under Section 409A of the Code, the Treasury Regulations thereunder and any other applicable guidance, the Company and the Executive agree to amend this Agreement, or take such other actions as the Company and the Executive deem reasonably necessary or appropriate, to cause such compensation, benefits and other payments to comply with the requirements of Section 409A of the Code, the Treasury Regulations thereunder and other applicable guidance, while providing compensation, benefits and other payments that are, in the aggregate, no less favorable than the compensation, benefits and other payments provided under this Agreement. In the case of any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Section 409Aof the Code, if any provision of the Agreement would cause such compensation, benefits or other payments to fail to so comply, such provision shall not be effective and shall be null and void with respect to such compensation, benefits or other payments to the extent such provision would cause a failure to comply, and such provision shall otherwise remain in full force and effect.

Section 19.Miscellaneous.

(a)Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to its principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. Except as provided herein, the Agreement may not be amended, modified, repealed, waived, extended or discharged except by an agreement in writing signed by the parties hereto. No Person, other than pursuant to a resolution of the Board or a committee thereof, shall have authority on behalf of Sempra Energy to agree to amend, modify, repeal, waive, extend or discharge any provision of this Agreement or anything in reference thereto.

(b)Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party, by a reputable overnight carrier or by registered or certified mail, return receipt requested, postage prepaid, addressed, in the case of the Company, to Sempra Energy’s headquarters attention the most senior officer of Human Resources with a copy to the General Counsel or in the case of the Executive, the home address of the Executive on file with the Company, or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee.

(c)Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d)Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e)No Waiver. The Executive’s or the Company’s failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, or the right of the Company to terminate the Executive’s employment for Cause shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

(f)Entire Agreement; Exclusive Benefit; Supersession of Prior Agreement. This Agreement contains the entire agreement of the Executive, the Company or any predecessor or subsidiary thereof with respect to any severance or termination pay. The Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and all other benefits provided hereunder shall be in lieu of any other severance payments to which the Executive is entitled under any other severance plan or program or arrangement sponsored by the Company, as well as pursuant to any individual employment or severance agreement that was entered into by the Executive and the Company, and, upon the Effective Date of this Agreement, all such plans, programs, arrangements and agreements other than agreements to arbitrate disputes with the Company, to the extent in conflict with this Agreement, are hereby automatically superseded and terminated. Any prior agreements/provisions agreeing to arbitrate disputes with the Company shall remain in full force and effect and shall not be affected by this Agreement.

(g)No Right of Employment. Nothing in this Agreement shall be construed as giving the Executive any right to be retained in the employ of the Company or shall interfere in any way with the right of the Company to terminate the Executive’s employment at any time, with or without Cause.

(h)Unfunded Obligation. The obligations under this Agreement shall be unfunded. Benefits payable under this Agreement shall be paid from the general assets of the Company. The Company shall have no obligation to establish any fund or to set aside any assets to provide benefits under this Agreement.

(i)Termination upon Sale of Assets of Subsidiary. Notwithstanding anything contained herein, this Agreement shall automatically terminate and be of no further force and effect and no benefits shall be payable hereunder in the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, (ii) an Asset Sale (as defined in Section 16(e)) occurs (other than such a sale or disposition which is part of a transaction or series of transactions which would result in a Change in Control), and (iii) as a result of such Asset Sale, the Executive is offered employment by the Asset Purchaser in an executive position with reasonably comparable status, compensation, benefits and severance agreement (including the assumption of this Agreement in accordance with Section 16(e)) and which is consistent with the Executive’s experience and education, but the Executive declines to accept such offer and the Executive fails to become employed by the Asset Purchaser on the date of the Asset Sale.

Effective Date thereafter), the term of this Agreement shall automatically be extended for one (1) additional year, unless at least ninety (90) days prior to such date, the Company or the Executive shall give written notice to the other party that it or he, as the case may be, does not wish to so extend this Agreement. Notwithstanding the foregoing, if the Company gives such written notice to the Executive (i) at a time when Sempra Energy is a party to an agreement that, if consummated, would constitute a Change in Control or (ii) less than two (2) years after a Change in Control, the term of this Agreement shall be automatically extended until the later of (X) the date that is one (1) year after the anniversary of the Effective Date that follows such written notice or (Y) the first day of the calendar month following the second (2nd) anniversary of the Change in Control Date.

(k)Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the Executive and, pursuant to due authorization from its Board of Directors, Sempra Energy have caused this Agreement to be executed as of the day and year first above written.


SEMPRA ENERGY

/s/ Karen L. Sedgwick
Karen L. Sedgwick
Chief Administrative Officer and Chief Human Resources Officer

1/4/2023
Date


EXECUTIVE

/s/ Jeffrey W. Martin
Jeffrey W. Martin
Chairman, Chief Executive Officer and President

1/4/2023
Date

EXHIBIT A

SEPARATION AGREEMENT AND GENERAL RELEASE

This SEPARATION AGREEMENT AND GENERAL RELEASE (the “Agreement”), is made by and between ______________________________, a California corporation (the “Company”) and ___________________________ (“Employee”) (jointly referred to as the “Parties” or individually referred to as a “Party”) as of the Effective Date (as defined below).

WHEREAS, Employee was employed by the Company as an at-will employee;

WHEREAS, Employee and the Company previously entered into that certain Severance Pay Agreement dated ____________, 20___ (the “Severance Pay Agreement”) in connection with Employee’s employment with the Company;

WHEREAS, Employee’s right to receive certain severance pay and benefits pursuant to the terms of the Severance Pay Agreement is subject to and conditioned upon Employee’s execution [and non-revocation] of a general release of claims Employee has or may have against the Company Releasees (as defined below); and

WHEREAS, Employee’s right to receive the Consulting Payment provided pursuant to Section 14(e) of the Severance Pay Agreement is subject to and conditioned upon Employee’s execution [and non-revocation] of a general release of claims by Employee against the Company Releasees and Employee’s adherence to the covenants described under Section 14 of the Severance Pay Agreement.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, the adequacy of which is hereby acknowledged, the Parties hereby agree as follows:

1.Separation Date. Employee’s employment with the Company terminated at the close of business on [____________] (the “Separation Date”). Employee has received his/her final wages through the Separation Date, less deductions required by law, including any accrued but unused vacation, in accordance with applicable law. Employee has also been reimbursed for any outstanding employment-related expenses that were incurred and submitted consistent with Company policy. This Agreement is not a condition of employment or continued employment or a condition of receiving a raise or a bonus. On the Separation Date, Employee will be deemed to have resigned from all positions that he/she holds with the Company and its affiliates, and Employee will promptly execute any instrument reasonably requested by the Company or any of its affiliates to effectuate or commemorate such resignation. The term “affiliate” as used herein shall include, without limitation, such Person’s parent companies, divisions and subsidiaries, whether or not specified.

2.Severance Benefits. In exchange for Employee entering into this Agreement and not revoking it, and for the covenants and releases contained herein, the Company will provide Employee with the severance benefits described below. Employee acknowledges that the amounts and benefits set forth in this Section 2 as well as any benefits and claims not released under Section 4(b), fully satisfy any entitlement Employee may have to any payments or benefits from the Company through the Separation Date, including under the Severance Pay Agreement. Employee further acknowledges that no part of the severance payments described in this Section 2 consist of wages owed to Employee for his/her employment through the Separation Date.

(a)[The Company will pay Employee a lump sum payment of [______________________], less applicable withholdings, pursuant to Section [4/5] of the Severance Pay Agreement. Pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), payment will be made on the earlier of (i) the date that is six (6) months and one (1) day after the Separation Date; and (ii) the date of Employee’s death.

(b)The Company will pay Employee a lump sum payment of [___________], less applicable withholdings, which is equal to the Consulting Payment set forth in Section 14(e) of the Severance Pay Agreement. Such payment will be made during the thirty (30) day period commencing on the earlier of (i) a date that is six (6) months and one (1) day after the Separation Date; and (ii) the date of Employee’s death

(c)The Company will also provide Employee with the severance benefits set forth in Sections 4(c), (d) and (e) of the Severance Pay Agreement. For the avoidance of doubt, the value of the services set forth in Sections 4(c), (d) and (e) of the Severance Pay Agreement shall not be subject to liquidation or exchange for any other benefit.]

3.Tax Consequences. The Company makes no representations or warranties with respect to the tax consequences of the payments and any other consideration provided to Employee or made on Employee’s behalf under the terms of this Agreement. Employee agrees and understands that Employee is responsible for payment, if any, of local, state, and/or federal taxes on the payments and any other consideration provided hereunder by the Company and any penalties or assessments thereon. Employee further agrees to indemnify and hold the Company and its affiliates harmless from any claims, demands, deficiencies, penalties, interest, assessments, executions, judgments, or recoveries by any government agency against the Company or any of its affiliates for any amounts claimed due on account of (a) Employee’s failure to pay or delayed payment of federal or state taxes, or (b) damages sustained by the Company or any of its affiliates by reason of any such claims, including reasonable attorneys’ fees and costs

4.Release of Claims. As a material inducement for the payment of the severance and benefits of the Severance Pay Agreement, and except as otherwise provided in this Agreement, Employee, on behalf of him/herself and on behalf of his/her heirs, family members, executors, agents and assigns, hereby irrevocably and unconditionally releases, acquits and forever discharges the Company Releasees from any and all Claims he/she has or may have. For purposes of this Agreement and the preceding sentence, the words “Releasee” or “Releasees” and “Claim” or “Claims” shall have the meanings set forth below:

(a) “Company Releasees” shall refer to (i) the Company, (ii) each of the Company’s owners, stockholders, predecessors, successors, assigns, agents, directors, officers, employees, representatives, attorneys, advisors, and affiliates (including parent companies, divisions, and subsidiaries), (iii) agents, directors, officers, employees, representatives, attorneys and advisors of such affiliates (including parent companies, divisions, and subsidiaries), and (iv) all persons and entities acting by, through, under or in concert with any of them

(b) The words “Claim” or “Claims” shall refer to any charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs actually incurred) of any nature whatsoever, known or unknown, suspected or unsuspected, which Employee had or may have, own or hold against any of the Company Releasees through and including the Effective Date that in any way arise out of, relate to, or are in connection with Employee’s employment relationship with the Company and its affiliates and the termination of that relationship, including, without limitation, all rights arising out of alleged violations of any contracts, express or implied, including the Severance Pay Agreement; any tort claim; any legal

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restrictions on the Company’s right to terminate employment relationships; and any federal, state or other governmental statute, regulation, law or ordinance, including common law principles, governing the employment relationship including, without limitation, all laws and regulations prohibiting discrimination or harassment based on protected categories, and all laws and regulations prohibiting retaliation against employees, including retaliation for engaging in protected activity or legal off-duty conduct. This release does not extend to claims for workers’ compensation or other claims which by law may not be waived or released by this Agreement, nor does it limit Employee’s right to receive any vested payments or benefits to which he/she is entitled under any Company (including its affiliates) benefit plan (including, without limitation, any of the Company’s (including its affiliates) qualified retirement plans or non-qualified deferred compensation plan), which payments or benefits will be paid or provided pursuant to the terms of the applicable governing documents.

5.Release of Unknown Claims. Employee expressly waives and relinquishes all rights and benefits afforded by any statute (including, but not limited to, Section 1542 of the Civil Code of the State of California and analogous laws of other states), which limits the effect of a release with respect to unknown claims. Employee does so understanding and acknowledging the significance of the release of unknown claims and the waiver of statutory protection against a release of unknown claims (including, but not limited to, Section 1542). Section 1542 of the Civil Code of the State of California states as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”

Thus, notwithstanding the provisions of Section 1542 or of any similar statute, and for the purpose of implementing a full and complete release and discharge of the Company Releasees, Employee expressly acknowledges that this Agreement is intended to include in its effect, without limitation, all Claims which are known and all Claims which Employee does not know or suspect to exist in Employee’s favor at the time of execution of this Agreement and that this Agreement contemplates the extinguishment of all such Claims. Employee acknowledges that he/she might hereafter discover facts different from, or in addition to, those Employee now knows or believes to be true with respect to a Claim or Claims released herein, and they expressly agree to assume the risk of possible discovery of additional or different facts, and agree that this Agreement shall be and remain effective, in all respects, regardless of such additional or different discovered facts.

6.Covenant Not to Sue. Employee agrees that Employee will not file any suit, claim, proceeding or complaint against any Company Releasees arising out of or in connection with any Claims released herein, except as required to enforce the terms of this Agreement. Employee’s right to file or participate in an administrative claim or investigation by the Equal Employment Opportunity Commission, or any other local, state, or federal administrative body or government agency against the Company, which is guaranteed by law, cannot be and is not waived. However, to the extent permitted by law, and except as to Securities and Exchange Commission whistleblower awards, Employee agrees that if such an administrative claim is made against any Company Releasee(s) on Employee’s behalf, Employee shall not be entitled to recover any individual monetary relief or other individual remedies beyond the separation benefits identified in this Agreement.

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7.No Pending Lawsuits. Employee represents and warrants that Employee does not have any lawsuits, charges, claims, grievances, or actions of any kind pending against any Company Releasees arising out of or in connection with any Claims released herein, by or on behalf of Employee or on behalf of any other person or entity, and that, to the best of Employee’s knowledge, Employee possess no such claims (including, but not limited to, under the Family and Medical Leave Act, the Age Discrimination in Employment Act, the California Family Rights Act, the Fair Labor Standards Act, the California Labor Code and/or workers’ compensation claims). Employee further acknowledges that he/she is not aware of, or has fully disclosed to the Company, any information that could reasonably give rise to such a claim, cause of action, lawsuit or proceeding against any Company Releasee(s).

8.No Cooperation. Employee agrees that he/she will not knowingly encourage, counsel, or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any Company Releasee(s) arising out or in connection with any Claims released herein, unless under a subpoena or other court order to do so. Employee agrees to immediately notify the Company upon receipt of any such subpoena or court order, and to furnish to the Company, within three (3) business days of its receipt, a copy of such subpoena or other court order.

9.Payment of Salary and Receipt of All Benefits. Employee acknowledges and represents that, except as provided in this Agreement, the Company has fully paid or provided Employee all salary, wages, bonuses, accrued vacation/paid time off, premiums, leaves, housing allowances, relocation costs, interest, severance, outplacement costs, fees, reimbursable expenses, commissions or other incentive compensation, stock, stock options, vesting, and any and all other benefits and compensation due to Employee. Employee specifically represents that Employee is not owed any further sum by way of reimbursement from the Company or any of its affiliates. To the extent Employee claims that additional wages are or may become owed to Employee, there is a good faith dispute based in law and fact over whether any wages in excess of the wages already paid to Employee are or will be due, and thus California Labor Code Section 206.5 is inapplicable.

10.Indemnification.

(a)As a further material inducement to the Company to enter into this Agreement, Employee hereby agrees to indemnify and hold each of the Company Releasees harmless from all loss, costs, damages, or expenses, including without limitation, reasonable attorneys’ fees incurred by the Company Releasees, arising out of any breach of this Agreement by Employee or the fact that any representation made in this Agreement by Employee was false when made. As a further material inducement to Employee to enter into this Agreement, the Company hereby agrees to indemnify and hold each of the Company Releasees harmless from all loss, costs, damages, or expenses, including without limitation, reasonable attorneys’ fees incurred by the Company Releasees, arising out of any breach of this Agreement by the Company or the fact that any representation made in this Agreement by the Company was knowingly false when made.

(b)If Employee is a party or is threatened to be made a party to any proceeding by reason of the fact that Employee was an employee, officer or director of the Company or any of its affiliates, the Company shall indemnify and hold harmless Employee against any expenses (including reasonable attorneys’ fees, provided, that counsel has been approved by the Company, which approval shall not be unreasonably withheld), judgments, fines, settlements and other amounts actually or reasonably incurred by Employee in connection with that proceeding, and provided, that Employee acted in good faith and in a manner Employee reasonably believed to be in the best interest of the Company. The limitations of Section 317 of the Corporations Code of the State of California shall apply to this assurance of indemnification.

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Notwithstanding the foregoing or any other provision contained herein, this Agreement shall not supersede or in any way limit any (i) indemnification arrangements in favor of the Employee under the Company’s or any of its affiliates charter documents or bylaws or pursuant to any agreement between the Employee and the Company or any of the Company’s affiliates or (ii) the provision of insurance against insurable events which occurred while the Executive was a director or officer of the Company, in each as provided by and subject to the limitations set forth in Section 10 of the Severance Pay Agreement.

11.No Admission of Liability.

The Parties understand and acknowledge that no action taken by either Party in connection hereto, either previously or in connection with this Agreement, shall be deemed or construed to be (i) an admission of the truth or falsity of any actual or potential claims, or (ii) an acknowledgement or admission by either Party of any fault or liability whatsoever to the other Party or to any third party. This Agreement shall not in any way be construed as an admission by the Company that it has acted wrongfully with respect to Employee or any other person or entity, or that Employee has any rights whatsoever against the Company, and the Company specifically disclaims any liability to or wrongful acts against Employee or any other person or entity, on the part of itself, its employees or its agents. This Agreement shall not in any way be construed as an admission by Employee that Employee has acted wrongfully with respect to the Company, or that Employee failed to perform Employee’s duties or negligently performed or breached Employee’s duties, or that the Company had good cause to terminate Employee’s employment.

12. Cooperation in Litigation. Employee agrees to cooperate with the Company and its affiliates and their respective designated attorneys, representatives and agents in connection with any actual or threatened judicial, administrative or other legal or equitable proceeding in which the Company or any of the Company’s affiliates is or may become involved. Upon reasonable notice, Employee agrees to meet with and provide to the Company and its affiliates and their respective designated attorneys, representatives or agents all information and knowledge Employee has relating to the subject matter of any such proceeding. The Company agrees to reimburse Employee for any reasonable costs Employee incurs in providing such cooperation.

13.Governing Law. This Agreement is entered into in [state] and, except as provided in this section, shall be governed by substantive [state] law.

14.Arbitration of Disputes. If any dispute arises between Employee and the Company relating to this Agreement, including any dispute regarding the interpretation, enforceability, or validity of this Agreement (“Arbitrable Dispute”), the Parties agree to resolve that Arbitrable Dispute through final and binding arbitration under this section. Employee also agrees to arbitrate any Arbitrable Dispute which also involves any other Company Releasee who offers or agrees to arbitrate the dispute under this section.

(a)Any Arbitrable Dispute will be decided by an arbitrator though individual arbitration, and Employee and the Company waive any right to a jury trial or a court bench trial. Employee and the Company also waive the right for any dispute to be brought, maintained, decided or arbitrated as a class and/or collective action and the arbitrator shall have no authority to hear or preside over any such action (“Class Action Waiver”). Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, Employee and the Company are waiving the right to pursue or have a dispute resolved as a plaintiff or class member in any purported class, collective or representative proceeding. To the extent the Class Action Waiver is determined to be invalid, unenforceable, or void, any class and/or collective action must proceed in a court of law and not in arbitration.

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Notwithstanding any other provision of this Agreement, to the fullest extent permitted by law, Employee and the Company (1) agree not to bring a representative action on behalf of others under the Private Attorneys General Act of 2004 (“PAGA”), California Labor Code § 2698 et seq., in any court or in arbitration, and (2) agree that, for any claim brought on a private attorney general basis, including under the California PAGA, any such dispute shall be resolved in arbitration on an individual basis only (i.e., to resolve whether Employee has personally been aggrieved or subject to any violations of law), and that such an action may not be used to resolve the claims or rights of other individuals in a single or collective proceeding (collectively, “Representative PAGA Waiver”). Notwithstanding any other provision of this arbitration agreement or the JAMS Rules, the scope, applicability, enforceability, revocability or validity of this Representative PAGA Waiver may be resolved only by a court of competent jurisdiction and not by an arbitrator. If any provision of this representative PAGA Waiver is found to be unenforceable or unlawful for any reason, the unenforceable provision shall be severed from this Dispute Resolution provision, and any such representative PAGA claims or other representative private attorneys general act claims must be litigated in a court of competent jurisdiction and not in arbitration. To the extent that there are any Arbitrable Disputes to be litigated in a court of competent jurisdiction because a court determines that the representative PAGA Waiver is unenforceable with respect to those disputes, the Parties agree that litigation of those Arbitrable Disputes shall be stayed pending the outcome of any individual disputes in arbitration.

(b)The Arbitration shall take place at the office of JAMS that is nearest to the location where Employee last worked for the Company in accordance with the JAMS Employment Arbitration Rules & Procedures then in effect (“JAMS Rules”) (or, if Employee is employed outside of California at the time of the termination of Employee’s employment, at the nearest location of the American Arbitration Association (“AAA”) and in accordance with the AAA Employment Arbitration Rules and Mediation Procedures then in effect ( “AAA Rules”)), copies of which are available at www.jamsadr.com; tel: 800.352.5267 and www.adr.org; tel: 800.778.7879, before a single experienced employment arbitrator selected in accordance with those rules.

(c)The Arbitrator may not modify or change this Agreement in any way. The Company will be responsible for paying any filing fee and the fees and costs of the Arbitrator; provided, however, that if Employee is the party initiating the claim, Employee will contribute an amount equal to the filing fee that would be paid to initiate a claim in the court of general jurisdiction in the state in which Employee is employed by the Company, unless a lower fee amount would be owed by Employee pursuant to the JAMS Rules (or AAA Rules, as applicable) or applicable law. Each Party shall pay for its own costs and attorneys’ fees and pay any costs that are not unique to arbitration (i.e., cost that each party would incur if the claim(s) were litigated in a court, such as costs to subpoena witnesses and/or documents, take depositions and purchase deposition transcripts, copy documents, etc.), if any. However if any party prevails on a statutory claim which affords the prevailing party attorneys’ fees and costs, or if there is a written agreement providing for attorneys’ fees and/or costs, the Arbitrator may award reasonable attorney’s fees and/or costs to the prevailing party, applying the same standards a court would apply under the law applicable to the claim.

(d)The Arbitrator shall apply the Federal Rules of Evidence and shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The Arbitrator is required to issue a written award and opinion setting forth the essential findings and conclusions on which the award is based, and any judgment or award issued by the Arbitrator may be entered in any court of competent jurisdiction. The Arbitrator does not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action. In addition, unless all parties agree in writing

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otherwise, the Arbitrator shall not consolidate or join the arbitrations of one or more than one individual. Neither party may seek, nor may the Arbitrator award, any relief that is not individualized to the claimant or that affects other individuals. The Arbitrator may award declaratory or injunctive relief only in favor of the individual party seeking relief and only to the extent necessary to provide relief warranted by that Party’s individual claims.

(e)Employee and the Company recognize that this agreement to arbitrate arises out of or concerns interstate commerce and that the Federal Arbitration Act shall govern the arbitration and the interpretation or enforcement of this section or any arbitration award. If a court decides that applicable law does not permit the enforcement of any of this section’s limitations as to a particular claim or any particular remedy for a claim, then that claim or particular remedy (and only that claim or particular remedy) must be severed from the arbitration and may be brought in court. To the extent that the Federal Arbitration Act is inapplicable, California law pertaining to arbitration agreements shall apply. Arbitration in this manner shall be the exclusive remedy for any Arbitrable Dispute. Except as prohibited by the Age Discrimination in Employment Act of 1967, as amended, should Employee or the Company attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this section, the responding party will be entitled to recover from the initiating party all damages, expenses, and attorneys’ fees incurred as a result of this breach. This Section 13 supersedes any existing arbitration agreement between the Company and Employee as to any Arbitrable Dispute (as defined herein). Notwithstanding anything in this Section 13 to the contrary, a claim for benefits under an Employee Retirement Income Security Act of 1974, as amended, covered plan shall not be an Arbitrable Dispute.

15.Effective Date. The Parties understand and agree that this Agreement is final and binding eight (8) days after its execution and return (the “Effective Date”). Should Employee nevertheless attempt to challenge the enforceability of this Agreement as provided in Section 13 or, in violation of that section, through litigation, as a further limitation on any right to make such a challenge, Employee shall initially tender to the Company, by certified check delivered to the Company, all monies received pursuant to Section 4 or 5 of the Severance Pay Agreement, as applicable, plus interest, and invite the Company to retain such monies and agree with Employee to cancel this Agreement and void the Company’s obligations under the Severance Pay Agreement. In the event the Company accepts this offer, the Company shall retain such monies and this Agreement shall be canceled and the Company shall have no obligation under Section 14(e) of the Severance Pay Agreement. In the event the Company does not accept such offer, the Company shall so notify Employee and shall place such monies in an interest-bearing escrow account pending resolution of the dispute between Employee and the Company as to whether or not this Agreement and the Company’s obligations under the Severance Pay Agreement shall be set aside and/or otherwise rendered voidable or unenforceable. Additionally, any consulting agreement then in effect between Employee and the Company shall be immediately rescinded with no requirement of notice.

16.Notices. Any notices required to be given under this Agreement shall be delivered either personally or by first class United States mail, postage prepaid, addressed to the respective parties and shall be effective upon receipt as follows:

To Company: [TO COME]

Attn: [TO COME]

With a copy to:

Attn: [TO COME]

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To Employee: ______________________

______________________

17.Voluntary Waiver and Release of ADEA Claims. Employee understands and acknowledges that Employee is waiving any rights Employee may have under the Age Discrimination in Employment Act (“ADEA”), and that this waiver and release is knowing and voluntary. Employee acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Employee was already entitled. Employee further understands and acknowledges that Employee has been given a period of twenty-one (21) days to review and consider this Agreement before signing it and may use as much of this twenty-one (21) period as Employee wishes prior to signing. In the event Employee signs this Agreement and returns it to the Company in less than the twenty-one (21)-day period identified above, Employee hereby acknowledges that Employee has freely and voluntarily chosen to waive the time period allotted for considering this Agreement, and that the Company has not promised Employee anything or made any representations not contained in this Agreement to induce Employee to sign this Agreement before the expiration of the twenty-one (21) day period. Employee is encouraged, at Employee’s personal expense, to consult with an attorney before signing this Agreement. Employee understands and acknowledges that whether or not Employee does so is Employee’s decision. Employee may revoke this Agreement within seven (7) days of signing it. If Employee wishes to revoke, the Company’s Vice President, Human Resources must receive written notice from Employee no later than the close of business on the seventh (7th) day after Employee has signed the Agreement. If revoked, this Agreement shall not be effective and enforceable, and Employee will not receive payments or benefits under Section 4 or 5 of the Severance Pay Agreement, as applicable. The Parties agree that changes, whether material or immaterial, do not restart the running of the twenty-one (21)-day period described above.

18.Section 409A. All payments and benefits payable under this Agreement are intended to comply with the requirements of Section 409A of the Code. Notwithstanding the foregoing, certain payments and benefits payable under this Agreement are intended to be exempt from the requirements of Section 409A of the Code. This Agreement shall be interpreted in accordance with the applicable requirements of, and exemptions from, Section 409A of the Code and the Treasury Regulations thereunder. To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Section 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder To the extent that any payments under this Agreement are subject to Section 409A of the Code, the provisions of Section 9 of the Severance Pay Agreement shall apply.

19.Return of Company Property. Employee represents and warrants that he/she has returned all of the Company’s property, including all work in progress, files, photographs, notes, records, credit cards, keys, access cards, computers, and other Company or customer documents, products, or property that Employee has received in the course of his/her employment, or which reflect in any way any confidential or proprietary information of the Company. Employee also warrants that he has not downloaded or otherwise retained any information, whether in electronic or other form, belonging to the Company or derived from information belonging to the Company.

20.Confidential Information; Public Releases.

(a)Employee acknowledges and reaffirms Employee’s continuing obligations under the Confidentiality Agreement. The Parties understand and agree that nothing in this

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Agreement is intended to interfere with or discourage Employee’s good-faith disclosure to any governmental entity related to a reasonably suspected violation of the law or to prevent Employee from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that Employee has reason to believe is unlawful. The Parties further understand and agree that Employee cannot be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (a) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

(b)The Parties understand and agree that the Company and its affiliates shall take any and all necessary or appropriate action to timely satisfy their respective reporting and disclosure obligations in connection with Employee’s separation and this Agreement, including filing any requisite forms with the Securities and Exchange Commission (“SEC”) and Employee will promptly provide any information reasonably requested by the Company or any of its affiliates in fulfilling any such reporting or disclosure obligations.

21.Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes any and all other agreements (except the Severance Pay Agreement and the Confidentiality Agreement) with respect to the subject matter of this Agreement, whether written or oral, between the Parties. Any prior agreements/provisions agreeing to arbitrate disputes with the Company shall remain in full force and effect and shall not be affected by this Agreement. All modifications and amendments to this Agreement must be in writing and signed by all Parties.

22.No Representation. The Parties represent and acknowledge that in executing this Agreement, neither is relying upon any representation or statement not set forth in this Agreement or the Severance Pay Agreement.

23.Take All Necessary Further Action. Each party agrees, without further consideration, to sign or cause to be signed, and to deliver to the other party, any other documents and to take any other action as may be necessary to fulfill the obligations under this Agreement.

24.Severability. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provisions or application; and to this end the provisions of this Agreement are declared to be severable.

25.Counterparts. This Agreement may be executed in counterparts.

With the benefit of representation and advice of counsel, the Parties have read the foregoing Severance Agreement and General Release, and accept and agree to the provisions it contains and hereby execute it voluntarily and with full understanding of its consequences. The Parties acknowledge that they are receiving valuable consideration in exchange for the execution of this Agreement, to which they would not otherwise be entitled.

DATED: __________

__________________________________________

DATED: __________

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__________________________________________

Employee acknowledges that Employee first received this Agreement on [date].

_________________________

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Document

Exhibit 10.39

SEMPRA ENERGY
SEVERANCE PAY AGREEMENT

THIS AGREEMENT (this “Agreement”), dated as of January 1, 2023 (the “Effective Date”), is made by and between SEMPRA ENERGY, a California corporation (“Sempra Energy”), and Kevin C. Sagara (the “Executive”).