SEC Filing | Sempra

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sre-20240630



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)

☒

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

For the quarterly period ended

June 30, 2024

☐

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 Registrant as Specified in its Charter,
Address of Principal Executive Office and Telephone Number

State of Incorporation

I.R.S. Employer Identification No.

Former name, former address and former fiscal year, if changed since last report

1-14201

SEMPRA

California

33-0732627

No change

488 8th Avenue

San Diego, California 92101

(619) 696-2000

1-03779

SAN DIEGO GAS & ELECTRIC COMPANY

California

95-1184800

No change

8330 Century Park Court

San Diego, California 92123

(619) 696-2000

1-01402

SOUTHERN CALIFORNIA GAS COMPANY

California

95-1240705

No change

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:
Common Stock, without par value	SRE	New York Stock Exchange(1)

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

(1) Sempra’s common shares are also registered with the National Securities Registry of the CNBV in Mexico. The registration of Sempra’s common shares with the National Securities Registry does not imply certification regarding the investment quality of the securities, the solvency of the issuer or the accuracy or completeness of the information included in the quarterly report, nor does it confirm acts that may have been performed in contravention of the law. This quarterly report has been filed in Mexico in accordance with the general provisions applicable to issuers and other securities market participants.

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

☒

☐

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

☒

☐

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:

☒ 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

If an emerging growth company, indicate by check mark if the Registrants have 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.

☐

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

Yes

☐

☒

Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.

Common stock outstanding as of August 1, 2024:


Sempra			633,145,875 shares
San Diego Gas & Electric Company			Wholly owned by Enova Corporation, which is wholly owned by Sempra
Southern California Gas Company			Wholly owned by Pacific Enterprises, which is wholly owned by Sempra

Table of Contents


TABLE OF CONTENTS

		Page
Glossary		4
Information Regarding Forward-Looking Statements		7

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	9
	Notes to Condensed Consolidated Financial Statements
	Note 1. General Information and Other Financial Data	29
	Note 2. New Accounting Standards	45
	Note 3. Revenues	46
	Note 4. Regulatory Matters	50
	Note 5. Sempra – Investments in Unconsolidated Entities	52
	Note 6. Debt and Credit Facilities	54
	Note 7. Derivative Financial Instruments	57
	Note 8. Fair Value Measurements	64
	Note 9. Sempra – Equity and Earnings Per Common Share	70
	Note 10. San Onofre Nuclear Generating Station	73
	Note 11. Commitments and Contingencies	75
	Note 12. Sempra – Segment Information	81
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	83
	Overview	83
	Results of Operations by Registrant	83
	Capital Resources and Liquidity	100
	Critical Accounting Estimates	112
	New Accounting Standards	113
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	113
Item 4.	Controls and Procedures	114

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	115
Item 1A.	Risk Factors	115
Item 5.	Other Information	115
Item 6.	Exhibits	117

Signatures		119

This combined Form 10-Q is separately filed by Sempra, San Diego Gas & Electric Company and Southern California Gas Company. Information contained herein relating to any one of these individual Registrants is filed by such entity on its own behalf. Each such Registrant 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 Registrant. No one section of the report deals with all aspects of the subject matter. A separate Part I – Item 1 is provided for each Registrant, except for the Notes to Condensed Consolidated Financial Statements, which are combined for all the Registrants. All Items other than Part I – Item 1 are combined for the three Registrants.

None of the website references in this report are active hyperlinks, and the information contained on or that can be accessed through any such website is not and shall not be deemed to be part of or incorporated by reference in this report or any other document that we file with or furnish to the SEC.

Table of Contents

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
amparo			an extraordinary constitutional appeal governed by Articles 103 and 107 of the Mexican Constitution and filed in Mexican federal court
Annual Report			Annual Report on Form 10-K for the year ended December 31, 2023
AOCI			accumulated other comprehensive income (loss)
ARO			asset retirement obligation
ASEA			Agencia de Seguridad, Energía y Ambiente (Mexico’s National Agency for Industrial Safety and Environmental Protection)
ASU			Accounting Standards Update
Bcf			billion cubic feet
Bechtel			Bechtel Energy 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
CCA			Community Choice Aggregation
CCM			cost of capital adjustment mechanism
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
CNBV			Comisión Nacional Bancaria y de Valores (Mexico’s National Banking and Securities Commission)
CODM			chief operating decision maker as defined in Accounting Standards Codification 280
ConocoPhillips			ConocoPhillips Company
CPUC			California Public Utilities Commission
CRE			Comisión Reguladora de Energía (Mexico’s Energy Regulatory Commission)
CRR			congestion revenue right
DOE			U.S. Department of Energy
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.)
EPC			engineering, procurement and construction
EPS			earnings per common share
ETR			effective income tax rate
Exchange Act			Securities Exchange Act of 1934, as amended
FERC			Federal Energy Regulatory Commission
Fitch			Fitch Ratings, Inc.
FTA			Free Trade Agreement
GCIM			Gas Cost Incentive Mechanism
GHG			greenhouse gas
GRC			General Rate Case
HOA			Heads of Agreement
IEnova			Infraestructura Energética Nova, S.A.P.I. de C.V.
IMG			Infraestructura Marina del Golfo
INEOS			INEOS Energy Trading Limited, a subsidiary of INEOS Limited
IOU			investor-owned utility
IRA			Inflation Reduction Act of 2022
IRS			U.S. Internal Revenue Service

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GLOSSARY (CONTINUED)

ISO			Independent System Operator
ITC			investment tax credit
JV			joint venture
KKR Denali			KKR Denali Holdco LLC, an affiliate of Kohlberg Kravis Roberts & Co. L.P.
KKR Pinnacle			KKR Pinnacle Investor L.P. (as successor-in-interest to KKR Pinnacle Aggregator L.P.), an affiliate of Kohlberg Kravis Roberts & Co. L.P.
Leak			the leak at the SoCalGas Aliso Canyon natural gas storage facility injection-and-withdrawal well, SS25, discovered by SoCalGas on October 23, 2015
LNG			liquefied natural gas
MD&A			Management’s Discussion and Analysis of Financial Condition and Results of Operations
MMBtu			million British thermal units (of natural gas)
Moody’s			Moody’s Investors Service, Inc.
MORENA			Movimiento Regeneración Nacional (Mexico’s National Regeneration Movement)
MOU			Memorandum of Understanding
Mtpa			million tonnes per annum
MW			megawatt
MWh			megawatt hour
NCI			noncontrolling interest(s)
NDT			nuclear decommissioning trusts
NEIL			Nuclear Electric Insurance Limited
O&M			operation and maintenance expense
OCI			other comprehensive income (loss)
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.
Other Sempra			All Sempra consolidated entities, except for SDG&E and SoCalGas
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
PBOP			postretirement benefits other than pension
Port Arthur LNG			Port Arthur LNG, LLC, an indirect subsidiary of SI Partners that owns the PA LNG Phase 1 project
PP&E			property, plant and equipment
PPA			power purchase agreement
PUCT			Public Utility Commission of Texas
RBS Sempra Commodities			RBS Sempra Commodities LLP
Registrants			has the meaning set forth in Rule 12b-2 under the Exchange Act and consists of Sempra, SDG&E and SoCalGas for purposes of this report
ROE			return on equity
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
SEDATU			Secretaría de Desarrollo Agrario, Territorial y Urbano (Mexico’s agency in charge of agriculture, land and urban development)
SENER			Secretaría de Energía de México (Mexico’s Ministry of Energy)
series A preferred stock			Sempra’s 6% mandatory convertible preferred stock, series A
series B preferred stock			Sempra’s 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
SI Partners			Sempra Infrastructure Partners, LP, the holding company for most of Sempra’s subsidiaries not subject to California or Texas utility regulation
SoCalGas			Southern California Gas Company
SOFR			Secured Overnight Financing Rate

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GLOSSARY (CONTINUED)

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 Norte			TAG Norte Holding, S. de R.L. de C.V.
TAG Pipelines			TAG Pipelines Norte, S. de R.L. de C.V.
TCEQ			Texas Commission on Environmental Quality
TdM			Termoeléctrica de Mexicali
TO5			Electric Transmission Owner Formula Rate, effective June 1, 2019
U.S. GAAP			generally accepted accounting principles in the United States of America
VAT			value-added tax
VIE			variable interest entity
Wildfire Fund			the fund established pursuant to AB 1054
Wildfire Legislation			AB 1054 and AB 111

In this report, references to “Sempra” are to Sempra and its consolidated entities, collectively, and references to “we,” “our,” “us” and “our company” are to the applicable Registrant and its consolidated entities, collectively, in each case 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 Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements when discussed together or collectively:

▪the Condensed Consolidated Financial Statements and related Notes of Sempra;

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

▪the Condensed Financial Statements and related Notes of SoCalGas.

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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions about 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 “believe,” “expect,” “intend,” “anticipate,” “contemplate,” “plan,” “estimate,” “project,” “forecast,” “envision,” “should,” “could,” “would,” “will,” “confident,” “may,” “can,” “potential,” “possible,” “proposed,” “in process,” “construct,” “develop,” “opportunity,” “preliminary,” “initiative,” “target,” “outlook,” “optimistic,” “poised,” “positioned,” “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:

▪California wildfires, including potential liability for damages regardless of fault and any inability 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, denials or revocations of permits, consents, approvals or other authorizations, renewals of franchises, and other actions, including the failure to honor contracts and commitments, by the (i) CPUC, CRE, DOE, FERC, IRS, PUCT and other regulatory bodies and (ii) U.S., Mexico and states, counties, cities and other jurisdictions therein and in other countries where we do business

▪the success of business development efforts, construction projects, acquisitions, divestitures, and other significant transactions, including risks related to (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, (iv) obtaining third-party consents and approvals and (v) third parties honoring their contracts and commitments

▪macroeconomic trends or other factors that could change our capital expenditure plans and their potential impact on rate base or other growth

▪litigation, arbitration, property disputes and other proceedings, and changes (i) to laws and regulations, including those related to tax and trade policy and the energy industry in Mexico and (ii) due to the results of elections

▪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

▪the availability, uses, sufficiency, and cost of capital resources and our ability to borrow money or otherwise raise capital on favorable terms and meet our obligations, including due to (i) actions by credit rating agencies to downgrade our credit ratings or place those ratings on negative outlook, (ii) instability in the capital markets, or (iii) rising interest rates and inflation

▪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 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 meeting the demand for lower carbon and reliable energy in California, and (iii) with respect to Sempra Infrastructure’s business, volatility in foreign currency exchange rates

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

▪weather, natural disasters, pandemics, accidents, equipment failures, explosions, terrorism, information system outages or other events, such as work stoppages, that disrupt our operations, damage our facilities or systems, cause the release of harmful materials or fires or subject us to liability for damages, fines and penalties, some of which may not be recoverable through regulatory mechanisms or insurance 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 reduce or eliminate its quarterly dividends due to regulatory and governance requirements and commitments, including by actions of Oncor’s independent directors or a minority member director

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

Table of Contents

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, in our Annual Report and in other reports we file with the SEC.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


SEMPRA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
	(unaudited)
REVENUES
Utilities:
Natural gas	$	1,494	$	1,660	$	3,603	$	6,072
Electric	1,144		1,054		2,200		2,081
Energy-related businesses	373		621		848		1,742
Total revenues	3,011		3,335		6,651		9,895

EXPENSES AND OTHER INCOME
Utilities:
Cost of natural gas	(137)		(311)		(691)		(2,994)
Cost of electric fuel and purchased power	(156)		(88)		(245)		(202)
Energy-related businesses cost of sales	(54)		(81)		(163)		(274)
Operation and maintenance	(1,333)		(1,366)		(2,545)		(2,575)
Depreciation and amortization	(603)		(549)		(1,197)		(1,088)
Franchise fees and other taxes	(156)		(148)		(340)		(340)
Other income, net	30		31		129		72
Interest income	17		17		30		41
Interest expense	(311)		(317)		(616)		(683)
Income before income taxes and equity earnings	308		523		1,013		1,852
Income tax benefit (expense)	130		(175)		(42)		(551)
Equity earnings	433		388		781		607
Net income	871		736		1,752		1,908
Earnings attributable to noncontrolling interests	(146)		(121)		(215)		(313)
Preferred dividends	(11)		(11)		(22)		(22)
Preferred dividends of subsidiary	(1)		(1)		(1)		(1)
Earnings attributable to common shares	$	713	$	603	$	1,514	$	1,572

Basic EPS:
Earnings	$	1.13	$	0.96	$	2.39	$	2.50
Weighted-average common shares outstanding	633,450		630,014		633,135		629,926

Diluted EPS:
Earnings	$	1.12	$	0.95	$	2.38	$	2.49
Weighted-average common shares outstanding	636,279		632,121		635,817		632,185

See Notes to Condensed Consolidated Financial Statements.

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SEMPRA
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
	Sempra shareholders’ equity
	Pretax amount		Income tax benefit (expense)		Net-of-tax amount		Noncontrolling interests (after tax)		Total
	(unaudited)
	Three months ended June 30, 2024 and 2023
2024:
Net income	$	595	$	130	$	725	$	146	$	871
Other comprehensive income (loss):
Foreign currency translation adjustments	(16)		—		(16)		(7)		(23)
Financial instruments	5		(12)		(7)		55		48
Pension and other postretirement benefits	8		(2)		6		—		6
Total other comprehensive (loss) income	(3)		(14)		(17)		48		31
Comprehensive income	592		116		708		194		902
Preferred dividends of subsidiary	(1)		—		(1)		—		(1)
Comprehensive income, after preferred dividends of subsidiary	$	591	$	116	$	707	$	194	$	901
2023:
Net income	$	790	$	(175)	$	615	$	121	$	736
Other comprehensive income (loss):
Foreign currency translation adjustments	11		—		11		4		15
Financial instruments	69		(20)		49		52		101
Pension and other postretirement benefits	2		(1)		1		—		1
Total other comprehensive income	82		(21)		61		56		117
Comprehensive income	872		(196)		676		177		853
Preferred dividends of subsidiary	(1)		—		(1)		—		(1)
Comprehensive income, after preferred dividends of subsidiary	$	871	$	(196)	$	675	$	177	$	852

	Six months ended June 30, 2024 and 2023
2024:
Net income	$	1,579	$	(42)	$	1,537	$	215	$	1,752
Other comprehensive income (loss):
Foreign currency translation adjustments	(13)		—		(13)		(6)		(19)
Financial instruments	48		(16)		32		169		201
Pension and other postretirement benefits	13		(3)		10		—		10
Total other comprehensive income	48		(19)		29		163		192
Comprehensive income	1,627		(61)		1,566		378