Business Context and Reporting Period
This Form 10-Q is a combined quarterly report for Sempra, San Diego Gas & Electric Company (SDG&E), and Southern California Gas Company (SoCalGas) for the period ended June 30, 2026. Sempra operates as a holding company with three reportable segments: Sempra California (regulated utilities), Sempra Texas Utilities (equity investment in Oncor), and Sempra Infrastructure (energy infrastructure projects). A significant portion of Sempra Infrastructure's assets, including SI Partners and Ecogas, are classified as held for sale pending the sale of a 45% equity interest in SI Partners to KKR Partners, expected to close in the third quarter of 2026.
Key Financial Metrics (Six Months Ended June 30, 2026)
| Metric | Sempra Consolidated | SDG&E | SoCalGas |
|---|---|---|---|
| Total Revenues | $6,652 million | $2,915 million | $2,915 million |
| Net Income | $2,092 million | $486 million | $532 million |
| Earnings Attributable to Common Shares | $1,833 million | $486 million | $531 million |
| Diluted EPS | $2.80 | N/A | N/A |
| Operating Cash Flow | $3,117 million | $1,120 million | $1,241 million |
| Capital Expenditures (PP&E) | $4,687 million | $934 million | $967 million |
| Total Assets | $115,281 million | $33,068 million | $27,927 million |
| Long-Term Debt | $31,023 million | $11,150 million | $7,550 million |
Material Changes vs. Prior Period
- Revenue: Consolidated revenues decreased by $150 million (2%) compared to the first six months of 2025. This was driven by a $443 million decrease in natural gas revenues due to lower average prices and volumes, partially offset by a $292 million increase in electric revenues from capital projects and transmission operations.
- Earnings: Earnings attributable to common shares increased by $466 million (34%) to $1,833 million. Key drivers included:
- Sempra Texas Utilities: Earnings increased $163 million due to higher equity earnings from Oncor Holdings, driven by new base rates and the Unified Tracker Mechanism (UTM).
- Sempra Infrastructure: Earnings increased $274 million, primarily due to $92 million in unrealized gains on commodity derivatives, $81 million in income tax benefits related to assets held for sale, and $73 million in lower depreciation expense.
- Sempra California: Earnings increased $34 million, aided by higher CPUC base operating margins and favorable FERC transmission settlements (TO6).
- Cost of Natural Gas: Decreased by $278 million (41%) due to lower average natural gas prices and reduced volumes driven by weather.
- Depreciation: Decreased by $60 million (5%) primarily because Sempra Infrastructure ceased recording depreciation on assets classified as held for sale.
Guidance, Outlook, and Risks
- Capital Expenditure Outlook: Sempra expects 2026 capital expenditures for PP&E and investments to total approximately $11.3 billion, an increase from the previous $8.6 billion estimate. This increase is largely due to the delayed closing of the SI Partners sale, meaning Sempra retains a larger share of infrastructure capital costs for a longer period.
- Divestiture Progress:
- SI Partners Sale: Expected to close in Q3 2026. Upon closing, Sempra will deconsolidate SI Partners and retain a 25% equity interest.
- Ecogas Sale: Expected to close in August 2026 for approximately $500 million.
- Regulatory Matters:
- Wildfire Fund: The Wildfire Fund faces potential exhaustion due to claims from other IOUs related to the 2025 LA Fires. SDG&E cannot currently estimate the potential loss from reduced coverage.
- FERC TO6 Settlement: Approved in June 2026, increasing SDG&E's authorized base ROE to 10.28% effective retroactively from June 1, 2025.
- CPUC GRC: SDG&E and SoCalGas filed a petition for modification of the 2024 GRC seeking increased revenue requirements for 2025-2027.
- Project Updates:
- ECA LNG Phase 1: Exported its first cargo on July 7, 2026. However, damage was discovered in refrigerant compressors during planned inspections; substantial completion is now expected in Q4 2026.
- Port Arthur LNG (PA LNG): Phase 1 remains on schedule for commercial operations in late 2027. Phase 2 construction has commenced.
- Risks: Significant risks include the potential exhaustion of the Wildfire Fund, litigation related to the 2025 LA Fires (Palisades and Eaton), construction delays or cost overruns on major LNG projects, and regulatory disallowances of costs.
Investor Verification Checklist
- SI Partners Sale Closing: Verify the actual closing date and final purchase price adjustments for the 45% SI Partners sale to KKR Partners.
- ECA LNG Phase 1 Status: Monitor the root cause investigation and remediation timeline for the refrigerant compressor damage to confirm Q4 2026 substantial completion.
- Wildfire Fund Exposure: Assess the impact of other IOUs' claims on the Wildfire Fund and the potential reduction in SDG&E's asset carrying value.
- Capital Expenditure Execution: Track the $11.3 billion 2026 capex guidance, specifically the portion attributable to Sempra Infrastructure prior to the SI Partners deconsolidation.
- Regulatory Outcomes: Monitor the CPUC's decision on the 2024 GRC Track 3 settlement offer ($621 million revenue requirement) and the petition for modification.
- LA Fires Litigation: Review developments in the Palisades and Eaton fire litigation involving SoCalGas and potential indemnity claims.