Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2026, for Sempra and its wholly-owned subsidiaries, San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas). 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 in the U.S. and Mexico). The filing highlights a strategic capital recycling program involving the planned sale of a 45% equity interest in Sempra Infrastructure Partners (SI Partners) to KKR Partners and the sale of Ecogas.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Revenues | $3,655 million | $3,802 million |
| Net Income | $1,150 million | $919 million |
| Earnings Attributable to Common Shares | $1,037 million | $906 million |
| Diluted EPS | $1.58 | $1.39 |
| Operating Cash Flow | $1,809 million | $1,482 million |
| Capital Expenditures (PP&E) | $2,461 million | $2,336 million |
| Total Assets | $113,518 million | $110,878 million |
| Long-Term Debt | $30,847 million | $28,979 million |
Material Changes vs. Prior Period
- Earnings Growth: Earnings attributable to common shares increased by $131 million (14%) year-over-year, driven primarily by a $116 million increase in Sempra Infrastructure earnings and a $25 million increase in Sempra Texas Utilities earnings.
- Revenue Decline: Total revenues decreased by $147 million (4%), primarily due to lower natural gas revenues ($337 million decrease) driven by lower volumes and prices, partially offset by higher electric revenues ($165 million increase) from capital projects and transmission operations.
- Infrastructure Segment Performance: Sempra Infrastructure earnings surged due to $58 million in asset and supply optimization gains (unrealized gains on commodity derivatives), $36 million in lower depreciation (due to assets held for sale classification), and a $35 million net income tax benefit related to the classification of SI Partners and Ecogas as held for sale.
- Utility Segment Stability: Sempra California earnings remained relatively flat ($720 million vs. $724 million), with higher base operating margins offset by lower income tax benefits and higher net interest expense.
- Cash Flow: Operating cash flow increased by $327 million, supported by higher net income and improved working capital management, while investing cash outflows increased by $526 million due to higher contributions to Oncor Holdings and capital expenditures.
Guidance, Outlook, and Risks
- Divestitures: Sempra expects to close the sale of a 45% interest in SI Partners to KKR Partners for approximately $9.99 billion (subject to adjustments) and the sale of Ecogas for approximately $500 million in the second or third quarter of 2026. Upon closing, SI Partners will be deconsolidated and accounted for under the equity method.
- Regulatory Matters:
- Wildfire Fund: The Wildfire Fund faces potential exhaustion due to claims from recent wildfires (LA Fires). SDG&E cannot currently estimate the range of potential loss if coverage is reduced.
- FERC/CPUC: SDG&E is appealing a FERC order disallowing the California ISO adder for transmission rates. The CPUC has approved revenue requirements for 2024-2027, but SDG&E and SoCalGas have filed petitions for modification seeking additional revenue recovery for capital costs.
- Legal Proceedings: Significant litigation includes pending lawsuits related to the January 2025 Palisades and Eaton fires involving SoCalGas and SDG&E, and wrongful death lawsuits related to a construction incident at the Port Arthur LNG Phase 1 project.
- Project Updates: The ECA LNG Phase 1 project achieved mechanical completion in December 2025 and introduced gas in April 2026, with commercial operations targeted for summer 2026. The Port Arthur LNG Phase 1 project remains on schedule for commercial operations in late 2027.
Investor Verification Checklist
- Divestiture Closing Conditions: Verify the status of third-party consents and regulatory approvals required to close the SI Partners and Ecogas sales in Q2/Q3 2026.
- Wildfire Fund Exposure: Monitor updates on the Wildfire Fund's liquidity and the outcome of investigations into the LA Fires to assess potential liability exposure for SDG&E.
- FERC Transmission Rates: Track the outcome of SDG&E's appeal regarding the California ISO adder and the approval of the TO6 settlement, which impacts future transmission revenue.
- Project Execution Risks: Review progress on the ECA LNG Phase 1 and Port Arthur LNG Phase 1 projects, specifically regarding cost overruns, construction timelines, and the resolution of the Port Arthur construction incident litigation.
- Interest Rate Sensitivity: Assess the impact of rising interest rates on variable-rate debt, particularly for projects classified as held for sale, and the effectiveness of interest rate swap terminations.