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Sempra (SRE) Q1 2024 Earnings Call Transcript Highlights: Strong Start with Robust Financial ...

GuruFocus Research
·4-min read

  • Adjusted EPS (Q1 2024): $1.34

  • Full Year 2024 Adjusted EPS Guidance: $4.60 to $4.90

  • 2025 EPS Guidance: $4.90 to $5.25

  • GAAP Earnings (Q1 2024): $801 million or $1.26 per share

  • Adjusted Earnings (Q1 2024): $854 million or $1.34 per share

  • Annual Dividend Growth Rate: Approximately 7% over the last 10 years

  • Capital Campaign through 2028: $48 billion

Release Date: May 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Sempra (NYSE:SRE) reported a strong start to the year with first quarter financial results setting a positive tone for 2024.

  • The company reaffirmed its full-year 2024 adjusted EPS guidance range of $4.60 to $4.90 and provided a 2025 EPS guidance of $4.90 to $5.25, reflecting a consistent long-term EPS growth expectation of 6% to 8%.

  • Sempra (NYSE:SRE) is benefiting from robust macroeconomic fundamentals supporting U.S. energy demand, particularly in Texas where ERCOT raised its forecasted peak demand significantly.

  • Significant progress in LNG developments at Sempra Infrastructure, with approximately 16 million tonnes per annum of new export capacity under construction, doubling the existing LNG operating footprint.

  • Positive regulatory outcomes in California, including support for updated return on equity and implementation of a fixed charge for residential electric customers to improve affordability and support clean energy goals.

Negative Points

  • Higher net interest expense and lower income tax benefits impacted earnings at Sempra California.

  • The company faces ongoing challenges with supply chain constraints, although some relaxation has been noted.

  • Sempra Infrastructure reported lower transportation revenues and higher O&M costs, partially offset by higher power results.

  • The pause on the FTA permit affects the progress of Port Arthur Phase 2, although it is expected to be temporary.

  • Despite strong demand growth projections, there are concerns about the availability of labor and materials to meet the infrastructure build-out needs in Texas.

Q & A Highlights

Q: Can the existing financing plan support the incremental CapEx for 2025 through 2027, and is there a possibility to utilize SIP balance sheet capacity to offset potential equity needs from incremental CapEx? A: Jeffrey Walker Martin, Chairman, President & CEO of Sempra, confirmed that the company's balance sheet is in good shape and there is no need for additional equity. The company has a plan in place that should allow them to efficiently finance their growth, leveraging their track record of successful financing since 2018.

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Q: How is Sempra planning to recognize the impacts of the Cost of Capital Mechanism (CCM) in California, and is there a customer reinvestment plan? A: Jeffrey Walker Martin mentioned that the impacts of the CCM and related issues would be reconciled in the next earnings call post the rate case decisions, providing clear visibility on the forward earnings impact.

Q: With the latest ERCOT load growth outlook, is the level of system investment by Oncor consistent with this growth, or is there potential for further upside? A: Jeffrey Walker Martin highlighted that the growth in Texas is significant, with expectations to match the peak demand load of California by 2030. He noted that 40% to 50% of this growth could fall within Oncor's service territory, indicating potential for further upside in their planning.

Q: Can you provide more details on the SRP filing and its expected impact over the next 3 years in terms of overall system resiliency? A: Jeffrey Walker Martin and E. Allen Nye, CEO & Director of Oncor Electric Delivery Company LLC, discussed the SRP filing which includes $3 billion over 3 years to enhance system resiliency. This plan is incremental to Oncor's existing capital plan and aims to harden the system against extreme weather, reduce outage times, and improve overall reliability.

Q: What are the implications of the pause on the FTA permit for LNG projects, and how is it affecting Sempra's operations? A: Jeffrey Walker Martin reassured that the pause is temporary and expected to resolve by early next year. He emphasized that this pause only directly impacts Port Arthur Phase 2 and that Sempra's other projects are progressing well with existing permits.

Q: Given the robust load growth opportunities in Texas, are there any supply chain or other constraints affecting the T&D buildout at Oncor? A: Jeffrey Walker Martin and E. Allen Nye addressed concerns about supply chain constraints, noting that Oncor has effectively managed these issues. They have secured the necessary equipment and vendor arrangements for the next few years, ensuring they are well-positioned to execute on their capital plan.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.