DBA Sempra

Today, ladies and gentlemen, welcome to the SEMPRA first quarter earnings call. Today's conference is being recorded. At this time, I turn the conference over to Mr. Donovan. Please go ahead.

Good morning, everyone, and welcome to SEMPRA's first quarter 2022 earnings call. A live webcast of this teleconference and slide presentation is available on our website on the investor section. We have several members of our management team with us today, including Jeff Martin, Chairman and Chief Executive Officer, Trevor Mihalik, Executive Vice President and Chief Financial Officer. Lisa Alexander, Senior Vice President, Corporate Affairs and Chief Sustainability Officer. Justin Bird, Chief Executive Officer of Semper Infrastructure. Faisal Khan, Senior Vice President and Chief Financial Officer of Semper Infrastructure. Alan Lai, Chief Executive Officer of Encore. Kevin Segarra, Executive Vice President and Group President and Peter Wall, Senior Vice President, Controller, and Chief Accounting Officer. Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statement we make today. The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-K and 10-Q filed with the SEC. All of the earnings per share amounts in our presentation are shown on a diluted basis and we'll be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for reconciliation to GAAP measures. We also encourage you to review our 10Q for the quarter ended March 31, 2022. I'd also like to mention that the forward-looking statements contained in this presentation speak only of today, May 5th, 2022. And it's important to know that the company does not assume any obligation to update or revise any of these forward-looking statements in the future. With that, please turn to slide four and let me hand the call over to Jeff.

Thank you, Glenn, and thank you all for joining us today. Against the backdrop of a challenging economic environment, our company remains focused on executing our T&D investment strategy in our core markets. Sempra California is preparing to submit GRC filings at both SDG&E and SoCalGas later this month, focused on providing safe, reliable, and cleaner energy to its 26 million consumers. Turning to Texas, Encore is executing on its record five-year capital plan focused on critical T&D infrastructure investments across its service territory to support strong demographic growth and plans to file its rate case later this month. And at Semper Infrastructure, they're developing a platform that's uniquely positioned to export LNG directly from the Gulf and Pacific Coast to customers in Europe and Asia. The recent tragic events unfolding in Ukraine have highlighted the need for secure access to reliable sources of cleaner energy and simple infrastructure is well positioned to be part of the solution. Our strategy of investing in T&D infrastructure to expand and modernize North America's energy systems across each of our three growth platforms is continuing to drive our record $36 billion five-year capital plan. and it's helped us deliver another quarter of strong financial results. Also in April, we completed $250 million of share repurchases under our existing board authorization. In the last six months, we've returned $750 million of capital to our shareholders in the form of share repurchases, which taken together with our dividend program, demonstrates our commitment to returning value to our owners while remaining focused on investing in and growing our businesses as part of the disciplined capital allocation strategy. Shifting to our quarter results, earlier this morning we reported first quarter 2022 adjusted earnings per share of $2.91. We're also affirming our full year adjusted EPS guidance range for 2022 and our EPS guidance range for 2023. Please turn to the next slide. I'd now like to briefly highlight some of the key strategic advantages of our T&D portfolio. SEMPRA's three growth platforms are strategically positioned in highly attractive and contiguous markets in North America and serve one of the largest utility consumer bases in the United States. Our strong position helps create momentum for critical investments in advancing safety, reliability, and cleaner energy as the global energy market continues to evolve. We also believe our platforms will play an important role in building the energy systems of the future. Please turn to the next slide where I'll turn the call over to Lisa to provide an update on our sustainable business practices.

Thanks, Jeff. I'm pleased to share that we recently issued our annual corporate sustainability report for the 14th consecutive year. Sustainability is central to our strategy, capital allocation, and sustained performance. Throughout our report, you'll see examples of our sustainable business practices, including how we've aligned our portfolio with long-term macroeconomic market and policy trends. Among other factors, our corporate strategy is focused on enhancing safety. climate resilience and affordability, and capturing new investments in infrastructure that support increasingly diversified and cleaner forms of energy. One of the key improvements to the report is our enhanced ESG reporting to address the evolving needs of our stakeholders in light of a constantly changing environment. We appreciate the collaboration and continue to align our reporting to track and deliver on key ESG metrics. A couple of other highlights from the report are reflected on this slide. Recently, SDG&E issued its decarbonization roadmap for California, the Path to Net Zero, which demonstrates our position as a leader in helping the state reach its goal of carbon neutrality by 2045. It's also important to note that safety is foundational to our business. We're continuing the essential work of helping ensure employee and contractor safety and operational excellence. For example, ECHA LNG recently surpassed one million hours worked without a lost time injury. Additionally, customer affordability is another top priority, and we're investing in the necessary infrastructure to help mitigate operating risks and enable a just energy transition. This approach of investing in our business while striving to maintain affordability underscores our values of doing the right thing, championing people, and our unwavering commitment to safety across our operations. Finally, we have a demonstrated history of sound corporate governance and oversight by our board of directors. The report highlights our board's skills and experience in, among other areas, cybersecurity, energy transition, and operational excellence. Our strength in sustainable business practices has been recognized by experts in the sector, including the Dow Jones Sustainability World Index. and we've been named to the list for four consecutive years. Notably, we are the only North American utility company to be so recognized. I'm very proud of the collective effort from each of our businesses and our shared work with all our stakeholders. With sustainability at the heart of our corporate strategy, it provides a clear sense of purpose for our 20,000 employees. Please turn to the next slide where I'll hand the call over to Trevor to provide business and financial updates.

Thanks, Lisa. We made solid progress in the first quarter with a number of positive developments at each of our operating companies, beginning with California. We're excited about SDG&E's completion of the Cleveland National Forest Fire Hardening and Safety Project, which is an example of SDG&E's commitment to making its electric system safer and more reliable. Next, I'd like to remind you of an important decision issued by the CPUC in February establishing a statewide renewable natural gas procurement standard with procurement targets for California's investor-owned gas utilities in 2025 and 2030. This decision reaffirms the role of renewable natural gas in the state, and we view it as a significant step toward the future of cleaner fuels in California. Against that backdrop, SoCalGas continues to execute on its own goal of 20% renewable natural gas delivery to its core customers by 2030. In April, both SDG&E and SoCalGas filed their cost of capital applications to update each of their authorized rates of return, which would be effective for 2023 through 2025. We expect a decision by year end. Regarding SDG&E's off-cycle cost of capital application for 2022, we expect a decision later this year. For more information on the cost of capital filings, please refer to the appendix. Additionally, both utilities plan to file their general rate cases with the CPUC in the coming weeks to update their authorized revenue requirements for 2024 through 2027. Among other considerations, our filings will focus on safety and reliability investments, while also looking to advance the state's clean energy goals. We look forward to working with the Commission and all of our stakeholders on these important regulatory proceedings. Shifting to Texas, it's important to note that in 2021, it was a record year for Encore in terms of the new and active requests for transmission interconnections. highlighting the rapid economic growth in its service territory. This growth has continued in the first quarter of 2022 with a 78% increase in new interconnection requests compared to the first quarter of 2021. Encore's service territory continues to experience strong new commercial development and population increases as demonstrated by Encore connecting approximately 16,000 new premises in the first quarter. Additionally, last month, Encore's Board of Directors approved an update to its 2022 capital plan from $2.8 billion to $3 billion. While Encore's Board typically approves the annual capital plan in October, this off-cycle approval is another example of the robust economic growth in Texas driving investments to support transmission and distribution expansion. Also in March, Encore received approval of its transmission cost of service filing, for the recovery of its 2021 capital investments. Encore also plans to file its rate case with the Public Utilities Commission of Texas later this month. Now let's shift to Sempra Infrastructure, which is focused on making critical new investments that support the energy transition. As part of this strategy, Sempra Infrastructure is working to export LNG directly from the Gulf and Pacific coasts to customers in Europe and Asia. Furthermore, Our U.S.-Mexico cross-border infrastructure business supports the growing integration of North American energy markets. As part of our effort to develop Cameron LNG Phase II, we've successfully reached a number of important commercial and permitting milestones and are now progressing towards the engineering stage of the project. As a reminder, in January, we filed our amendment with the FERC to transition from gas turbines to electric drives. If approved, this would result in a more capital-efficient single train with an estimated 44% reduction in greenhouse gas emissions compared to the previous design. Also, last month, we signed project development agreements and an HOA with the Cameron LNG partners to advance Phase 2 of the project. These arrangements provide the commercial framework for the development of a fourth train as well as increased production capacity through de-bottlenecking activities from the existing three trains. Sempra infrastructure contemplates taking its share of the offtake and selling it under long-term sale and purchase agreements to third parties. In summary, under the proposed arrangement, Cameron LNG Phase II would be fully contracted prior to reaching a final investment decision. In addition, We selected two feed contractors to run a competitive process, which is intended to culminate in a fixed price turnkey EPC contract. The feed process is expected to conclude in the summer of 2023, which would allow us to evaluate taking FID thereafter. We believe we have a strong plan of execution, and this detailed and rigorous feed process will result in better scope, definition, cost, and schedule for the project. Next, as we continue to advance our dual market strategy, we broadened our alliance with Total Energies to advance the Vista Pacifico LNG project and to explore renewable opportunities in North America. The MOU to develop Vista Pacifico LNG contemplates that Total Energies would receive one-third of the project offtake and potentially participate in the project equity. Given the increasing demand for LNG projects, we're continuing to have active discussions with market participants around Port Arthur LNG. As a reminder, the proposed facility at Port Arthur has advanced permitting and design work and is targeted to have total capacity of approximately 13.5 MTPA. Lastly, at Semper Infrastructure, we continue to expect the sale of a 10% interest to Adia for approximately $1.8 billion to close in the second quarter, subject to customary closing adjustments and conditions. Please turn to the next slide. Earlier this morning, we reported first quarter 2022 GAAP earnings of $612 million or $1.93 per share. This compares to first quarter 2021 GAAP earnings of $874 million or $2.87 per share. On an adjusted basis, first quarter 2022 earnings were $924 million or $2.91 per share. This compares to our first quarter 2021 adjusted earnings of $900 million or $2.95 per share. Please turn to the next slide. The variance in the first quarter 2022 adjusted earnings compared to the same period last year can be explained by the following key items. $42 million of lower earnings at Sempra Infrastructure attributable to higher non-controlling interest consisting of $24 million increase as a result of the decrease in our ownership interest of Sempra Infrastructure Partners, net of an increase in our ownership interest in Enova, and $18 million primarily due to an increase in Sempra Infrastructure Partners subsidiaries net income. This was offset by $27 million of higher equity earnings at SEMPRA Texas utilities, primarily due to the increased revenues from the rate updates to reflect increases in invested capital, higher customer consumption, and customer growth. $25 million of higher transportation and terminal earnings at SEMPRA infrastructure, and $22 million of higher CPUC base operating margin, net of operating expenses at SDG&E. Please turn to the next slide. To summarize, we've continued to invest in our record capital plan to help build the energy networks of the future. We're pleased about the strength of our financial performance this quarter, and we'll remain highly focused on executing our strategy and capital program throughout the remainder of the year. With that, this concludes our prepared remarks. We'll now stop and take your questions.

Thank you. Ladies and gentlemen, if you'd like to ask a question, you may do so by pressing star 1 on your telephone keypad. Please make sure that your speakerphone is turned off so your signal can be read by our equipment. Star 1 to ask a question. We'll pause just a moment to give everyone an opportunity to signal for questions. We'll take our first question from Char Porreza with Guggenheim Partners. Please go ahead.

Hey, guys. Good morning.

Good morning, Char.

Just, Jeff, starting off with the LNG updates today, can you just maybe further elaborate on the Cameron 4 timing updates? Obviously, part of the limiting element was the engineering piece. Does the latest update potentially eliminate some of the future timeline risk? Is this kind of the last FID delay we should expect?

Shara, thank you for the question. I've got some feedback from some other investors that may have been portions of the script that I need to make sure that we read. Just give me one second to clean up the script, and we'll come back to your question, okay? Okay. The part that I'd like to review for the investment community is, against the backdrop of a challenging economic environment, our company remains focused on executing our T&D investment strategy in our core markets. Semper California is preparing to submit GRC filings at both SDG&E and SoCalGas later this month, focused on providing safe, reliable, and cleaner energy to its 26 million consumers. Turning to Texas, Encore is executing on its record five-year capital plan, focused on critical T&D infrastructure investments across its service territory to support strong demographic growth and plans to file its rate case later this month. At Semper Infrastructure, they're developing a platform that's uniquely positioned to export LNG directly from the Gulf and Pacific coast to customers in Europe and Asia. The recent tragic events unfolding in Ukraine have highlighted the need for secure access to reliable sources of cleaner energy, and Semper Infrastructure is well-positioned to be part of the solution. Our strategy of investing in T&D infrastructure to expand and modernize North America's energy systems across each of our three growth platforms is continuing to drive our record $36 billion five-year capital plan and has helped us deliver another quarter of very strong financial results. Also in April, we completed $250 million of share repurchases under our existing board authorization. Now, in the last six months, we've returned $750 million of capital to our shareholders in the form of share repurchases, which, taken together with our dividend program, demonstrates our commitment to returning value to our owners while remaining focused on investing in and growing our businesses as part of a disciplined capital allocation strategy. Shifting to our quarter results, earlier this morning we reported first quarter 2022 adjusted earnings per share of $2.91. We're also affirming our full year adjusted EPS guidance range for 2022 and our EPS guidance range for 2023. So these remarks should be read together with the remarks we made earlier this morning. And turning back to you, Char, Based on the nature of the question, I want to agree with you. Look, we're very excited about the Cameron Phase 2 project. There was a flurry of activity in the first quarter that I think gives us a lot more confidence today about that project's ability to move forward. We have estimated that by putting together two competitive EPC contractors, that additional time will improve the scope. It will improve the definitive detail around the engineering and help us have a better project in the long run. And I oftentimes use what is probably a poor metaphor, Char, when we refer to golf. The goal is not to play 18 rounds of golf in two hours. The goal is to basically shoot the lowest possible score. And we've been in this business for just over 15 years. And when it comes to executing an LNG project, All the planning up front makes a tremendous amount of difference. So right now we're estimating that that EPC work will come together in the summer of 2023, and soon thereafter we'll take FID. So I think the key takeaway really is, as you described, we've added a lot more detail to our execution plans, and the probability that this project goes forward has increased significantly in the last quarter.

Perfect, perfect. And then just, Jeff, just lastly, can you maybe just address the project development pipeline? I mean, this optionality means, I mean, in our viewpoint, more now than it ever has given sort of the issues you highlighted, you know, happening overseas in your prepared remarks, right? Maybe starting off with sort of the ability to deliver more capacity. Is there demand for Vista Pacifico and, more importantly, for Port Arthur? Is the engineering and permitting in relatively advanced stages required? Given the history of the projects, would you be able to move faster to address the market demand in terms of setting future FIDs? Thanks.

Yeah, it's a great question. Let me try to take it in a couple pieces here. I'll start at the very top and say that we're one of the few developers in the U.S. LNG community that has a shot at delivering up to 30 million tons per annum of new capacity to the marketplace. And what I'd like to do, Char, is let me just give you a quick overview of what we're seeing in the macro environment for LNG, and then I'll pass it to Justin. And Justin, I think it would be helpful if you just start on slide 13 and walk the audience through your entire development pipeline. But for those of you who have been following our company for the last three to five years, we've often discussed our forecast of a second wave of U.S. LNG development that would be necessary by the middle of this decade. And when you have properly functioning markets, they tend to pull forward both risk and opportunity. I think that's what we're seeing today. In this case, with the tragic war in Ukraine, the sanctions against Russia highlight several considerations. First, today Europe benefits from about 18 billion cubic feet per day of Russian gas. And if you were being asked to replace all that and you convert that to capacity, that would be 127 million tons per annum of new capacity that's required to supply Europe. That would be more than double all of the existing plans that are on the table in the United States LNG community. So a couple highlights as I've thought about it is, a clear takeaway is that energy security is a foundational component to transitioning toward a clean energy future. The second takeaway is European markets are clearly net short LNG in the near and medium term, and that is clearly showing up in a record strip of foreign prices, forward prices all across the curve. And finally, strong growth continues in Asia, and over the long term, I want to emphasize that Asia remains the number one growth market for U.S. LNG. With these considerations in mind, I believe the US LNG community is in the best position to respond to the needs of both markets, and that's why we're actively pursuing commercial arrangements with both European and Asian buyers, and that's why we've had a high number of market announcements in the last quarter. And Justin, if you don't mind, let's just walk through slide 13 and give a comprehensive overview of the development we have underway.

Thank you, Jeff. Thanks, Char. First off, to echo Jeff's thoughts, we're very pleased with the significant progress we've made on our LNG projects over the last quarter. Cameron phase one is in operations and we're proud to say is producing over 100% of the volumes that we expected at this time. ECHA phase one, again, three million tons per annum, Brownfield, located just south of San Diego. Only project to take FID in 2020. That project is on time and on budget. TechNeep is doing a great job there. As Lisa mentioned in her prepared remarks, we have achieved over one million work hours without a recordable safety incident. We're very proud of our safety record. and we remain on track to begin producing LNG by the end of 2024. Turning next to phase two at Cameron, again, very exciting brownfield expansion project, real cost advantage in the market. We talk about an additional approximate seven MTPA, one of which comes from the de-bottlenecking, and approximately six comes from the additional train. We have made progress on all three of the milestones that I mentioned in prior calls. On the permitting front, FERC has published a schedule that shows they expect to issue an environmental assessment in December, which would hopefully give us the permit in the first quarter of 2023. On the commercial side, we announced a project development agreement and an HOA with our partners. We are making progress on marketing those volumes that we will take and we should expect progress in that in the next quarter. On the engineering side, as Jeff mentioned, we are running a competitive feed process and we do expect that to be completed in the summer and as Jeff mentioned, we think that process will ensure that we have enough scope, definition, and engineering work to take FID. Moving next to Vista Pacifico. Here we're targeting up to 4 million tons per annum, and we recently signed the MOU with CFE in support of the project and announced a broadening of our strategic alliance with Total, who is a looking at one-third of the project's offtake and potentially a minority equity stake. Still an early-stage project, but has a strong competitive advantage as a Pacific outlet to U.S. natural gas to Asia. Port Arthur, again, the largest project in our portfolio with 13.5 million tons per annum in Phase I. As you mentioned, because of its scale and advanced permitting status, we're seeing a significant renewed interest in Port Arthur, and we're advancing commercial discussions with a number of partners and key off-takers. Also on the list, which again is not included in the close to 30 million tons that Jeff talked about, is ECHA Phase II. We think this is a project that will make sense, and we're working on looking at opportunities there to bring in gas and to optimize the design of that project. So, again, I think it's been a tremendous quarter. We've made tremendous progress on LNG. I'm very proud of that business line and what they've achieved.

Terrific. Thank you, guys. That more than addressed my question. Appreciate it. Thanks, Jeff. Bye, guys.

Thanks a lot, Char. Thank you.

We'll take our next question from Durgesh Chopra. With Evercore ISI, please go ahead. Hi, Jagesh.

Hey, good morning, Jeff. Thank you for taking the question. Hey, just obviously a robust pipeline of, you know, LNG projects here. Maybe just, you know, maybe this is probably in Trevor's bucket, but as we think about financing of these projects, you know, should we be thinking about project debt, minority equity interest, and minimum equity at the central level? That's part one of my question. And then part two, would you consider, you know, further sell down of the, you know, the SIP stake in order to fund this kind of robust opportunity, which is clearly multiples of billions of dollars over the next few years? Thank you.

Thank you, Durgesh. And I'll start with part one of your question first. I think if you go back over the last, four or five years, we've been successful in growing our earnings per share at a CAGR of 11%. And to do that, we really reshuffled our portfolio, sold down non-core assets, and in the last 18 months, you've seen us consolidated our unregulated business under one platform. And the reason we formed Semper Infrastructure was we thought there was an opportunity to do three things, simplify the business model, consolidate those cash flows and create an investment-grade balance sheet, and bring in and diversify the capital structure with a view toward highlighting value for owners. So we've notched that in the Aadia transaction at roughly an $18 billion equity value. In terms of sell downs, I like to get the Aadia deal done first before we consider that. But right now we have such a wonderful slate of growth in front of us. We're very happy with our current three platforms and we're very happy to own 70% of that business going forward. And as we go forward in time, we'll always work with our board of directors to look at opportunities to continue to optimize that business. But in terms of financing, one of the benefits of consolidating the E-Innova platform with LNG and establishing an investment-grade balance sheet is that business is now self-funded. And I thought it would be helpful, Faisal, as the CFO of Semper Infrastructure, if perhaps you could give them an example of how you think about financing these projects on your own balance sheet.

Yes, sure. Thanks, Jeff, and good morning, Dhrigesh. So I think you'll recall in the past that we've talked about sort of all the potential sort of levers or sources of capital that we can pull in to finance these projects. So, you know, first and foremost, you know, project finance is one of the key areas we look at as we're signing these 20-year contracts with high credit-worthy counterparties. I mean, PF can basically supply 50% to 60% of the capital we need. Partner capital, we've talked about that. You've seen us execute on that with Cameron and at ICA. So if you think about 10 to 30% of inequity sell down in some of these projects, that pulls in another slug of capital. And then when you think about what Jeff just talked about, our retained cash flows, we have strong cash flows off our existing assets. those retained earnings definitely can be plowed back into the equity needs for the project. We also have the ability to work with our partners in capital calls. So I think we have a lot of diverse sources of capital to pull into these projects. The other thing, just to give you an example of how we're looking at Cameron, so as we think about financing that project with our partners, If you remember, Cameron has this amortizing debt capacity at the project, and so that in itself is creating balance sheet capacity as we go through each year. So, you know, roughly call it almost half a billion dollars of debt is being amortized on a proportional basis to us. So that gives us the ability to go in and create debt capacity there and finance the expansion. So that just gives you an example. But, you know, suffice to say, we've got a lot of different areas we could pull capital out and still maintain, you know, SEMPRA's 70% ownership in the infrastructure. Thank you, Faisal.

Thanks a lot for that detailed response, Faisal. Thank you. Just one quick follow-up. You know, in your MOU with Total, you know, you guys talked about pursuing, like, renewable opportunities, including offshore. Maybe just can you talk to that a little bit? The reason why I ask that question, obviously, is one of your peers. Utilities is kind of in the market for sort of dropping their offshore projects. So just curious as to what you're targeting there. Is that international offshore, domestic offshore, and any other color you could provide? Thank you.

Sure, I will frame this for you and pass it to Justin for the specific response. But you recall that we built roughly a 3,000 megawatt gross portfolio of renewables that we transacted on in 2018 and 2019. And this is a business we know very, very well. Our focus in the renewable space is on selective market opportunities where we think we can produce the right types of hurdle rates. This is a very, very margin-constrained business from SEMPR's perspective. So as we think about a $36 billion capital program, our first dollars go into funding our utility growth. And inside Justin's business, we'll be very selective about the renewable opportunities that we do pursue and making sure we do it in a capital-efficient way with partners. But maybe, Justin, you could talk about your clean power business. and why the Total MOU has a positive opportunity for us.

Yeah, thank you, and thanks for the question, Dargash. Yeah, the MOU with Total, and again, there were two. One covered Vista Pacifico. The other covered looking at certain renewable opportunities in North America. Really covers two aspects. One is Total's potential participation in some of our future renewable projects in Mexico that could service CalISO, as well as Total asking us to look at their opportunity for offshore wind that would serve as California. So as part of our broad strategic alliance with Total, look, it's a great relationship. We hope to expand it beyond LNG and other areas. And really, these are the first opportunities we're looking at. So clearly, you know, we would look to them to potentially partner in Mexico, and I think they see the value that we can bring in a renewable project into California.

Got it. Sounds like this is more, you know, this is more California and Mexico than over in the East Coast. Okay. Thank you so much, guys. I much appreciate it. Sorry. Go ahead, Jeff. Thanks.

No, I was going to say thank you. Your summary of that is accurate. It's California-Mexico focus.

Got it. Thank you so much, guys. I appreciate you taking the time and answering my questions. Thank you.

We'll take our next question from Steve Flishman with Wolf Research. Please go ahead.

Yeah, thank you. Appreciate it. Morning, Steve. I won't ask you to go through all the LNG projects again, but... Just a follow-up on Cameron. So in terms of realistic timelines for both the – for first the de-bottlenecking and then the full expansion, what are realistic kind of timelines for a startup?

Sure. I'll pass that to Justin. You can – provide your response.

Yeah, so thanks, Steve. So on the de-bottlenecking, we are working through the engineering process with our partners. And remember, de-bottlenecking may be a series of changes that we make over time. So that engineering, we're working through that. We expect that to really continue kind of through late summer, fall, and then we'll figure out the timeline for bringing those things on. Really, that is about, one, optimizing the existing production, not interfering with that, and then finding cost-effective ways to increase that capacity to that approximate one or perhaps more. In terms of train four, again, I think we gave a detailed outline as we move toward FID. And then when we get to the construction period, it's gonna be the typical periods that you see, kind of that four to five year period. And then that's where we are for Cameron phase two. As Jeff mentioned, part of the work we're doing and why the feed process, we're definitely gonna let that run its course to the summer, is that we do think we will get increased certainty on execution plans a better sense of the scope of work, the timing of the work, and frankly, reduced costs.

The only point that I would clarify for you, Steve, too, is that these projects tend to have something in the neighborhood of a 48-month to 50-month window for construction. So once you take FID, and secondly, Justin, convey that accurately, the de-bottlenecking, because it will be a series of ongoing projects which are conducted concurrent with construction, you'd expect to see the benefit of that 1 million ton per annum that we're targeting start to show up across multiple periods between 2024, 2025, and 2026. Thank you. And just on the buyback update, so

How should I think about the buybacks that have been done relative to, I think on the last call, you had kind of a billion-dollar placeholder in 2023. Is some of this moving forward, some of that?

Yeah, sure. I would say, taking you back, Steve, to the Q4 call, you recall that we had completed about $500 million of share repurchases in December of 2021 and in January of 2022. And as part of that, we committed to a long-term EPS growth rate of 6%, 6% to 8%. I cited it earlier on the call that over the last five years, we've gone at roughly 11%. in terms of our EPS, so I'm quite comfortable reaffirming our expectation that we are quite comfortable growing this business long-term between 6% and 8%. But we indicated on the Q4 call that we would complete a billion-dollar share repurchase before the end of 2023, and I would just say at this point nothing's changed as it relates to that forecast. We've simply brought forward $250 million of that targeted amount. The key takeaway from my perspective and from Trevor's perspective is we're excited to be executing our $36 billion capital program, and we view our dividend program, Steve, together with these periodic share repurchases as a great way to return value to our shareholders along the way.

That's great. And just one follow-up to that question. So it was just when you look at your buybacks, you bought a lot of stocks. at a much lower price, which is great. And then this last $250 million actually was even done at a higher price. Is there any messaging to take from that that, hey, even at $169, you have a certain view of the stock value, or was it just more you had the cash sitting around, or just wondering if there's any message from that?

No, I think there's a very clear message. And you recall back when our stock was trading at a different price in Q2, Q3, Q4 of last year, we've been fairly consistent about our view of our ability to grow this business at a rate faster than our peers. And in combination, we think we have a very unique growth and income story. We thought that we were undervalued in Q4, and that's one of the reasons we put some dollars to work in the share repurchase program. And if you look at where we were trading relative to the peer group in Q4 of last year, we're just as deeply discounted at this moment in time to our peer group as we were back in Q4. So there's a strong view on this management team that this stock should trade consistent with the peer group or better. And that's one of the reasons we're very comfortable going in the marketplace to continue our share repurchase program.

Thank you very much.

Thank you, Steve.

We'll take our next question from Nicholas Campanella with Credit Suisse. Please go ahead.

Hey, how's everyone doing? Thanks for taking the time. Good. Good morning. Hey, good morning. Good morning. I hate to just belabor it on the LNG stuff. I just wanted to just make sure we had the project priorities right in terms of you have a lot out there. We've seen some of your competitors signing various purchase agreements, and I know you're working through multiple projects and Cameron's prioritized, but where do you just feel that you have the best momentum right now, and where should we be looking at? What projects should we be looking at for further announcements in the near term? Thanks.

Yeah, thank you for the question and we don't mind providing additional color. I think that, you know, I think I just want to convey that we've been in this business for close to two decades and we understand what it takes to get a project done and very pleased that we got ECA phase one moving forward in Q4 of 2020. We've made a lot of progress recently on all of our projects, but the ones I would focus on is, number one, it's really, really important to this management team and our board of directors that we execute our existing capital campaign. And our largest project today is underway at Eco Phase 1. So our top priority is to execute on the existing FID that we took on that project. Secondly, we spent a lot of air time in the last three or four earnings calls talking about Cameron expansion. It truly has a cost advantage in the marketplace. So the ability to basically add one train and effectively with de-bottlenecking 7 million tons per annum is a remarkable opportunity against the backdrop of the world being short LNG, particularly at this moment in time in Europe. And then beyond that, we are clearly looking at all the different opportunities around Vista Pacifico and Port Arthur. But I think the thing I always want to convey is we are very, very disciplined. And I gave a poor goth analogy earlier. But from our standpoint, it's not always a race. We think that there's a lot of value and there's a lot of customers in the marketplace that want to work with a company that has a strong balance sheet and a strong track record and is focused on doing things the right way. So we think we have a unique position in the marketplace. We don't think about it from a speed perspective, but we think about it from executing with deliberation and the right values to make sure that we can deliver the best risk-adjusted cash flows to our investors. So right now, the focus is making sure we execute on our existing construction program and that we run headlong toward Cameron expansion with a great group of partners. As Justin indicated earlier, we expect to have that project fully contracted or substantially so by the end of Q2.

Got it. Thank you very much. That's helpful. I guess just like Jeff, a broader kind of business mix and strategy question. You took over three to four years ago. You talked a lot about repivoting the company to North American infrastructure. That now seems like it's complete. The stocks responded. And I guess just, you know, how are you thinking about the portfolio today? Are there businesses that you want to be bigger in and from an inorganic perspective specifically? Thank you.

Sure. You know, I think I made a comment earlier that we feel very good about our three growth platforms. And I'll tell you, one of the observations that we've had in our strategy discussions with our board of directors was very early in the first half of the pandemic of 2020, we realized the value in this sector of scale, right? So as you think about the clean energy transition, you think about the GRC programs that are going forward. In our company here in California and Texas, There's no question that putting E-Innova together with LNG and circling some EBITDA figure of around $2 billion was the right move with an investment grade balance sheet. So I think one of the things we're benefiting from right now is we're in the best markets that are experiencing tremendous growth and we've been able to put together three businesses at scale. So when we came out with our 6% to 8% long-term growth rate, we have a very bullish view of what we can accomplish, and it's really around the market position and scale that we have across all three of these areas. And right now, as you think about inorganic opportunities, I think we can effectively take those off the table. We've got a $36 billion capital program, and our job is to execute that with discipline, and I think we're going to be in a position to outperform.

Thanks a lot. Thank you.

We'll take our next question from Jeremy Tonet with J.P. Morgan. Please go ahead.

Hi. Good morning.

Good morning, Jeremy.

I just wanted to come back to the LNG side a little bit more, if I could. And just wanted to get your thoughts, I guess, on the depth of the long-term contract market out there. We've seen Schneer, Global Venture, recent months kind of signed these 15, 20-year contracts. We saw energy transfer get over four MTPA in the past month or so here, and kind of that same zip code. Do you see the depth of that market improving versus where it was before, given what we're seeing for energy security needs, as you outlined there? Just wondering, you know, is the market there for the contract length that you guys want and the risk profile that you want? How do you see the market today there?

Yeah, I'll make just a quick comment, and I'll pass it to Justin, and maybe, Justin, you can update them on the type of conversations you're seeing in terms of contract tenor. But I just returned to one of the things I said in my earlier remarks, which is there's no question that everyone now can see what we've been forecasting, which is this net short position in Europe. And the magnitude of what is required to back out 8 billion cubic feet per day of gas is a significant number of new capacity that will exceed even what the US LNG community can provide. But Asia is a larger opportunity. So I think if you look at the opportunity in both markets, There's going to be a real demand near-term and long-term for more LNG facilities, and that impacts the pricing environment and the opportunity to have longer tenured contracts. But, Justin, maybe you can provide a little bit of color on what the conversations you're having.

Yeah. Yeah, thanks, Jeff. Yeah, Jeremy, yeah, the conversations we are having are around the types of contracts that we look for at SEMPRA, which, again, to your point, is long-term with creditworthy counterparties. I think you are accurate. There has been a dramatic shift in the market in the recent days. Specifically, we've seen a significant amount of long-term contracts You know, you saw, well, I think one in February, I think there's around seven in March, and most recently there's been one in April. So yes, you are seeing a lot of parties, given the volatility in both TTF and JKM, and frankly the high forwards, you're seeing a definite renewed interest in parties willing to go long-term, and those are the conversations that we are having.

Got it. That's helpful. So the type of contracts we're seeing signed out there, those are the types that would be sufficient for you guys to underpin, I guess, future, you know, moving forward with the project at this point. Yes, that's correct. Got it. Okay. And then maybe just want to pivot towards the offshore win for a moment here. Just how to think about that, how that fits into the portfolio, your queue of projects. Just wanted to see how high of a priority that is at this point.

I would say it's one of our lowest priorities.

Got it. That's helpful. Thanks. And just the last one, if I could, thinking about the state's RNG goals, there are also ongoing heat pump efforts seemingly in some competition here. Just wondering how you think about the balance of electrification versus RNG in decarbonized in California at this point.

Yeah, great question. I will tell you that we've got a lot of folks inside of our company that are focused on both opportunities around green molecules and green KWs. But I think what we view is there's going to be a requirement that we transition in an orderly way toward increasing clean resources. And we're very, very bullish on electrification. I hope we get the chance for Al and I to update you on some of the really large-scale electrifications taking place in the Texas marketplace. But I would also tell you there are some hard to decarbonize areas in American society, largely heavy industry, heavy transportation, some of the maritime and aviation uses of energy. So in California, there's growing recognition by the regulator and across all market participants that there's gonna be a strong trend toward electrification, but there's really a convergence between the need for green molecules to power some of that electrification and to help decarbonize. So I think the commission deserves a tremendous amount of credit for taking a forward looking view on renewable natural gas as an example. You may recall that over three years ago, we set a target for 2030 of 20% of our core customers being served by RNG, and that was well before this ever came on the radar screen for our regulator. And now that they've adopted targets that progress over time up to closer to 12%, We feel like we're in a great position. I think we came out at around 4% penetration in our core customers at the end of 2021, and we continue to be optimistic about executing against some of the expectations of our regulators. So we firmly believe there's a role both for cleaner molecules and for cleaner electrification, and we expect to see both of those work in tandem going forward.

Got it. That's very helpful. I'll leave it there. Thanks. Thank you very much.

We'll take our next question from Anthony Crado with Mizzou. Please go ahead.

Good morning, Jeff.

Good morning, Trevor.

Good morning. Hopefully two easy ones. One is that I just want to make sure I understand fully. Is the LNG growth platform funding, even though projects maybe have been accelerated or potentially accelerated, is that still a self-funding model for the LNG growth platform?

it sure is a self-funding model. And I think it goes back to a couple of comments I've stitched together this morning, which was, we think one of the great lessons from the COVID economic environment was the importance of scale. And scale will be even more important when we think about what we need to accomplish across all three platforms. and putting together those two businesses with an IG balance sheet. Our clear intention was to make sure it's a self-funded platform, and Faisal gave some examples of how I expect to do that using project-level equity, internally generated cash flows, and project finance.

Great. And then just lastly, hopefully an easy follow-up, if I think of all of the questions or most of the questions I could say on the call, they're probably mostly related to Maybe the smallest piece of Semper's overall business, Semper infrastructure. Is that a good or bad thing? Is it that the work that management has done over the last two years where there were more questions than maybe the core business like Semper California or Semper Texas, that has transitioned to the smaller business. Do you view that as a good or bad thing?

I think it's a positive, let me explain why. Roughly 80% of our earnings mix comes from what we think are some of the best utility platforms in the United States. So our ability to basically grow rate-based off of a $42 billion number at the end of last year at 9% going forward in our five-year plan is a remarkable opportunity. But our ability to basically exceed expectations and grow this business faster than we forecasted really turns to our ability to grow, how we grow SEMPRA infrastructure, right? So we're at a moment in time where across all three platforms inside of Justin's business, That's the LNG and net zero solutions business, clean power, and our energy network business. That has the chance to provide some really unique additive growth to our portfolio. So we talk a lot about our growth in the past. We've got a very strong portfolio of bond-like returns from our California platform and our Texas platform. But our opportunity to exceed people's expectations is going to rely a lot on how they execute across their portfolio and SEMPRA infrastructure.

Great. And then just lastly, I think, Jeff, when you describe the transition that companies have over the years, selling South America, investing in Sempra Texas, you mentioned the word contiguous. How important is that towards the Sempra platform going forward?

You may remember, you know, 15 or 20 years ago, a lot of M&A in our sector was limited to businesses that were actually contiguous. That's no longer a requirement. But one of the things we think about from our strategy is how do we extract synergies and efficiencies across all three platforms? And at Sempra, the value of the parent company is we focus on people, process, and technology to help drive the results across all three platforms, and having a contiguous platform is is really helpful. And I'll tell you, the way I view it is, a lot of people broadly diversify their businesses. They're in different markets and different jurisdictions, but they fail to have the discipline to make sure they're extracting the benefits of diversification. In our case, we think the best way to manage risk is to go deeper in the markets that are most important. So when you think about California as the fifth largest economy in the world, Texas has moved from number 10 to number 9 and Mexico is currently number 15 and forecasted by 2040 to be number 7 in the world. What we want to do is we want to have great regulatory relationships in those marketplaces. We want to understand all the market fundamentals and we want to make sure that we're putting together a capital allocation strategy that allows us to extract the best risk-adjusted opportunities in those markets. So one of the things I've talked about before is We've grown this business over the last two decades at a 7% EPS CAGR in an industry that has grown over the same period of time at 3%. And that's not just because we're better managers. It's because we're in the right market. So this focus on being deep and committed to extracting efficiencies in each of our core markets and contiguity as part of that is part of our winning strategy, we believe.

Great. Thanks for taking my questions, and congrats on a good quarter. Thanks a lot. I appreciate it.

We'll take our next question from Ryan Levine with Citi. Please go ahead.

Good morning, Ryan.

Thanks for taking my question. Hi. What factors influence the scale and sizing of this in Pacifico from an MPTA perspective?

Thank you. I would just say that we're really excited about both ECA Phase I, which is under construction, and Vista Pacifico. They both really leverage the same common resource of Permian gas, and we have a straight shot through two different pipeline systems to support Vista Pacifico. I had the opportunity to have dinner with the President of Mexico and John Kerry a couple weeks ago in Mexico City, and the topic of that conversation, Ryan, was how we can move Vista Pacifico along at a faster pace. In Mexico, they understand the value of being able to export some of their natural resources, particularly high sulfur oil, but they also want to make sure that they raise their marquee status as an exporter of LNG. So I'm pleased with the type of support we have across the government inside of Mexico to support that project going forward. But, Justin, maybe you could talk about how you're thinking about the capacity at Vista Pacifico. Yeah.

Ryan, as Jeff mentioned earlier, Really, Vista Pacifica will source gas from the Permian. Some of the sizing revolves around how much gas can be delivered at what rate there. We're also looking at clearly optimizing the design of the economics. It could be that we do it in two phases as we get additional gas transportation capacity. But again, early stage development, we will optimize the size to create the best risk-adjusted returns.

Thanks. And then one on financing plans, it looks like most of your debt is more fixed rate in nature, but curious how you're thinking about managing the more floating rate debt both in your current portfolio or current capital structure and then as you look to grow these different businesses.

And are you focused more on the LNG side or you're talking about across the enterprise, Ryan?

More within SIP, but to the extent there is and the other decisions, that'd be helpful.

Sure. Faisal, please take that.

Yeah, sure. Hey, Ryan. So you're looking at sort of proportional debt across separate infrastructure of, you know, close to roughly $9 billion. A lot of it is fixed rate debt and some of the debt we've, you know, that was floating rate we've swapped to fixed. But, you know, we actually don't have a tremendous amount of floating rate exposure. So, and I think, you know, as you've seen the move in interest rates, you know, we haven't really seen a big impact to the bottom line. So, you know, I think as we move forward with our projects, you know, we'll look to see what the balance is between floating and fixed. But right now we feel like we're in a pretty good position.

Okay. Thank you. I think some of those hedges expire in the next few years. Is the intention to continue to do swaps to lock in the fixed rates?

I think, so what we have is we have a lot of amortizing debt at Semper Infrastructure. So I mentioned Cameron on a proportional basis. We also have our pipelines in Mexico, the ones that we have joint venture agreements with, those also have amortizing debt. So naturally what's going to happen is that debt rolls off, those swaps expire. So that's kind of probably what you're seeing. But other than that, we don't have any sort of floating rate debt that's not swapped for the tenor of the security.

Appreciate the cover.

Thank you.

Thank you, Ryan.

We'll take our next question from Julian DeMolian-Smith with Bank of America. Please go ahead.

Hey, afternoon, morning. How are you guys?

Hi, Julian.

Hey, excellent. Hey, Jeff, just a quick question here going back to Port Arthur, just focused on that. How do you think about the opportunity on permitting to pivot to electric or not? I mean, basically the thought there is, is it desirable to go back and look at that from an electric perspective, just given the GHG benefits and sort of what that means from a contracting perspective? Obviously, you know, cognizant of your other decisions here. And maybe you could speak a little bit to the timeline on that asset as well, considering where you stand.

Right. If you recall, just by way of analogy at Cameron, one of the things we did in concert with our partners was look at opportunities for us to lower our overall greenhouse gas footprint at Cameron, and that caused us to shift our filings to move to an electric drive for Cameron Phase II. We're looking at things very similarly at Port Arthur. I think one of the unique advantages Port Arthur has is, number one, its scale and the degree that it's fully permitted across almost every aspect of the development currently. So I think the expectation would be that electric will probably be part of phase two at Port Arthur LNG, and given the level of interest we have in phase one, we would proceed as we've currently filed.

Got it. And considering that you don't need the updates on the FERC side, timeline there, obviously you've got this engineering work with C4 pushing into 23. Any kind of similar, you know, timeline that you'd like to offer on Port Arthur?

We currently haven't put out an expectation for FID at Port Arthur. I would say that we are having conversations with more than 20 different counterparties related to that project, and the interest is very high. But again, I think I've said it two or three times on this call, we're really committed internally to take a measured approach and be very disciplined. And if we can get that project in a box with really, really solid risk-adjusted cash flows, it's the type of project that could move forward in our timeline.

Sorry, Jeff. I didn't mean to push too much. I know we're all chomping at the bit for free to succeed here. I get it. Quick last question. I mean, seriously. Quick last little detail if I could throw it in there. Encore. We haven't talked about it enough here. Prospects on settlement here, pre-settling, however you want to talk about that in the context of filing later this month, you all have done remarkably well there over the years.

Sure, I think this might be an opportunity, if you allow me, I think we can comment on the rate case and maybe give a little bit of visibility into the growth we're seeing there. I know Alan had a remarkably positive press release that put out that tracked a lot of that. Let me just start by saying, before I pass it to Alan, Trevor and I were in Dallas last week for the Encore board meeting. We could not have been more pleased with the comprehensive nature of the growth they're seeing on their system. As you know, in the market, they say the comment about don't fight the tape. There is a strong tape in Texas toward further growth. They raised their capital program from 2022 from $2.8 billion to $3 billion. And, Alan, maybe perhaps we could do two things. Maybe you could walk folks through some of the growth you're seeing on the system, because I think your examples would be helpful to people, and then get right to Julian's question about how we think about settlement, which has been the tradition at Encore as you look at regulatory filings like this.

Yeah, sure, glad to. Julian, thanks for the question. Jeff, from the growth perspective, you know, I think you described it well. You know, what we're seeing, we put it out in our press release, and then Trevor talked about it early on today. But, you know, still kind of 2% premise growth, 16,000 new premise this quarter. The real growth that we're seeing right now is transmission POIs, which is, you know, we put in our press release, but You know, 50% increase in active requests, 78% increase in new requests, so just really strong transmission POI, point of interconnection growth that we're seeing across our system right now. What we hadn't talked about yet, and you mentioned it, Jeff, a little bit about electrification, is what we're continuing to see in West Texas, which continues to be very strong. You know, we've talked about our Culberson loop, which is our transmission system that we serve the Delaware on. You know, in December of 2021, it peaked at 800 megawatts, and in March, we're already at 845. Far West Texas weather zone every month in 2022 has exceeded the demand for the corresponding months in 21. And then kind of a new thing we're seeing, I haven't, I don't think, talked to you all that before, is we have another loop out there known as the Stanton loop. which serves the Midland Basin, and we're also seeing really strong demand on that loop right now as well. So, you know, a lot of that is electrification of existing facilities. I think the next phase on that will be, you know, many of our customers are looking at electrifying really their entire processes. And so that's out there and still coming. That really strong growth, Jeff, to your point, is what's driving this $200 million additional CapEx that you and the board and Trevor did with us a couple weeks ago. We're still at 15 over 5 on our five-year plan. We have added $200 million to that. That's not pull forward. That's $200 in addition. But we're not changing our five-year CapEx outlook until we get to our board in October. But, you know, I think you can extrapolate out, if you think about the growth we're seeing here, which has been fairly consistent over a number of years now and even increasing, that there's some upward pressure on that CapEx number or opportunities going into October. That, in addition to the fact that we, like other utilities in Texas and around the country, I think are taking a really hard look at resiliency and hardening, and there may be some things we have on that coming out of October as well. So that's kind of the background on the growth and the CAPEX story that we're seeing. Julian, to your question specifically, I appreciate the comments. I couldn't agree more. I've been around this business for about 30 years now, and we have a history and almost a tradition of being able to work with these parties down here and with our commission. And I think we'll do everything we can to do that again this year. We are going to file this case around May 11th. which is our, I think in our queue we said, you know, unless we settle early, that puts us in new rates, kind of end of third quarter, or end of fourth quarter, I'm sorry, beginning of first quarter. You know, I think we have a very strong case. I think we have a really good story. You know, we're a good company. We work with the state. We do what we're asked to. We have, you know, safe operations, reliable operations, and we are the low-cost provider in the state from an IOU perspective. And we have very strong relationships with our stakeholders and I think a very good reputation with our regulators. And so all those things are going to give us opportunities to do what we've done in the past, which is work with these parties and try to, you know, reach something amicable that works for us and benefits the state and the ERCOT market. And we're doing that now. We've had some discussions already with some parties. Obviously, we haven't filed our case yet. So we'll see who all intervenes in our case. People have to have a time for discovery, as they always do. And then, you know, you always try and settle these things to the extent you can, you know, around the time of intervener testimony, obviously before hearing. But it's a good case, I believe. It's a strong case. We're looking forward to presenting it. And as history as a guide, I think you know what we'll try and do and We'll work with the parties and see what we can come up with, and I'm optimistic, but we'll have to see who intervenes and what positions they take.

Thank you, Alan.

You bet.

Excellent, guys. Thank you so much. Have a great one. Thanks a lot, Julian.

We'll take our next question from Michael Lapidus with Goldman Sachs. Please go ahead.

Hey, guys. Thanks for taking my question, and congrats on a good start to the year. On Cameron, two questions there just on having a kind of re-up or re-do or re-evaluate the feed study and getting a response back middle of next year. Just curious, how much certainty do you think you have at this point in time in terms of what Cameron, you know, the expansion is going to actually cost? And I say that given the updated feed study, but honestly given all the things happening in the macro environment with, both labor inflation, commodity goods, inflation materials, et cetera.

Michael, we usually have a seven-limit question for LNG on our call, but we're going to take your eighth question just because of our longstanding relationship, okay?

Sounds great. I'll take it.

I'm joking with you. We've done a lot of work on Cameron. This isn't something we started in the last 12 months. We've got a lot of definitive work that's been done. In fact, Cameron has benefited from a lot of the work that was done at Port Arthur over the last several years. So we're in great shape in terms of our understanding of the cost structure of that business. I think what you're seeing us do is make sure there's a competitive process. We want to make sure that we've got a clear understanding of the schedule, all the key milestones that we need to have in place so that we can execute well. I think we have the shot to execute Cameron Phase 2 exceedingly better than how we executed Cameron Phase 1, and this additional detail work is part of our desire to have a really clean execution plan. So the way I would read into it is, and I made this comment earlier, our confidence level in the detail of this project and the commercial viability of the project has gone up dramatically in the last four or five months. And this additional work, I think, only adds more value to the schedule and, more importantly, more value to the project.

Got it. And then one for Alan. Actually, it may be one and a half questions for Alan. Alan, just curious, in your team's planning, kind of reliability planning, system planning, what do you think kind of the multi-year demand growth projection is that's baked into that planning by your team?

Sorry, Michael, the multi-year demand growth is what you're asking for? Yeah, load growth. Yeah, about 1.5% consumption.

Got it. Okay. And just curious, there's an interesting docket underway or proceeding, I don't know what to call it, at ERCOT right now, talking about what's happening with both data centers and even crypto bonds, and that it could be – five to six gigawatts in a 70-something gigawatt market of incremental demand, some in front of the meter, some behind the meter in the next 24 months. Just curious how you think that ripples through both that 1.5% demand projection, but also just broader market reliability, system needs, regulation, etc.? ?

Yeah, Michael, it's a really good question. I'll tell you, we spent a lot of time on it. And I can tell you, we are seeing what you would expect we see with those type of numbers being thrown around. I am glad, I'm encouraged that ERCOT and the Commission probably are going to look at this because it's a very interesting load, right? Now, I like load. I like new customers and I like big customers. And so that's a good thing. How those customers integrate and operate on the system And the amount of generation they require, electrons they require, I think is an important issue for the state. But we are seeing a high level of large customers, right? I mean, some of those have been publicly announced, the TI plant in Sherman, the Samsung plant in Taylor, which are different, obviously, not crypto or data center related. But we're also seeing a large number of, you know, 50, 100, 200 megawatt customers coming to us and wanting to get online very rapidly. And a lot of that is reflected in some of our transmission POI numbers. And a lot of that hasn't been reflected yet. It's still to come. But it will, if it manifests, result in, obviously, discussions we have with our board going into October on CapEx, depending on what we actually see coming out of those. And again, I think it's great that the state is looking at it. I think it's a very interesting load because it can manifest very rapidly, right? It's not like building a manufacturing facility. You can put up a crypto facility very quickly. And so that impacts our ability to get to you quickly. And then you can also potentially move that very quickly if market conditions change. And so I think it's an important issue for the state, and I'm glad they're looking at it. And we're obviously looking at it very closely as well from not only a a CapEx and operation perspective, but what it would do overall, you know, to ERCOT. Got it. Thank you, Alan.

Michael, I would also add to that that, you know, we go back and think about the last time Allen settled a rate case, which was in November of 2017. At that time, they had a forward five-year capital program of $7.5 billion. And in the last four years, it's doubled to 15. And based upon what Trevor and I saw at last week's board meeting and some of the feedback that Allen's given us, you know, this has all been done around the idea of meeting new load growth. But today, that load growth is continuing, and we're now looking at the prospect of adding in what Alan described earlier, which is more spending around resiliency and obsolescence to make sure that we can integrate all these different loads. So my basic thesis here, Michael, is being in the right markets Really good markets with good regulatory jurisdictions and solid growth is a great way to outperform your peers, and Encore is a great example. And I'll tell you, Al and his team are running a great program, and I think as we get toward October, not only will they be prosecuting their rate case and hoping that that will be settled, I think we're going to be looking at increased capital spending. That's one of the reasons they've been running their equity layer at around 45% instead of 42.5% heading into this rate case.

Got it. Thank you, Jeff. Thanks, Alan. Much appreciated. Thank you, Michael.

We'll take our next question from Paul Patterson, Glenrock Associates. Please go ahead.

Morning, Paul.

Morning, guys.

Hey. So I have sort of a big picture question, and I apologize if you guys talked about it but I missed it. But as you know, perennially there's this concern that's raised by manufacturers about the price of natural gas and LNG's potential impact on it. And given this robust outlook for LNG exports, and also you guys sell a lot of natural gas, and obviously you guys look at this in a pretty big way and a pretty detailed way, I'm sure. And it's dynamic. So there's the potential for supply increases, et cetera, in relation to prices. So I was just wondering, when you see all this opportunity and you see domestic needs and everything and supply, what do you What do you think the impact would be on, what's the long-term sort of outlook you guys have on natural gas prices in the US given this LNG, robust LNG outlook that you see?

You follow me? Look, Paul, it's a great question, and obviously there's been a lot of moving forces going across the supply and demand marketplace, both for oil and natural gas, and even in electricity in some markets. Markets like Europe, you know, have a lot of gas on the margin markets for electricity. But I would say that, you know, you've got about a 6.5 to 7.5 BCF per day marketplace that we export to Mexico every And you've also got this 11 or 12 BCF marketplace as we export LNG around the world. So that's about 20 BCF per day. And what's interesting is on a relative basis, Henry Hub has not had a lot of price volatility relative to the markers you usually see for natural gas in Europe at TTF or JKM. So long term, remember, there hasn't been a lot of investment over the last five years from the oil and gas sector in new sources of delivery. And I think you're going to continue to see market forces continue to come back in and raise the rates of production as necessary to meet demand. So I can't give you a definitive forecast. It's something that we follow closely. But we're very confident about the level of natural gas resources in the United States, and the United States being best positioned to meet the growing demand for both Asia and for Europe. There is a DOE study that I would refer you to. In the DOE analysis, they talk about the United States' ability to supply these different markets over the next 20 years, and that might be a good resource for you to reference.

Yeah, I think I've seen it maybe. I just was wondering if you thought that that – you think that those assumptions and everything still apply given – I haven't looked at it in a while, I think, but if it's the same one we're talking about. But you think those things, if I understand you correctly, are pretty much intact even with this more robust potential outlook that you see?

I think that's fair, and I would also – I think that's fair, and I'd also remind folks that because we're T&D-focused – As we look at launching these various LNG projects, you remember Cameron was a tolling project. ECA phase one is a project where we don't take any commodity risk because you're buying at an index and you're selling at an index. So in terms of shielding our projects, the way you do that is you make sure you've got long-term contracts with good credit counterparties, and you make sure you're not taking commodity risk. But in terms of the larger macroeconomic picture, I would refer you to that DOE study, which tends to indicate the conclusions you just described. Okay. Thanks so much. Appreciate it. Thank you for joining the call, Paul.

Ladies and gentlemen, this concludes today's question and answer session. At this time, I'd like to turn the conference back to Mr. Martin for any additional or closing remarks.

Look, I just want to stop and thank everyone for joining today's call. We look forward to seeing you all at the upcoming AGA conference in Florida later this month. Feel free, per custom, to reach out to our IR team with any additional questions. And this concludes today's call.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.