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Operator
Operator
Good day and welcome to Sempra's fourth quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn it over to Glenn Donovan. Please go ahead.
Glenn Donovan
Director of Investor Relations
Good morning and welcome to Sempra's fourth quarter 2023 earnings call. The live webcast of this teleconference and slide presentation are available on our website under our events and presentations section. We have several members of our management team with us today, including Jeff Martin, chairman and chief executive officer, Karen Sedgwick, executive vice president and chief financial officer, Trevor Mahalik, executive vice president and group president Sempra California, Alan Nye, chief executive officer of Encore, Justin Bird, executive vice president and chief executive officer of Sempra infrastructure, Peter Wall, senior vice president, controller and chief accounting officer and other members of our senior management team. 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 10K filed with the SEC. Earnings per common 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 10K for the year ended December 31st, 2023. Please note that all share and per share amounts reflect the two for one split of our common stock in the form of a 100 percent stock dividend that we announced in the second quarter call and distributed in August. I'd also like to mention that the forward looking statements contained in this presentation speak only of today, February 27th, 2024. And it's important to note 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 five and let me hand the call over to Jeff.
Jeff Martin
Chairman and Chief Executive Officer
Thank you, Glenn, and thank you all for joining us today. Over the last several months, we've spent time with investors and the research community soliciting feedback on ways to make today's call more informative. In response to your feedback, we'll be providing more information today from more executives. I'll start off by summarizing our recent business accomplishments and our corporate strategy, and will be followed by the leaders of each of our business platforms who will likewise summarize their accomplishments, business model and expected capital deployment. Karen will close out today's presentation with a review of our Q4 and full year financial results and outline our new 2024 to 2028 capital plan. We'll also be sure to save time at the end to take your questions. Now, turning to 2023, it was a strong year of operating and financial performance for our company and in large measure is a credit to our corporate strategy and our success in simplifying our business model. At Semper, we're focused on making disciplined investments in large and growing economic markets that are looking to modernize their energy networks and connect communities to safer, more reliable and cleaner energy. Over the last five years, this strategy has allowed us to build significant scale into our business for the benefit of customers and shareholders. As we previewed on our third quarter call in November, I'm excited to announce that our capital plan has increased by 20 percent to a new company record of 48 billion dollars, with more than 90 percent allocated to regulated transmission and distribution investments. Trevor, Alan and Justin will go into more detail later in today's presentation, but the overall scope and size of our capital plan really speaks to the robust markets we operate in and the magnitude of the growth opportunities that are in front of our company. Turning to our 2023 financial results, we delivered adjusted EPS of four dollars sixty one cents, exceeding the high end of our guidance and providing support to narrow our full year 2024 EPS guidance range to four dollars sixty cents to four dollars ninety cents. This morning, we're also announcing full year 2025 EPS guidance range of four dollars and ninety cents to five dollars and twenty five cents, which represents approximately seven percent growth from the midpoint of the prior guidance range. Based upon the continued growth we're seeing across our three TND growth platforms, we're affirming our projected long term EPS growth rate of six to eight percent. Finally, we're also pleased to announce the board of directors approved increase in our dividend for the 14th consecutive year to two dollars and forty eight cents per share. Please turn to the next slide. For the past several years, the United States has experienced significant economic uncertainty due to higher inflation, supply chain disruptions and higher interest rates. Against this backdrop, Semper delivered strong financial performance in 2023 with record adjusted earnings and record adjusted earnings per share. Also, over the last several years, our investment strategy has consistently prioritized making investments in energy networks in California and Texas. And this has allowed us to grow our rate base in those markets at the end of 2023 to just over 50 billion dollars. Looking forward, one of the primary benefits of rolling out an expanded capital plan is that it provides unique visibility to the strength of our long term earnings growth. Also, it's important to note that our equity offering last November was successful in mitigating future equity needs associated with our new plan. On the regulatory front, we've made several advances highlighting the constructive nature of the jurisdictions where we operate and our ability to work effectively with key stakeholders. In California, the cost of capital mechanism triggered. As a result, SDG&E and SoCal Gas increased their authorized ROEs last month. We also reached a proposed settlement with certain intervenors for a portion of our pending rate cases, which we view constructively. Turning to Texas, Encore successfully completed its base rate review last spring. Also, several important pieces of legislation were passed that support new investments in transmission and distribution that benefit customers and the continued growth of the state's economy. Also, at Semper Infrastructure, we declared positive FID on Port Arthur LNG Phase 1, secured financing, and began construction. We continue to make steady progress on our development projects. While the pause on non-FT export permits has impacted the sector, we're confident in the commercial value of our projects and will continue to develop these critical infrastructure assets on a reasonable timeline. Justin will address this topic further in his section. Please turn to the next slide. Semper is building critical new infrastructure designed to support economic and population growth while providing attractive financial returns to our owners. Through 2050, global GDP is expected to more than double, much of which will come from emerging economies, driving the need for incremental energy resources. Going forward, we strongly believe renewables, natural gas, and cleaner molecules will be critical in meeting rising energy demand as we transition to an energy future with lower carbon intensity. As an example, United States Natural Gas Production set a record during 2023 for the third consecutive year, fueled by strong domestic demand and record LNG exports, all while still achieving lower carbon emissions over the past several decades, as renewables and cleaner burning natural gas replace coal as a fuel source in power generation. Please turn to the next slide. As we modernize our energy grid, the IEA estimates that $11 trillion are expected to be spent in the North American energy sector through 2050, with over $5 trillion focused on T&D investments. Please turn to the next slide. As we've outlined in the past, we've been disciplined in maintaining our focus on what we believe is the higher value, lower risk portion of the energy value chain. In the T&D segment, we make disciplined investments with a view toward producing high-quality, recurring cash flows from regulated utilities and long-term contracted assets that generally grow with inflation. Please turn to the next slide. As you can see here, our strategy, combined with disciplined capital allocation, has allowed us to successfully meet or exceed our EPS guidance range for the last six years. Over this same time period, our adjusted EPS has compounded annually at approximately 10% since 2018, which is top decile amongst our peers. Please turn to the next slide. Improving our corporate strategy has allowed us to build significant scale into our business for the benefit of our customers and shareholders, and that's been demonstrated by the consistency of our financial performance. It's also noteworthy that we've accomplished this across different market cycles that have included a global pandemic, supply chain shortages, high inflation, rising interest rates, and geopolitical unrest. In short, our disciplined execution has consistently delivered total shareholder returns at levels that are well above our peer group. Please turn to the next slide. Before I hand the call to Trevor, I'd like to reiterate our key investment highlights. We own high quality T&D growth platforms located in California and Texas, and some of North America's most attractive economic markets that also benefit from constructive regulation. We exercise a disciplined approach to capital allocation and are excited to launch our new five-year capital plan of $48 billion. We believe this sets out a clear roadmap for our future growth and supports our expected long-term EPS growth rate of 6 to 8%. In conclusion, we're proud of our recent accomplishments and the growing strength of our business franchise. Across our management team, there's a lot of excitement about the opportunities that are ahead of us. Now please turn to the next slide where Trevor will walk you through the business updates at Semper, California.
Trevor Mahalik
Executive Vice President and Group President, Sempra California
Thanks, Jeff. Let me start by highlighting the financial results at Semper, California. Earnings for the full year 2023 were $1.75 billion, benefiting from $4.6 billion of capital investments focused on safety, reliability, and wildfire mitigation. These investments increased rate base by 11% over 2022. We have long emphasized California's constructive regulatory compact, including forward-looking rate cases, access to the cost of capital mechanism, and an established wildfire fund. And this year, we had several positive regulatory outcomes that reinforced our conviction and supports attracting capital to the state. As Jeff mentioned, last fall, the cost of capital mechanism triggered and the CPUC approved increasing our authorized ROE at SDG&E and SoCal Gas by 70 basis points. This increase was effective January 1, 2024. In October, we reached settlements for important capital and O&M portions of our rate case requests with certain interveners. And while these settlements are subject to CPUC approval, we're encouraged by that progress. And we anticipate receiving a proposed decision on our GRC in the second quarter. As a reminder, once finalized, rates will be retroactive to January 1, 2024. Separately, in addition to the recently awarded transmission projects by TISO, SDG&E has advanced their competitive bid for the Imperial Valley to the north of Song's transmission line and expect an update in late April. We're also extremely proud of the recent recognition of our electric business. SDG&E was again awarded Best in the West for electric reliability for the 18th consecutive year and recognized for their industry leadership in wildfire mitigation predictive modeling technology. The CPUC also recently increased the authorized storage capacity of Aliso Canyon by over 50%. This demonstrates the Commission's recognition of the importance of existing energy infrastructure and the critical role SoCalGas plays in supporting reliability and affordability of both natural gas and electricity in California. And finally, Arches, which is one of SoCalGas's strategic partners, was selected to receive DOE funding to help develop a regional hydrogen hub. This is important because Los Angeles is one of the nation's largest manufacturing hubs and cleaner molecules are expected to play a pivotal role in helping -to-electrify sectors lower their emissions. Please turn to the next slide. Now let's turn to some of the key trends that are supporting growth at Semper California. We operate in the largest U.S. market, representing nearly 15% of national GDP. California is also among the top three states for job growth, with nearly one million jobs created over the past five years. We're also well aligned with the state policy that promotes building an economy based on sustainable energy. Earlier this month, the CPUC made further commitments to renewables, mandating the construction of 56 gigawatts of new clean energy by 2035, including over 15 gigawatts of energy storage. California also remains home to the largest source of solar power and the highest penetration rate of electric vehicles of any state in the country. Just in San Diego County, there are now over 140,000 EVs, and that number is expected to increase significantly in the coming years. It is also noteworthy that San Diego County leads the state with 23% of our customers having installed rooftop solar systems. These systems are often accompanied by a battery, and as battery storage solutions become more cost effective, the need to reliably integrate these technologies on our network is expected to increase. Turning to Los Angeles, the manufacturing sector generates over 80 billion dollars in annual GDP. For customers that require high heat content molecules, RNG and hydrogen will be increasingly important for affordable, reliable and safe operations. When you pair California's economic growth with its ambitious clean energy goals, the need for significant T&D investment is critical to help ensure reliability and affordability. The key takeaway here is that our investment strategy and the rate case filings are closely aligned with public policy and the direction the state is going. Please turn to the next slide. Semper California is modernizing the T&D infrastructure necessary to integrate more renewables and clean molecules to serve the growing energy needs of customers while facilitating California's energy transition. As this slide shows, our utilities play a central role in connecting new, cleaner sources of energy to a diverse and growing set of customers. We continue to prioritize safety and reliability with a strong focus on maintaining an efficient cost structure. We currently have the lowest bills relative to our peers in the state and are in line with the national average. We will always be focused on providing the best possible service while ensuring customer affordability is a top priority. Please turn to the next slide. Turning to our five-year capital plan, we're announcing over $24 billion of investments. On the electric side, we are pursuing safe and reliable infrastructure investments, integrating renewable energy, incorporating battery storage, supporting EV infrastructure and hardening the system against event risks. On our natural gas system, we will continue to modernize our gas network, reduce carbon emissions, and make investments in energy infrastructure that support the delivery of cleaner molecules. We expect these investments to grow our rate base at an approximate 7% CAGR from 2023 to 2028. We're excited about the growth prospects at Semper California, and we feel fortunate to have the opportunity to deliver safe and reliable energy in a market with a constructive regulatory environment. Please turn to the next slide where Alan will discuss Encore's accomplishments in Texas.
Alan Nye
Chief Executive Officer of Encore
Thank you, Trevor. Encore delivered strong financial performance in 2023, deploying $3.8 billion of capital and growing rate base by 12% over the prior year. We were pleased to complete our base rate review at the PUCT and emerged with a constructive outcome where all prior T&D investments by Encore were deemed prudent and approved. 2023 also marked one of the most successful Texas legislative sessions for our industry in recent history. Several bills that were passed during the 88th Texas legislative session demonstrate the state's commitment to supporting a safer, smarter, more resilient, and more reliable electric grid to power continued growth across the state. Encore has historically worked closely with the Texas legislature and its many stakeholders to achieve productive outcomes, but this session in particular was incredibly constructive. First, the legislature increased our allowed distribution cost recovery tracker filings to twice a year, reducing Encore's regulatory lag on critical investments. Additionally, the legislature passed HB 2555, which encourages utilities to make their systems more resilient and provides expedited recovery for approved capital and O&M expenditures. The PUCT finalized rules to implement HB 2555 last month. We expect to file our first system resiliency plan, or SRP, within the next several months. The PUCT is allowed six months to review the SRP, and if approved, we would expect to begin implementation by year end. Distribution capital approved in the SRP will be recovered through our DCRF tracker filings. Regulatory lag that normally accrues between the time of in-service and the implementation of rates will be offset by a regulatory asset that will be recovered in our next DCRF. Similarly, O&M expense approved as part of the SRP will be offset by a regulatory asset that will be included for recovery in a subsequent DCRF. Use of this new mechanism should reduce the regulatory lag normally associated with the types of expenditures. We look forward to using the capital and O&M that gets approved under our SRP plan to improve the resiliency of our system, harden the system against storms, extreme weather, and wildfire risk, and generally improve our customers' experience, while at the same time improving recovery of the expenditures. From an operational perspective, Encore continued to execute at a high level. In 2023, we built, rebuilt, or upgraded approximately 3,200 miles of T&D lines, while also increasing the number of premises we serve by 73,000. In West Texas alone, we built, rebuilt, or upgraded over 650 miles of T&D lines and eight new switching and substations. The Texas grid performed very well through record demand peaks over the last 12 months. Encore's reliability performance, as measured by our non-storm SATY score, improved by approximately 7% in 2023 compared to the previous year. Finally, in 2023, we set company records for active transmission interconnection requests and new transmission interconnection requests in the queue. Active generation and retail interconnection requests increased 25% year over year. New interconnection requests increased 19% year over year. Please turn to the next slide. These interconnection requests are driven by the dynamic economic growth that we continue to see in Texas. The Texas miracle continues and is demonstrated by the continued strong growth, both in population and diverse commercial and industrial businesses moving to the state. Encore serves some of the country's fastest growing metro areas, including four of the 15 fastest growing cities. From a sheer scale perspective, Texas GDP is second only to California and continues to grow at a robust pace, growing at approximately 8% during the third quarter, faster than the nation as a whole for the fifth quarter in a row. Texas continues to see electric vehicle penetration as well. Over a recent 12-month period, the DFW Metroplex had the largest increase in EV registrations out of any major metro area in Texas with 63% growth. Please turn to the next slide. Encore has also seen significant growth in commercial and industrial customers representing electric loads that are larger than traditional commercial projects. Data center development continues to be robust across our service territory, including new sites that have the potential to support hyperscale computing and generative artificial intelligence services. These projects represent the potential for thousands of megawatts of new electric load, often hundreds of megawatts for just one project. Similarly, electrification of the oil and gas industry in West Texas continues at an impressive pace. A Permian Basin Reliability Plan update published by ERCOT earlier this month projects that within 15 years, the total demand in West Texas could increase four-fold from its current 6.5 gigawatts to 26 gigawatts. This growth is expected to support oil and gas production as well as general electrification. Encore will be at the forefront in expanding its system to meet the requirements of these customers. Finally, as the population continues to expand both organically and from relocations, we still expect total premise growth to continue at approximately 2% annually. Each of these developments creates new opportunities to expand the Encore energy system. We are positioning ourselves to meet these demands through hiring, supply chain procurement, and system planning, and looking forward to continuing to serve our customers and the ERCOT market. Please turn to the next slide. On Semper's Q3 call, we discussed this growth and announced our intention to increase our capital plan. We are pleased to announce that Encore's five-year capital plan for 2024 through 2028 is projected to be $24.2 billion, which is a 26% increase over our previous five-year capital plan of $19.2 billion. The vast majority of this capital plan is to serve customer growth, although the maintenance needs of our system continue to grow steadily as well. This plan does not include the amount of capital expenditures that we expect to request in the upcoming SRP filing that I mentioned earlier. We expect to file that plan in the first half of this year, and the proposed spend will be subject to PUCT review and approval. With today's updated plan, we anticipate Encore's rate base to grow at an annual average rate of 11% from 2023 to 2028. While historically, our earnings growth rate fell below our rate-based growth due to regulatory lag, the addition of enhanced recovery mechanisms arising from the legislative session should move our long-term earnings growth rate closer to our rate-based growth rate. Please turn to the next slide, where I'll turn the call to Justin to update you on Sempra Infrastructure.
Justin Bird
Executive Vice President and Chief Executive Officer, Sempra Infrastructure
Justin Thanks, Alan. We're also excited about the opportunities in Texas. Sempra Infrastructure is advancing the approximately $13 billion Port Arthur LNG Phase 1 project in Texas. This investment, along with Encore's capital plan, certainly makes Sempra among the largest investors in the state. At Sempra Infrastructure, we're advancing construction on five projects, all of which are on time and on budget, and our strategy differentiates us from others in the space. We have a dual-coast LNG export strategy, a robust energy network portfolio, and power transmission infrastructure to move more renewable power across the border, all with the goal of cleaner molecules and cleaner electrons to our customers and partners. We've achieved several noteworthy milestones in 2023. Declaring positive FID on Port Arthur LNG Phase 1 was a major success, and we secured all required project-level debt and equity contributions. Financially, we executed well relative to 2022's strong results, and our ability to maintain momentum through 2023 is another indication of our sustainable business model. Sempra Infrastructure's 2023 adjusted earnings were $764 million. I'd also like to specifically call out the progress at ECA LNG Phase 1 as it approaches its Summer 2025 COD. We are excited to bring one of the first North American Pacific Coast export projects to market. At Cameron LNG Phase 1, we've now exceeded 700 cargoes since production began in May of 2019, and we couldn't be more pleased with the high-quality operations from this critical infrastructure asset. On the development growth pipeline, our priorities remain focused on advancing commercial discussions for offtake volume and equity ownership at Port Arthur Phase 2, and assessing Cameron LNG Phase 2's EPC opportunities. At Cameron LNG Phase 2, we've been working with Bechtel on value engineering, and at this stage, we feel it's best to continue those efforts while evaluating other potential EPC contractors. We're continuing to work closely with Bechtel on Port Arthur Phase 1 and potentially Phase 2, but we and the Cameron partners want to take some additional time to help ensure a cost-effective build plan and conduct additional value engineering and analysis to improve the overall value of the project to our customers. At Port Arthur LNG Phase 2, we received FERC approval in September, and earlier this month, FERC staff issued an environmental assessment finding no adverse impact as a result of the Port Arthur Louisiana Connector Pipeline's amendment. I also want to mention that we continue to make significant progress toward an FID on Cimarron Wind. Recall, this is a 300 MW wind project located near our existing ESJ1 and ESJ2 wind projects that will directly interconnect with the California market. Finally, I wanted to highlight a hydrogen hub project we are participating in called High Velocity that is expected to receive $1.2 billion from DOE funding to pursue development. We are also actively engaged with a group of Japanese utilities on a collaboration to produce e-natural gas using renewable hydrogen and CO2 as inputs. Projects like these demonstrate Sempra infrastructure's innovative and entrepreneurial culture as we seek opportunities to provide cleaner and more secure energy for customers. Please turn to the next slide. Turning to macro trends impacting Sempra infrastructure, global energy demand continues to increase. On sustainability, Sempra infrastructure plays a critical role in providing cleaner, alternative solutions to heavier carbon fuels like coal and oil. Natural gas, and particularly LNG, can effectively replace less sustainable energy sources today. In fact, industry sources estimate that global LNG demand, in particular, will grow approximately 50% by 2045. There is an additional tailwind associated with emerging market growth as their share of global GDP increases relative to advancing economies. This drives overall energy consumption because developing economies tend to be more energy intensive as they modernize and improve quality of life. Sempra infrastructure also develops renewables and associated infrastructure that provide cleaner sources of energy and contribute to a broader decarbonization efforts in North America. The final macro driver is the need for energy security. Energy dense, reliable, and affordable energy is a key ingredient to building advanced economies. The key question is where that incremental energy production will be sourced. Recently, the DOE announced a pause on granting non-FTA LNG export permits to reevaluate the impact granting these permits would have on domestic energy costs and to consider whether climate factors impact the public interest. LNG's climate role is important, which is why even before the regulatory development, we started work on several initiatives designed to minimize our environmental impact and help reduce emissions across our portfolio. One example being the conversion of e-drives at Cameron LNG phase two. We're also developing carbon capture and sequestration infrastructure associated with our LNG projects. Long term, we are confident in the commercial, economic, and environmental value of our export facilities and will continue to work hard on behalf of our customers and investors to advance these projects. With that said, this permitting pause only applies to projects that haven't yet received their non-FTA export permit, such as Port Arthur phase two. This pause does not impact on any of our assets in operation or under construction. As a reminder, Cameron Train Four has a non-FTA export permit and the DOE stated in hearings earlier this month that the pause would not impact in service date extension requests for projects with existing permits. Per Sempra's planning convention, development projects such as Port Arthur phase two and Cameron phase two have not reached FID and are not included in our capital plan or guidance. So any potential delay would not impact our current earnings growth visibility or our existing capital plan. We can't speculate on the ultimate outcome of this policy, but we'd like to reiterate the compelling environmental value proposition that natural gas and LNG provide. The United States has decreased carbon emissions 17% below 2005 levels despite increasing GDP by more than double in that time. A major reason for that progress is natural gas replacing coal in energy production. We believe a lasting policy of limiting LNG exports would unfortunately hurt the global climate interests because prospective buyers could be forced to rely on more carbon intensive fuels including coal and fuel oil. We remain as enthusiastic as ever about the merits of our LNG projects as well as our ability to appropriately navigate the regulatory landscape to advance each one. Further, we are optimistic that normal permitting conditions will resume after all relevant variables have been carefully evaluated by the administration. Please turn to the next slide. On this slide, we highlight some key projects under construction in the Pacific and Gulf Coast. These projects strengthen our competitive advantage as a strategically located supplier to both Asia and Europe. The beauty of greenfield development is that it unlocks highly compelling brownfield expansion opportunities. We have begun procurement and engineering activities at Port Arthur, Louisiana Pipeline, a pipeline connecting Port Arthur LNG to feed gas in Gillis. We've also begun procurement and engineering at Louisiana Storage, a salt dome natural gas storage facility. These assets will contribute to the larger Port Arthur Energy Hub and demonstrate Sempra infrastructure's expertise in developing comprehensive energy projects. Meanwhile, construction across the Sempra infrastructure platforms continues to progress well. At Port Arthur LNG Phase 1, the next milestone will be to commence structural steel. At ECA LNG Phase 1, we are targeting 90% completion of structural steel. And at the GRO expansion, we have initiated construction and are targeting completion of the construction of the Mexicali segment later this year. To reiterate, Sempra infrastructure is playing a key role in securing energy needs and contributing to decarbonization efforts for customers around the globe. Please turn to the next slide. Looking further out, we are developing an enviable portfolio of growth projects, and this slide showcases some of our more significant pursuits. For a full list of development assets, please refer to the appendix. I would also note that a number of these projects are brownfield investment opportunities made possible by our initial greenfield investments at Cameron and Port Arthur. Please turn to the next slide. To conclude, we have $4.4 billion of capital deployment opportunity anchored on providing our long-term customers with cleaner and secure energy. And as a reminder, this number only includes projects which have reached a positive FID. Major 2024 investment allocations are slotted for the Port Arthur Energy Hub as Phase 1 construction progresses, ECCA LNG Phase 1 as we close in on COD, the GRO Pipeline Expansion Project, and the Louisiana Storage Development. Now please turn to the next slide and let me turn it over to Karen who will take us through the financial update.
Peter Wall
Senior Vice President, Controller and Chief Accounting Officer
Thank you, Justin. I'm excited to share our year-end results and give you more details on our financial plan. Earlier today, Semper reported 4th quarter 2023 gap earnings of $737 million, or $1.16 per share. This compares to 4th quarter 2022 gap earnings of $438 million, or 69 cents per share. On an adjusted basis, 4th quarter 2023 earnings were $719 million, or $1.13 per share. This compares to our 4th quarter 2022 earnings of $743 million, or $1.17 per share. Full year 2023 gap earnings were $3 billion, $30 million, or $4.79 per share. This compares to 2022 gap earnings of $2 billion, $9 to $4 million, or $3.31 per share. On an adjusted basis, full year 2023 earnings were $2 billion, $920 million, or $4.61 per share. This compares to our previous full year 2022 adjusted earnings of $2 billion, $915 million, or $4.61 per share. This year's results demonstrate the combined strength of our three growth platforms and sets us up for improved growth in 2024. Please turn to the next slide. Now I will summarize the variance of full year 2023 adjusted earnings compared to the same period for last year. At Semper, California, we had $69 million of higher net interest expense, partially offset by net tax benefits, offset by $51 million of higher electric transmission and CPUC-based operating margin, and $52 million of higher regulatory interest income and regulatory awards. At Semper, Texas, we had $2 million of higher equity earnings attributable to increased invested capital, partially offset by higher interest and operating expenses. I note that earnings in 2022 and 2023 were impacted by the lack of capital trackers that can't be filed during a rate case. At Semper, Infrastructure, we had $85 million of higher earnings attributable to non-controlling interest, $10 million of higher taxes, partially offset by lower interest expense, given increased capitalized interest, offset by $49 million of higher transportation tariffs, higher asset supply optimization, partially offset by lower equity earnings from Cameron LNG. For Port Arthur, while our ownership stake is approximately 20%, we consolidate the project accounting purposes, thus capitalizing interest based on the project's in-progress construction. As construction advances, you're seeing the impact of higher capitalized interest versus previous years. Ultimately, these capitalized costs will be amortized back as higher depreciation after the plant moves into commercial operation. At Semper Parent, there were $15 million of higher investment gains, partially offset by higher net interest expense, and lower income tax benefits. Please turn to the next slide. Turning to new investments, as Jeff noted earlier, we're announcing a company record $48 billion capital plan, with over 90% of the planned investment allocated to our regulated utilities. This represents an impressive 20% increase over the previous plan, and will ultimately serve as the foundation for our company's growth over the coming years. About $24.1 billion, or roughly half of the capital plan, is marked for investment at Semper California's two utilities, which together have a weighted average ROE of approximately 10.5%. At Semper Texas, $19.5 billion includes our proportionate share of Encore's planned CAPEX, where recent legislative development should help Encore reduce regulatory lag and improve ability to help lessen the gap between the authorized and actual rates of return. The remaining $4.4 billion are primarily associated with Semper Infrastructure's L&G projects, under construction and their associated infrastructure. Please turn to the next slide. With this record capital plan, I would like to illustrate some of the key sources and uses. As you know, Semper raised equity in November 2023 to support our future investment needs and mitigate the financing risks associated with the capital plan. As a result, we are in a strong financial position and anticipate our reliable internal operating cash flows and regulatory authorized debt will provide the vast majority of our financing needs. We are a growing business while maintaining balance sheet strength, all with the goal of delivering attractive total shareholder returns over the long term. Along those lines, Semper will continue to target a 50 to 60% dividend payout ratio, providing plenty of reinvestment flexibility. Please turn to the next slide. Moving to the utilities, our strong earnings trajectory is underpinned by long-term rate-based growth. California and Texas rate base is expected to grow at 7 and 11% respectively, from 2023 to 2028. Our rate base is split approximately evenly between California and Texas, where we benefit from constructive regulatory jurisdictions and strong macroeconomic growth. On a combined basis, we anticipate just over 9% annual growth through 2028, and this gives us added confidence in achieving our projected 6 to 8% long-term EPS growth rate. Please turn to the next slide. Given the strength of our 2023 results, we've narrowed our 2024 earnings guidance estimates and are now projecting EPS guidance for the year, ranging from $4.60 to $4.90. Also, we're announcing 2025 earnings per share guidance with a range of $4.90 to $5.25. This equates to a projected EPS midpoint that's about 7% higher than 2024 guidance. Now let's break down a few of the assumptions embedded in these figures. At Semper, California, this already includes the cost of capital trigger. As for the GRC, we're assuming outcomes that are in the range of historical rate case decisions and continue to work constructively with the CPUC and intervenors through the proceeding to achieve an outcome that allows us to continue to deliver safe, reliable, and sustainable energy for our customers. Turning to Texas, we said in the prior call the guidance took into effect Encore's second DCRF. Subject to PUCT approval, the system resiliency plan will apply to 2025 through 2027. And due to timing differences between filing and construction of projects, we'd expect minimal financial impact in 2025. At Semper Infrastructure, there are a few things to highlight. 2022 and 2023 benefited from an attractive commodity price environment and in 2023 received the cumulative benefit of new tariffs on select Mexico pipelines. Due to the conservative nature of our project development process, we secured rates on the gas pipeline connecting ECA well in advance of COD. This allowed us to better optimize results during this period, but we would expect this impact to moderate as we go forward, particularly with a lower forward curve for natural gas. And now with the magnitude of projects currently under construction, we have better visibility to certain noncapitalized costs that have now been added to our 2024 plan. And we have ECA LNG phase one expected to come online in the summer of 2025 with full year operations expected in 2026. And finally, regarding the share count, the main driver of the increase is our recent equity offering. As we've discussed, green shoe of just over 2 million shares settled immediately in November of 2023. Over the course of this year, we're assuming weighted average diluted shares will increase by 4 million, which reflects the dividend reinvestment program, equity-based plans, and the drawdown of our forward settlement, which we now assume will occur in the second half of 2024. Thus, 2025 reflects those shares outstanding for the entire year, increasing our share count to approximately 654 million shares. Please turn to the next slide. In addition to our new five-year plan, we've added this slide in an effort to be more responsive to input from our many investors. Here, it shows the various categories of investment that we're tracking or developing that fall outside of our current plan. It totals over $10 billion, and many of these opportunities could form part of our future capital campaign. Please turn to the next slide. You've heard this from our other executives today, but it is important to note that we're excited by the investment opportunities in front of us. We are owners and operators of top tier T&D utility platforms located in North America's largest economy. Moreover, our utilities benefit from constructive regulation that supports significant investment and help ensure safe, reliable, resilient, and increasingly sustainable energy for our customers. Over time, our key priorities remain largely the same. We will invest in our high-quality T&D energy infrastructure to improve customer service, maintain a prudent balance sheet, and provide compelling returns to shareholders. A record $48 billion capital plan focused on our regulated utilities will be the primary foundation for our increasing rate-based growth and earnings power and gives us confidence in achieving our projected long-term EPS results. We thank you for joining us as we continue to build North America's premier energy infrastructure company and we're as enthusiastic as ever about our opportunity to continue delivering attractive risk-adjusted returns. I've had the opportunity to meet with many of you over the last month and I'll be out on the road with the IR team in March and hope to connect with those of you I haven't had a chance to meet yet. With that, I'd now like to open the call for some of your questions.
Operator
Operator
Thank you. This concludes the prepared remarks. We will now open the line to take your questions. If you would like to ask a question, please signal by pressing star 1-1 on your telephone keypad. Please make sure your mute function is turned off. We will pause for just a moment to allow everyone to signal for questions. And our first question will come from Constantine Lednev from Guggenheim Partners. Your line is open.
Constantine Lednev
Analyst at Guggenheim Partners
Hi, good morning team. Congrats on a great quarter. Good morning Constantine. Thanks. Thanks for taking the questions. The first one would be on the 2025 earnings growth in California. That's pointing to around 5%. How are you currently framing the GRC process into the 2024-25 planning assumptions, especially as there's some visibility around partial settlement issues in the process?
Jeff Martin
Chairman and Chief Executive Officer
Yeah, Constantine, here's the way I would think about it is the way we framed our rate cases, we always focus on making investments that are aligned with public policy and that directly support our customers. In terms of assumptions, we take the time to look at prior cases we've been through at the CPUC and then we tend to make reasonable assumptions from a range of potential outcomes. You know, our challenge is given where we're at in the regulatory process, that's probably all we're prepared to share in terms of assumptions at this time, but you did make a great point which is just last fall we settled with certain intervenors, about one-third of the rate case for the Southern California Gas Company and about one-third of the rate case for the Southern California Gas Company. So we're looking forward to a proposed decision in the second quarter and a final decision in the second half of the year.
Constantine Lednev
Analyst at Guggenheim Partners
Okay, and does that imply that you're taking into account any of the settlements into your planning parameters or is that still
Jeff Martin
Chairman and Chief Executive Officer
out there? No, I wouldn't think about the settlement itself impact and how we think about our assumptions. I just think it views an alignment with some of the intervenors around the way we're thinking about meeting the public policy initiatives for the state.
Constantine Lednev
Analyst at Guggenheim Partners
Okay, perfect. And then maybe shifting to your thoughts on cost of capital process at the CPUC, especially with phase two reply comments posted yesterday and benchmark yields are clearly pointing to a sustained increase, but how do you just bookend the assumptions on the five-year total plan?
Jeff Martin
Chairman and Chief Executive Officer
Yeah, here's the way I would think about it and I will also see if Trevor would like to add something. As you recall, when this issue was first addressed last year, we had indicated to the investment community that we expected the cost of capital mechanism to trigger and had it included in our EPS guidance. And now with the decision last December, which we think was fairly clear, it allowed us, Constantine, to have a little bit more confidence to narrow our 2024 EPS guidance range. And as you know, that had the benefit of actually raising the midpoint of our guidance for this year. Broadly, I think California continues to be a very constructive regulatory jurisdiction. I always point to the fact that we have forward-looking rate cases here, reasonable returns on equity to attract the capital that's needed, a strong framework that's actually quite unique for addressing climate-related event risk, and finally, more and more people are starting to understand and value the cost of capital mechanism that accounts for market conditions. But, Trevor, would you like to add anything in terms of the cost of capital?
Trevor Mahalik
Executive Vice President and Group President, Sempra California
Yeah, Jeff, no, I think you largely covered it. I would just add that I think we are really in good shape here on this. And, you know, I think the energy division's disposition letter was pretty clear on this. So, again, we feel we're in good shape.
Constantine Lednev
Analyst at Guggenheim Partners
Thank you. And just one quick follow-up, embedded within kind of that ROE outcome, do you have any O&M kind of funding or system reinvestments embedded in plan?
Jeff Martin
Chairman and Chief Executive Officer
Help me understand your question again, please. Just with the tailwinds
Constantine Lednev
Analyst at Guggenheim Partners
from the ROE outcome, are you embedding any kind of reinvestment in O&M from that tailwind going into 2024?
Jeff Martin
Chairman and Chief Executive Officer
Yeah, the way I would think about it is when we put our plan together, which was all part of the current rate case, so the 2024 plan would be impacted by how the outcome of the rate case is. And when we think about 2024 and 2025, we had to take a reasonable set of assumptions based upon prior cases, and that's embedded in our forecast.
Constantine Lednev
Analyst at Guggenheim Partners
Okay, perfect.
Jeff Martin
Chairman and Chief Executive Officer
Thank you, Constantine. Thank
Constantine Lednev
Analyst at Guggenheim Partners
you very much. Thank you.
Operator
Operator
Thank you. And our next question will come from Nick Campanella from Barclays. Your line is open. Good afternoon,
Jeff Martin
Chairman and Chief Executive Officer
Nick.
Nick Campanella
Analyst at Barclays
Hey, good afternoon. I hope everyone's doing well. Thanks for everything today. Thank you. So, I guess just, you know, you're going to file this SRP. It sounds like CapEx is biased, yet again, higher on the other side of that, you know, probably a second half event, but just how are you kind of describing your capital needs and how you would fund increased CapEx, equity debt, etc.?
Jeff Martin
Chairman and Chief Executive Officer
Yeah, I will start, Nick, by reminding everyone that, you know, on our Q3 call last year, we shared our expectation that our capital plan would go up between 10 and 20 percent, and in that same month, you'll recall that we sized our equity offering of roughly $1.3 billion to support our future financing needs. Slide 33, Nick, goes through kind of the sources and uses and picks up last fall's equity issuance and the ongoing drip. I think, to your point, the key takeaway for us is we're in great shape. Together with the operating cash flows and net debt, we're in a very strong position to comfortably support our new capital program without the need for any additional equity.
Nick Campanella
Analyst at Barclays
Right, and then I'm sorry, but just on top of, as you raise CapEx, I think, again, if this SRP filing is not included in the current CapEx plan, is there an incremental funding need on top of that and just how to think about that? Is there capacity, I guess, to raise additional CapEx without equity here, or should we just kind of be doing some equity going forward? Sorry about that. No, when
Jeff Martin
Chairman and Chief Executive Officer
we sized our equity needs last fall, we made sure that we did that with a margin around what we were trying to accomplish in terms of financing our future growth. So we have the capability of funding growth beyond $48 billion without raising additional equity. The challenge you get into is when you look at the slide that we've provided, it shows other opportunities. There's an additional $10 billion out there, so it's not just SRP. We've got other projects which are coming down the pike, but I think the great news is we've got a record capital plan. That capital plan is roughly $3 billion larger than our current market capitalization, and we were thoughtful last fall to take the equity overhang off of our stock and make sure that we had a margin of error to fully fund our capital plan with additional growth.
Nick Campanella
Analyst at Barclays
Very clear. Appreciate that. And then I guess just turning to the semper infrastructure earnings guidance, absolutely appreciate there's a step up 2024 into 2025 because of ECA. Are you assuming just kind of like a mid-year COD there, and I'm just trying to get a sense of what the normalized run rate for ECA is when that kind of comes online, if you can isolate that, and are there any other drivers to point to in terms of the strength for 2025 versus 2024? Thanks.
Jeff Martin
Chairman and Chief Executive Officer
Yeah, I would just give you two things to focus on, and Karen, you can add if you like to, but what I would mention is you're going to see a little bit higher development expenses not capitalized in 2024, and I would use a half-year convention for 2025, and that's the best way to think about your going forward run rate.
Peter Wall
Senior Vice President, Controller and Chief Accounting Officer
Yeah, and I would just add that, as you would expect, our financial projections include the incremental revenues associated with the SPA contracts, the commissioning volumes recognized after substantial completion of the facility, and the contributions from the GRO pipeline. So bringing on the first phase of the Pacific Coast LNG facility is really an exciting opportunity and differentiates semper infrastructure with a dual-coast business model that will serve global energy demand.
Nick Campanella
Analyst at Barclays
Hey, appreciate all your time today. Thank you. Thank
Jeff Martin
Chairman and Chief Executive Officer
you, Nick.
Operator
Operator
Thank you. Our next question comes from David Arcaro from Morgan Stanley. Your line is open.
David Arcaro
Analyst at Morgan Stanley
Oh, hey there. Thanks for the question. Hi, David. Hi. You know, I wondered if you could maybe elaborate a little bit on the value engineering timeframe on Cameron. I'm curious if there's any way you could bracket how long you've extended that process for us.
Jeff Martin
Chairman and Chief Executive Officer
Yeah, so, you know, what might be helpful here, David, is if you could just do two things, if you've got a moment, go ahead and talk about, if you would, just a brief update on the construction at both EECA and Port Arthur, and then come back to the development question he's asking, specifically how we're trying to create additional value around the Cameron opportunity.
Justin Bird
Executive Vice President and Chief Executive Officer, Sempra Infrastructure
Yeah, thank you, Jeff. We're excited to share that on ECA phase one and Port Arthur phase one. We're seeing both projects remain on track for construction. ECA phase one for COD in the summer of 2025, and for Port Arthur, train one, 2027, and train two in 2028. Moving along to the development projects, you recall that as part of our commitment to deliver superior risk-adjusted returns, we talk about the reverse field of dreams model, which is when they come, I'll build it. And along the same lines, I always say that we'll only move forward with our projects when we have the right cost and risk structure and long-term contracted cash flows that support a strong return for our shareholders. So, going to the heart of your question, David, on phase two, we're seeing significant commercial demand for low-cost brown-filled LNG assets, particularly those that have permits in hand, and we believe the Cameron will be one of the most technologically advanced LNG facilities in the world and have one of the lowest emission profiles as we've shifted to electric drives. We're working on a green power tariff and will have carbon sequestration. As you recall, it's fully permitted and we're working toward an FID. The four work streams that I've always talked about continue to make progress, but we still have some work to be done. So, our current efforts with respect to the Cameron partners are focused on optimizing costs and ensuring maximum value for the project. And for example, we're exploring procurement or reservation of long lead and critical path equipment. We are anticipating taking an FID on Cameron 2 as early as the first half of next year, so that's the first half of 2025. Shifting to Fort Arthur, we received our FERC permit last September and are now awaiting the DOE non-FTA export permit. We're continuing to work with Bechtel on an EPC agreement that can optimize efficiencies with the Phase 1 construction schedule, and we're continuing our marketing efforts for offtake and equity and having financing discussions with potential lenders. We also have our other Pacific Coast LNG opportunities, Phase 2 at ECA and Vista Pacifico. Both of these are in the early stages of development, but we see clear opportunities and excitement around these projects. So, just as a reminder, you know, per our planning convention, none of these projects have yet received positive FID. They're not included in our plan and represent upside of the plan of future earnings.
Jeff Martin
Chairman and Chief Executive Officer
So, David, I would just conclude that with that additional work in terms of securing long lead time items and additional value engineering, we're focusing on trying to take FID on that project in the first half of next year.
David Arcaro
Analyst at Morgan Stanley
Perfect. Yeah, thank you both. Very comprehensive. I'll leave it there and hand it over. Thank you.
Operator
Operator
Thank you. Thank you. Our next question will come from Carly Davenport from Goldman Sachs. Your line is open. Hi, Carly. Hi, good
Carly Davenport
Analyst at Goldman Sachs
afternoon. Hi, Jeff. Thank you so much for taking the questions. Maybe just to start, as we think about the five-year capital plan increasing by the 20%, you've reiterated the long-term growth rate of the 6 to 8%. But just curious, given the magnitude of that increase, how we should think about the rate base and earnings growth relative to that range over the current planning period?
Jeff Martin
Chairman and Chief Executive Officer
Well, it's interesting you ask that. The rate base growth across both of our utilities will be approximately 10%, which is a little bit stronger than we forecasted a year ago. At the end of the planning period, those two platforms will have $78 billion of rate base. And we really view that really as the focus of the capital plan as we indicated. It captures over 90% of that $48 billion. What is of note is that there's an $8 billion increase over the prior plan, and over half of that carly comes from the growth that we're seeing in Texas, which is really the strongest part of our story. But we continue to think that the most important thing is we have been messaging around a 6 to 8% growth rate for several years now. I think this type of visibility causes us to have additional confidence in that number. And one of the things I think that you and I have discussed before, if you look at slide 10 at the last five or six years, or go back over 10 years or 15 or 20, Semper is one of those few companies that's been able to perform earnings per share growth in that 7% to 10% range over long periods of time. Now, we're certainly forecasting the 6% to 8% on a go-forward basis. But the key takeaway from this plan is we have a lot of confidence in our ability to deliver that. I think as you've noted in your prior research, I've often indicated that I would be disappointed if we don't outperform the high end of that range.
Carly Davenport
Analyst at Goldman Sachs
That's super helpful. Thank you. And then maybe just to follow up on Texas, I think you mentioned in the slides planning for 2% annual premise growth. Do you think that could be conservative just based on what you've seen recently and the different growth opportunities that you've seen in Texas?
Jeff Martin
Chairman and Chief Executive Officer
Yeah, I mentioned that over half of our planning increase came from Texas. And I wouldn't mind having Allen kind of walk us through where the system, where the growth is showing up. The story in Texas, I think, which is quite unique, is not just the diversity of the growth in Texas, not just on the premise side. And it's also the amount of it, Carly, that's allocated to transmission. I don't think there's another growth story in the United States that is majority of the capex is related to transmission. And the reason that's important is Allen's team has the lowest transmission distribution bills in the state. And transmission projects, because it is the highest in the state, get socialized across all the different jurisdictions. But Allen, to Carly's point, maybe you could talk about premise growth, but more broadly, the growth that showed up on the system.
Alan Nye
Chief Executive Officer of Encore
Yeah, sure. Thanks, Jeff. And hey, Carly, really interesting question given what we're seeing on our system. And as Jeff said, and as I said in my opening remarks, we continue to see really very strong record-breaking growth across our system. You know, as I mentioned in my opening remarks, premise growth remains very strong, 73,000 last year, 14% increase year over year. From a transmission perspective, transmission points of interconnection, you know, very large customers connecting at transmission voltage. We set new year-end records for new and active points of interconnection, 23. Total interconnections are up 25% year over year. New interconnections are up 19% year over year. And then, you know, we always break it down into retail and generation. Retail is up 13%, but I want to pause there on the 13%. So we go from 250 at the end of 22 to 282 at the end of 23. But something to Jeff's point that's significant about our growth is not only the numbers, but kind of the magnitude and the diversity of the customers. And so in these retail numbers of the 282 retail point of interconnection requests we presently have, 46 of those are between 300 megawatts and 2600 megawatts individually in size. We actually have about 28 that are between 3 and 600 megawatts a piece, and we have about 18 that are between 600 and 2.6 gigs. So very long, very strong growth numerically just in the increase of the numbers, but also what we're seeing is the size of the customers. Excuse me, on the generation interconnection side, we see an increase of 34% year over year. West Texas, we always talk about West Texas, continues to be a very strong story for us with the far west Texas weather zone peak increasing by .6% year over year. The two transmission, you know, circuits are rather loops that we use to serve that part of the state. The Culverston loop saw a peak that was almost 18% above the prior year's peak, and Stanton increased about 20, just under 24%. So really, really incredibly strong growth across our system. Breakdown of CapEx, Jeff? Sure. Breakdown of our 24.2, it's on slide 48 of the appendix, to break it down a little further, we've got about $5.1 billion in distribution expansion, about $13.5 billion in transmission expansion, which is a point Jeff made moments ago, about $4.2 billion in maintenance capital, and then about $1.4 billion in tech. I think to Jeff's point, three things here just to conclude. One, 70%, a little over 70% actually of all this CapEx is pure growth capital. About 97% of this five-year plan is subject to recovery through our trackers. And then to Jeff's point specifically, a little over 60% of all this capital we're talking about is transmission, which obviously benefits everyone in the state, and therefore is spread across the state evenly, which helps us both the growth capital as well as the fact that heavy emphasis on transmission really allows us to stay where we want to be, which is among the low-cost providers in the state.
Carly Davenport
Analyst at Goldman Sachs
Yeah, excellent.
Alan Nye
Chief Executive Officer of Encore
Thanks.
Carly Davenport
Analyst at Goldman Sachs
Very clear. Thanks for all that detail. We appreciate the time.
Jeff Martin
Chairman and Chief Executive Officer
Thank
Carly Davenport
Analyst at Goldman Sachs
you, Carly.
Operator
Operator
Thank you. We now have time for one more question, and it will be from Ryan LeVine from Citi.
Ryan LeVine
Analyst at Citi
Your two questions, one on transmission and the prepared remarks as mentioned, we should expect an update in late April for the project that you're pursuing. Should we expect an outcome there or just further update as there's a range of potential scenarios that could play out in the coming weeks?
Jeff Martin
Chairman and Chief Executive Officer
Thank you for that question, Ryan. I'll let Trevor respond.
Trevor Mahalik
Executive Vice President and Group President, Sempra California
Sure, Jeff. Hey, Ryan. Yeah, I think we'll get a decision as to who's going to get selected in late April, and then there's 120 days for negotiations to happen for a final outcome. So I would say expect something over the next four months.
Ryan LeVine
Analyst at Citi
Okay. And then on LNG, appreciate the clarification around the non-FTA permit extension versus new applications. In terms of non-FTA permit extensions, is there a historic timeline around how long that typically takes, and does the pause for new applications potentially accelerate the timeline for extensions as there's allocation or resource issues?
Jeff Martin
Chairman and Chief Executive Officer
No, we have used the extension process for different projects in the past, and I would say there's not a standard timeline for that. I think we were just pleased to see the DOE confirm that it was a separate process for extensions rather than for new filings. The filing that we've made for Port Arthur Phase 2 is pending. We just have to wait through this process of the pause, but I think one of the points Ryan just made in his discussion was we have a whole series of development milestones that we're pursuing for Port Arthur Phase 2. We think it's a very attractive, commercially viable project, and I think those milestones we've worked through concurrently with the ultimate permitting process. So whether it ends up being a delay for the project or it's actually completed, consistent with the timeline for other milestones remains to be seen.
Ryan LeVine
Analyst at Citi
Okay. Thank you.
Jeff Martin
Chairman and Chief Executive Officer
Thank you very much.
Operator
Operator
Thank you. That concludes today's question and answer session. At this time, I'd like to turn the conference back to Jeff Martin for any additional closing remarks.
Jeff Martin
Chairman and Chief Executive Officer
I wanted to briefly thank everyone for joining us today. I know there were several competing calls and even conferences this morning, so we appreciate everyone making the time to join us. If there are any follow-up items, please reach out to our IR team with any questions. Thank you again, and this concludes our call.
Operator
Operator
Thank you for your participation. You may now disconnect.
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