DBA Sempra

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.

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 Sedrick, Executive Vice President and Chief Financial Officer, Trevor Mihalik, Executive Vice President and Group President, Sempra California, Alan Nye, Chief Executive Officer of Encore, Justin Byrd, 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 10-K 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 a 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% stock dividend that we announced in the second quarter call and distributed in August. I'd also like to mention that the four 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.

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, it's a credit to our corporate strategy and our success in simplifying our business model. At Sempra, 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% to a new company record of $48 billion, with more than 90% 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 $4.61, exceeding the high end of our guidance and providing support to narrow our full year 2024 EPS guidance range to $4.60 to $4.90. This morning, we're also announcing full-year 2025 EPS guidance range of $4.90 to $5.25, which represents approximately 7% growth from the midpoint of the prior guidance range. Based upon the continued growth we're seeing across our three T&D growth platforms, we're affirming our projected long-term EPS growth rate of 6% to 8%. Finally, we're also pleased to announce the Board of Directors approved increase in our dividend for the 14th consecutive year to $2.48 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. Looking forward, one of the primary benefits of rolling out an expanded capital plan is 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 SoCalGas increased their authorized ROEs last month. We also reached a proposed settlement with certain interveners 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 one, 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. SEMPRA 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 grids, 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 the 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 discipline 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 percent 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 discipline 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 percent. 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 We'll walk you through the business updates at Semper California.