DBA Sempra

Good morning 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 2024 earnings call. A 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. Justin Byrd, Executive Vice President and Chief Executive Officer of Sempra Infrastructure. Alan Nye, Chief Executive Officer of Encore. Don Clevenger, Chief Financial Officer of Encore. Carolyn Wynn, Chief Executive Officer of SDG&E, 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 10-K for the year ended December 31st, 2024. I'd also like to mention the forward-looking statements contained in this presentation speak only of today, February 25th, 2025, 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. This year, as we report our Q4 and full-year financial results, we've organized our materials to lay out a clear roadmap for our company to deliver a decisive decade of growth. In part, that's why we took the time over the last several months to reach out to investors and the research community to get new ideas and suggestions on how to make today's call as informative as possible. With your input, we've added a lot more content to today's presentation and adjusted our list of presenters so you get to hear directly from a broader group of executives. In terms of our agenda, I'll start by reviewing our accomplishments in 2024 and provide an overview of our corporate strategy. Then we'll move to the leaders of our three business segments where each will discuss recent developments and operational initiatives in their businesses, as well as their respective capital plans. Afterwards, Karen will follow up the presentation on our Q4 and full-year financial results and the details surrounding our new five-year capital plan. And then at the end, I'll rejoin you to make some closing remarks. Turning to our 2024 financial results, we delivered adjusted EPS of $4.65, which is just below the midpoint of our guidance range. Later in today's call, Karen will walk through the key drivers behind those results. Turning to 2025 guidance, we've adjusted our financial forecast to account for a series of changes. These include the final decision in our California rate cases, as well as updated assumptions relating to interest rates, commodity prices, and O&M costs. Another key assumption in our 2025 guidance has to do with Encore filing its next base rate review. As you know, Texas is enjoying strong economic and population growth. Some estimates project Texas to have the largest population in the United States by 2045. And to further that point, from July 2023 to July 2024, Texas added over a half million new residents, the most of any state in the nation. New business continues to move to the state as well, and as the economy expands to the end of the decade, electricity demand is expected to nearly double. With this backdrop, there's a significant need for new infrastructure, which creates opportunity for Encore to increase its capital investments in the state. That's why Encore is preparing to file a comprehensive base rate review later this year, rather than waiting until 2027. Alan will go into more detail, but if the team elects to file a base rate review, which we have assumed in our plan, We believe this will strengthen the company's financial position as it looks to make critical investments necessary to support expected growth and energy demand. Taking all these factors into account, we're revising our full year 2025 EPS guidance range to $4.30 to $4.70. Our revised 2025 guidance falls below the prior expectations set for our company. That said, I'm confident that we're making the right decisions for the business as 2025 will form a new foundation for our future growth. In addition, we're announcing our full-year 2026 EPS guidance range of $4.80 to $5.30, which represents roughly a 12% growth rate from the midpoint of our updated 2025 guidance. This is important because we expect to pull through strong growth from 2026 in the future years. In addition to the reference year-over-year growth, we're seeing remarkable growth in our expected earnings from Sempra Texas, which supports raising our projected long-term EPS growth rate to 7% to 9%. Going forward, we'll update our estimated long-term growth rate on our year-end calls in February at the same time that we announce our updated capital plans. Finally, in keeping with our commitment to provide investors with a competitive total return, We're also pleased to announce that SEMPRA's Board of Directors approved increasing the company's annualized dividend for the 15th consecutive year to $2.58 per share. Please turn to the next slide where I'll walk through our recent accomplishments. In 2024, we made important progress on our five-year capital plan by deploying nearly $10 billion of capital across our three business lines. while also delivering solid financial results with 2024 adjusted earnings of roughly $3 billion. In terms of other accomplishments, we ended the year with utility rate base of $56 billion. It's also important to note that we're announcing a new record capital plan of $56 billion for 2025 to 2029, which represents a 16 percent increase over the prior plan. With over half of our new capital driven by opportunities at Encore, where Alan and his team are seeing remarkable customer growth, and taken together with California, 90% of the new capital plan is dedicated to our core strategy of investing in regulated utilities with constructive regulation. In California, SDG&E and SoCalGas received a final decision on their 2024 general rate cases, which support critical new investments in safety, reliability, and affordable customer service. Meanwhile, in Texas, you'll recall that the PUCT approved ENCOR's nearly $3 billion system resiliency plan, highlighting the constructive nature of that jurisdiction and ENCOR's ability to work collaboratively with key stakeholders to advance good public policy. Encore has already begun making investments in accordance with the SRP, and there are a significant number of near-term growth opportunities that Alan will be discussing momentarily. In addition, Alan will outline more clearly what investments fall within his new $36 billion capital plan, as well as providing very important visibility to other incremental investments that are expected to be added to his 2025 to 2029 plan, and new investments that are estimated for the 2030 to 2034 timeframe. And finally, at Semper Infrastructure, 2024 was an important year in terms of execution as we continue to advance construction across a series of large-scale infrastructure projects, including most notably ECA LNG Phase 1 and Port Arthur LNG Phase 1. Please turn to the next slide. Couple takeaways here. Utility capital investments have grown steadily at approximately 4% over the last decade. However, with economic expansion coming out of COVID, reshoring of industry, and record levels of investment in cloud computing, artificial intelligence, and data centers, we're seeing a notable uptick in energy demand. That's why utilities all across the country are quickly ramping up investment to build new energy infrastructure that supports growing energy demand. With over $200 billion of anticipated sector investment in 2025 alone, we certainly believe we're in the early innings of a new super cycle for the sector. On a relative basis, our 16% year-over-year increase in our five-year capital plan compares favorably to the trend shown here. In part, that's why we continue to believe SEMPRA is well positioned in the right markets with the right corporate strategy to create a lot of value in the coming years. Please turn to the next slide. Here, SIPR's core strategy centers on making disciplined investments in good businesses where we can earn quality returns while building scale advantages in large economic markets with favorable regulation. Please turn to the next slide. At Semper, we have narrowed our participation in the energy value chain with the goal of reducing the impact of commodity, environmental, and credit risk. By concentrating on transmission and distribution investment, it also improves our line of sight to future growth and helps us produce high-quality recurring cash flows from regulated utilities while also investing in long-term contracted assets with investment-grade counterparties in our infrastructure platform. Please turn to the next slide. To be clear, our corporate strategy is designed to build significant scale into our business for the benefit of customers and shareholders. To do that, we're launching a new record $56 billion capital plan that targets compound annual rate-based growth of 10%. Note, too, that our expectations of future growth are expanding, particularly in the state of Texas. That's why we're raising our long-term EPS growth estimates to 7% to 9%. Please turn to the next slide where Alan will walk you through a business update at Encore.