DBA Sempra

Good day and welcome to SEMPRA's first quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Louise Fick. Please go ahead.

Good morning and welcome to SEMPRA's first quarter 2026 earnings call. A live webcast of this teleconference and slide presentation are available on our website under the events and presentation 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. Justin Byrd, Executive Vice President of SEMPRA and Chief Executive Officer of SEMPRA Infrastructure. Caroline Nguyen, Executive Vice President of SEMPRA. Alan Nye, Chief Executive Officer of Encore. Diane Wold, 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-Q files 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 gap measures. We also encourage you to review our 10Q for the quarter ended March 31st, 2026. I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, May 7th, 2026, 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 three and let me hand the call over to Jeff.

Thank you all for joining us today. We're pleased with our first quarter financial results and the progress we've made against our 2026 value creation initiatives. Let me start by walking through the key developments from the quarter. Recall our first initiative is to invest approximately $13 billion in T&D energy infrastructure while also emphasizing improved financial returns. 2026 has started on a positive note with SEMPRA deploying $3 billion of investment capital in the first quarter, which keeps us on track to meet our annual target. As for improving returns, Encore received approval from the PUCT for the settlement of its base rate review. This decision comes with higher authorized equi layer at 43.5%, higher return on equity at 9.75%, and higher cost of debt set at 4.94%. Additionally, ONCOR is permitted to surcharge the difference between the new billing rates and ONCOR's current rates for the period January 1 to June 1, 2026. Based on the final order received last month, the surcharge will be made through a separate filing with recovery expected over the remainder of the year. Ultimately, this outcome is expected to better align rates with Encore's current cost structure and support improved financial strength and credit metrics during a period of elevated capital investment that helps support Texas's growing energy needs. For more information on the improved decision, please refer to slide 11 in the appendix. I also want to note that Encore submitted its inaugural UTM filing last month to incorporate $4.4 billion of T&D assets that were placed into service since January 1, 2025 into rates. Importantly, the UTM helps meaningfully reduce regulatory lag by allowing recovery on these assets and going forward can be filed every 365 days. We anticipate a final order and updated rates in the second half of 2026. In combination, the rate case approval and periodic UTM filings put ENCOR in a better position to earn closer to its authorized ROE across the plan period. In California, SDG&E filed an uncontested offer of settlement in its TO6 proceeding with FERC, which establishes the authorized framework for SDG&E's cost to own, operate, and maintain high-voltage transmission infrastructure. Similar to improving financial returns at Encore, the offer of settlement is important because it would also increase SDG&E's authorized base return on equity to 10.28% with a hypothetical capital structure of 54% equity among other items. The terms of the settlement remain subject to FERC approval, which is expected to occur in the second half of this year. Importantly, if approved, the settlement terms would be retroactive to June 1 of 2025. Now turning to SIPR infrastructure, we declared COD at Cimarron Wind during the quarter. At ECA LNG phase one, we introduced feed gas from the GRO pipeline into the facility and began the startup process. We continue to expect to produce first LNG next month, and we're targeting substantial completion this summer. At that point, we'll begin recognizing LNG revenues with long-term contracted sales and full commercial operations commencing shortly thereafter. Port Arthur LNG Phase I and Phase II construction projects continue to progress on time and on budget. Another one of our top priorities for the year is to close the SI Partners transaction and use the associated proceeds to reinvest in our utility businesses. We're making progress toward completing the transaction and have recently received key approvals from FERC and antitrust regulators. We expect a close in transaction in the second or third quarter of 2026. We also remain focused on simplifying Sempra's business model to concentrate our future investments on our utilities, which we previously projected would grow rate-based at roughly 11% annually through 2030. That's why we're continuing to advance our capital recycling program. Consistent with this initiative, the previously announced Ecogas sale remains on track to also close in the second or third quarter of this year. As you know, we also have a relentless focus on modernizing operations to support improving our cost structure and building out our execution capabilities. In that regard, Encore continues to make strides diversifying its supply chain while reducing execution risk. Currently, they're growing their supply base across multiple sourcing categories, securing labor and materials, expanding logistics and warehousing capacity, and strengthening physical security. Lastly, we continue to prioritize community safety, affordability, and operational excellence across the enterprise. As an example, during January's winter storm fern, SoCalGas's natural gas storage facilities helped both SoCalGas and SDG&E customers avoid approximately $120 million in higher potential energy costs by withdrawing natural gas purchase months earlier. The effective use of these assets highlights the clear value of natural gas storage and how it can be used successfully to support customer affordability. Additionally, the California Earthquake Authority published its Natural Catastrophe Resiliency Study in April. It outlined several potential pathways to improve affordability in the state and improve community safety. We're encouraged by the report and will closely monitor developments informed by the study's findings as the year progresses. Now, please turn to the next slide where Karen will walk through our financial results.