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Date

Thursday, Aug. 7, 2025, at 12 p.m. ET

Call participants

  • Chairman and Chief Executive Officer — Jeffrey W. Martin
  • Executive Vice President and Chief Financial Officer — Karen L. Sedgwick
  • Executive Vice President, Chief Executive Officer of Sempra Infrastructure — Justin Bird
  • Executive Vice President, Sempra California — Caroline Winn
  • Chief Executive Officer, Encore — Allen Nye
  • Chief Financial Officer, Encore — Don Clevenger
  • Vice President, Investor Relations — Louise Bick
  • Vice President, Controller, and Chief Accounting Officer — Diane Wold

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Takeaways

  • Adjusted EPS-- $0.89 adjusted EPS for Q2 2025, unchanged from the prior year period (adjusted, non-GAAP), with management stating results are "in line with the prior period's results."
  • GAAP earnings-- $461 million, or $0.71 per share (GAAP) for Q2 2025, compared to $713 million, or $1.12 per share, in Q2 2024.
  • Full-year 2025 adjusted EPS guidance-- Affirmed at $4.30 to $4.70 adjusted EPS for full year 2025; 2026 EPS guidance affirmed at $4.80 to $5.30.
  • Capital deployment-- Over $5 billion of new capital deployed in the first half of 2025, with more than $10 billion allocated to U.S. utilities in 2025.
  • Encore capital plan-- $36 billion five-year capital plan, with $12 billion of potential upside opportunities under evaluation for 2027-2029, not yet included in the base plan.
  • Encore legislative update-- HB 5247 was enacted in Texas in June 2025, creating the Unified Tracker Mechanism (UTM), allowing for annual interim rate adjustments and expected to lift Encore's earned ROE by 50% to 100% basis points over time compared to existing recovery mechanisms.
  • Encore base rate review filing-- Requests include a 45% equity layer (up from 42.5%) in Encore's June 2025 base rate review filing, a 10.55% ROE (up from 9.74%), and a 4.94% cost of debt (up from 4.39%), with a ruling anticipated in 2026.
  • ECA LNG Phase One-- Over 94% complete as of July 2025; mechanical completion expected later this year and substantial completion, with initial revenue generation, targeted for 2026.
  • Port Arthur LNG Phase Two-- Secured all major permits, signed a 20-year SPA with JERA for 1.5 MTPA in July 2025, and expects to reach FID in 2025.
  • Transmission projects-- SDG&E was awarded an estimated $600 million in California ISO transmission projects as part of the 2024-2025 transmission plan, with most investments expected after the current capital plan period.
  • Cost management and customer affordability-- SDG&E recently filed for approximately $300 million in savings through the reduction of certain regulatory programs, in addition to passing $200 million in federal tax credits to customers in 2025.
  • SDG&E wildfire mitigation-- 100% of the transmission system hardened with steel structures in the highest fire threat zones (as reported by SDG&E); per-mile undergrounding costs cut by 40% over the last 24 months.
  • Equity sale at Sempra Infrastructure-- Nonbinding letter of intent executed with KKR for an equity sale within or above the 15%-30% range; ongoing negotiations could impact Sempra's utility mix and credit profile pending closing in 2026.
  • Growth drivers at Encore-- Encore added 20,000 new premises in Q2 2025, with the Far West Texas weather zone peaking 9.2% above previous highs in May 2025.
  • Sempra Infrastructure operations-- Cameron LNG Phase One recently exported its 1,000th LNG cargo. Cimarron Wind project completion exceeded 85% as of Q2 2025, targeting power generation this year and commercial operation in 2026.

Summary

Sempra(SRE 1.77%) reinforced its focus on regulated utility growth and capital discipline, affirming EPS guidance and highlighting its ongoing business transition. Management emphasized Texas as a driver of incremental capital requirements and regulatory clarity, with new legislation (HB 5247) and pending rate proceedings setting the stage for higher returns and growth. LNG asset progress and contract execution, particularly the major milestone with JERA on Port Arthur Phase Two, may unlock further long-term cash flow upon completion. Dividend accretion, a stronger utility weighting, and deconsolidation potential of Sempra Infrastructure are positioned as key strategic levers pending final transaction outcomes and capital recycling in 2026.

  • Management stated, "we expect these transactions will be accretive to the company's EPS forecast as well as credit," contingent on 2026 completion.
  • The company described Encore’s capital plan is increasingly likely to reach the high end of, or exceed, current incremental targets for 2027–2029, driven by supportive legislative and regulatory actions and permitting progress.
  • Encore reported high-confidence load number for 2031 of 38 gigawatts, broken down into signed agreements and additional secured demand, signifying significant anticipated growth in its Texas service territory.
  • Sempra is actively advocating for state and regulatory reforms in California, prioritizing immediate customer bill savings and public policy changes (including phasing out regulatory programs and enhancing climate credits).
  • The CFO indicated the timing of Sempra Infrastructure equity sale was flexible, stating the extension "is designed to give the parties adequate time to do a transaction," reinforcing transaction certainty within a rolling timeframe.

Industry glossary

  • UTM (Unified Tracker Mechanism): Texas regulatory tool permitting annual interim rate adjustments for utilities based on eligible capital investment, replacing prior TCOS and DCRF mechanisms.
  • SPA (Sales and Purchase Agreement): Long-term contract committing buyers and sellers to specified volumes and prices, frequently used in the LNG sector.
  • FID (Final Investment Decision): The formal board-level go-ahead for a major energy project, releasing full capital for construction and execution.
  • AFUDC (Allowance for Funds Used During Construction): Accounting method in regulated utilities that permits capitalizing interest and equity costs incurred during construction projects.
  • POI (Point of Interconnection): Locations where utility infrastructure connects to customer or other third-party generation/load.
  • GRC (General Rate Case): Comprehensive, multi-year proceeding in which a regulated utility proposes and justifies adjustments to its base rates before its regulator.
  • TCOS (Transmission Cost of Service): Regulatory mechanism in Texas formerly used for annual transmission cost recovery prior to UTM.
  • DCRF (Distribution Cost Recovery Factor): Texas mechanism that allowed for limited annual distribution cost adjustments, replaced for qualifying investments by the UTM.
  • MTPA (Million Tonnes Per Annum): Standard capacity unit for annual output in LNG projects.

Full Conference Call Transcript

Louise Bick: A live webcast of the teleconference and slide presentation are available on our website under the Events and Presentations section. Many of you may know me. I'm Louise Bick, Vice President of Investor Relations. Glenn has recently taken on other financial responsibilities at Sempra, and I'm excited to be leading our IR program now. I look forward to seeing you more on the road in the coming weeks and months.

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 Bird, Executive Vice President of Sempra, Chief Executive Officer of Sempra Infrastructure; Caroline Nguyen, who I'd like to note, is a new Executive Vice President of Sempra. With over 35 years at our California Utilities, Caroline brings extensive safety and operational expertise to her role overseeing Sempra California's dual utility platform both SDG&E and SoCal Gas. Allen Nye, Chief Executive Officer of Encore; Don Clevenger, Chief Financial Officer of Encore; Diane Wold, Vice President, Controller, and Chief Accounting Officer of Sempra 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 statements we make today. The factors that could cause our actual results to differ materially are discussed in the company's most recent 10-Ks and 10-Q 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-Q for the quarter ended 06/30/2025.

I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, 08/07/2025. 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 four, and let me hand the call over to Jeff.

Jeff Martin: Thank you all for joining us today. Earlier this morning, we reported second quarter 2025 adjusted EPS of $0.89, which is in line with the prior period's results. With steady execution on our 2025 value creation initiatives, we're pleased with our first half results and remain on track to achieve our goals for the year. As a result, we're also affirming our full year 2025 adjusted EPS guidance range of $4.3 to $4.7, and we're also affirming our 2026 EPS guidance of $4.8 to $5.30. Next, I'd like to provide an update on the progress we've made on the five value creation initiatives announced earlier this year.

As a starting point, our current capital plan targets the investment of roughly $13 billion this year, with over $10 billion allocated toward our growing U.S. Utilities. Through the first half of the year, we've already deployed more than $5 billion of new capital while continuing our efforts to strengthen the regulatory compacts in the jurisdictions where we operate. This includes advocating for constructive regulatory and legislative frameworks to better serve all of our stakeholders. The recently passed House Bill 5247 in Texas is a great example, and Karen will touch on that development later in today's presentation. Next, I want to mention that we're making steady progress on our capital recycling initiatives.

In the equity sale at Sempra Infrastructure, we've executed an extension to the right of first offer process that is outlined in the limited partnership agreement. With the benefit of that extension, Sempra has entered into a non-letter of intent with KKR. The letter of intent contemplates an equity sale within or even above the 15 to 30% range, depending upon valuation and other considerations. Given that we're in ongoing negotiations, we're limited at this time in what we can disclose, but we'll look to provide additional updates once reaching a definitive agreement. During the quarter, we also advanced the ECO gas sales process and have received substantial interest from both strategic and financial parties.

I'd refer you to slide 10 for more color on both transactions. As previously mentioned, we expect these transactions to close sometime in 2026, and in combination, we expect these transactions will be accretive to the company's EPS forecast as well as credit. As is our convention, we don't provide any details on M&A transactions until definitive agreements are in place. Subject to the transactions being completed next year, we expect a notably higher contribution of earnings from our regulated utilities, which we expect to improve Sempra's overall credit and business risk profile. In that regard, I'd like to refer you to slide 12 of the appendix, which highlights our changing business mix.

As we continue our transition toward a more utility-focused business model, this slide demonstrates two key points. Number one, our utilities are anchored in the two largest economic markets in The United States, California and Texas. And number two, our regulated investments provide investors with broad exposure to both electric and gas utility investments in different markets with constructive regulatory compacts. Taken together, regulatory and geographic diversity across both electric and natural gas investments improves the consistency of our earnings and cash flow while also reducing financial risk. Moreover, because our five-year capital plan increasingly prioritizes growth at Encore, we expect our business mix to become more weighted toward Texas through the end of the decade.

A proposition that we feel strongly will enhance Sempra's value over time. Moving to our fit for 2025 campaign, we continue to make solid progress. The focus here, you'll recall, is on improving customer affordability by reducing internal cost, improving productivity, and aligning Sempra's cost structure to its future business needs. To date, we've adopted new technology, found innovative ways to streamline processes, and realigned our organizational structure to better serve our customers. Finally, I'd like to discuss our continued progress in mitigating enterprise risk. SDG&E, as you know, has long been a leader in operational excellence and has made significant investments in data science, technology, and wildfire mitigation measures.

Moreover, we're pleased to report that SDG&E has hardened 100% of its transmission system with steel structures in the highest fire threat areas or what we call tier three zones. SDG&E expects to achieve its medium-term goal of fully hardening tier two zones by 2028. I'd also like to highlight that over the last 24 months, our engineering and project management teams working alongside our vendors have been successful in reducing the cost per mile of undergrounding by 40%. Demonstrating again our commitment to operational efficiency and safety while also improving the affordability of our future services. And with that, please turn to slide five where Karen will walk through additional business and financial updates.

Karen Sedgwick: Thank you, Jeff. Across our businesses, we have a number of updates to share that demonstrate the progress we've made during the quarter. Starting with Sempra, Texas, Encore continues to present a truly compelling investment opportunity, as the company continues to execute on its $36 billion five-year capital plan. Encore is also evaluating incremental capital opportunities for the 2025 to 2029 period. As we've previously outlined, these opportunities are critical to supporting Texas' strong growth and are further reinforced by a series of constructive legislative bills that were recently passed and are designed to enable continued infrastructure expansion across the state.

In particular, HB 5247, which established the unified tracker mechanism or UTM for short, was signed into law by Governor Abbott in June. This bill allows qualifying electric utilities such as Encore to record costs to a regulatory asset arising from eligible capital investments and apply for interim rate adjustments through an annual UTM filing. This filing occurs in place of the existing TCOS and DCRF processes. We expect this legislation to help reduce regulatory investment lag and improve the earned return on equity, particularly during sustained periods of higher capital investment necessary to support high growth areas in Texas. Encore's earned ROE is anticipated to increase by 50 to 100 basis points over time versus the existing recovery mechanisms.

Encore has begun recognizing revenues related to assets placed into service from and after 01/01/2025 and expects to make its initial UTM filing in 2026. Other legislative outcomes from Texas are summarized on slide 14 in the appendix. Next, due to higher levels of growth and other drivers, Encore's rate case is also important, as a company looks to align its cost structure with the current operating environment.

In June, Encore filed a request for a comprehensive base rate review, seeking to recover past storm-related costs, increase amounts recovered in rates for future storm-related costs to better reflect historical costs, mitigate the impact of rising expenses and inflation, and improve its credit metrics and financial strength during a time of unprecedented growth. In its filing, Encore requested, among other items, a 45% equity layer compared to the currently authorized 42.5%. A 10.55% ROE compared to the currently authorized 9.74.94% cost of debt compared to the currently authorized 4.39%.

A key component of the base rate review is that it updates Encore's O&M expenses, which are currently based on a historical 2021 test year to the level experienced throughout 2024. This is intended to more closely align the costs included in rates to the realities of today's operating environment and help improve Encore's cost recovery and financial strength. In terms of timing, Encore is expecting to receive a final order in 2026. I'd also refer you to slide 13 in the appendix where we present additional information relating to Encore's base rate review.

Turning to Sempra, California, we're pleased to announce SDG&E has been awarded an estimated $600 million in transmission projects as part of the CAL ISO 2024 to 2025 transmission plan. Was finalized during the quarter. While most of the related investments are expected to occur beyond the period of our current capital plan, we're excited to continue to support California's transmission system while enhancing safety, and reliability across our service territory. Next, I'd like to acknowledge the significant initiatives currently underway to enhance customer affordability. SDG&E recently filed a request with the CPUC targeting savings of approximately $300 million by phasing out certain regulatory programs that are no longer economically beneficial to customers.

Recall too, this amount is incremental to the $200 million of federal tax credits that SDG&E is passing on to customers over the course of this year. Further reinforcing our efforts to improve customer affordability. Moving to Sempra Infrastructure. Let me start with operational updates. Cameron LNG phase one recently celebrated the successful production and export of its one thousandth LNG cargo. Marking a significant achievement just six years after its first commissioning cargo 2019. Elsewhere, we're steadily making progress on major construction projects at ECA LNG Phase one, Cimarron Wind and Port Arthur LNG phase one. Together, these projects should help drive a step change in cash flows at Sempra Infrastructure.

I'm pleased to note steady progress continues at ECA LNG phase one, Now that the company is closer to commercial operations, we are tracking several key near-term milestones that are expected to help us meet our financial commitments for next year. As of July, the project is more than 94% complete. We expect to reach mechanical completion later this year followed by substantial completion in 2026. At that time, the facility is expected to begin generating revenues from LNG commissioning cargoes. We now expect sales to our long-term SBA customers to start shortly thereafter in 2026. The Cimarron wind project is on time and on budget with overall project completion beyond 85%.

We continue to target commencement of power generation later this year, with commercial operations planned for 2026. We also continue work towards delivering Port Arthur LNG phase one on time and on budget. Targeting commercial operations for train one in 2027, and train two in 2028. Current construction is advancing the foundations steel installation, LNG tank construction, ground piping, and dredging activities with the overall project now surpassing 50% complete. We're also excited about some of the recent developments at Port Arthur LNG phase two, In May, the project received the Department of Energy non-FDA export authorization. At this point in time, Port Arthur LNG phase two has received all major permits necessary for taking FID.

Phase two also made significant commercial progress recently, In July, we executed a twenty-year SPA with JERA for 1.5 MTPA of offtake capacity. This milestone helps advance the project towards reaching FID, and underscores Sempra Infrastructure's commitment to supporting energy security for our customers, through stable, long-term LNG supply. We're pleased with additional strong offtake interest and remain focused on advancing commercial progress and financing the project. We're still expecting to take FID in 2025. I conclude the business update by saying there's plenty to be excited about at Sempra Infrastructure as this segment continues to advance growth in LNG energy networks, and clean energy. While posting strong financial performance.

Please turn to the next slide, while I review the second quarter financial results. Earlier today, Sempra reported second quarter 2025 GAAP earnings of $461 million or $0.71 per share. This compares to second quarter 2024 GAAP earnings of $713 million or $1.12 per share. On an adjusted basis, second quarter 2025 earnings were $583 million or $0.89 per share. This compares for our second quarter 2024 earnings of $567 million which also equated to $0.89 per share. For the first half of the year, we're pleased with our execution and Sempra is well positioned to deliver a year of solid financial performance on behalf of its shareholders. Please turn to the next slide.

Variances in the second quarter 2025 adjusted earnings as compared to the same period last year can be summarized as follows. At Sempra, California, we had $5 million primarily from higher regulatory awards electric transmission margin, and AFUDC equity. Partially offset by lower CPUC base operating margin and lower authorized cost of capital. Sempra, California also had $37 million of lower income tax benefits and higher net interest expense. As you may recall, we received our final GRC decision for the California utilities at the end of last year. Since then, as part of our Fit for 25 initiative, we continue making progress in managing costs within the authorized base GRC revenues.

We're also prioritizing safety and reliability initiatives based on the outcome of our GRC decision. While advancing efforts aimed at further reducing the cost of service. Turning to Sempra, Texas. We had $6 billion of higher equity earnings primarily from higher investment capital and customer growth. Partially offset by higher operating and interest expenses as well as lower consumption primarily attributable to weather. At Sempra Infrastructure, we had $26 million of higher revenues primarily from a contract modification and higher power volumes. At the parent, the $16 million increase is primarily due to timing of higher income tax benefits higher net investment gains, partially offset by higher net interest expense. Please turn to the next slide.

To conclude our prepared remarks, made steady progress on our 2025 value creation initiatives and delivered solid financial results for the first half of the year. At Sempra, Texas, we saw important milestones as Encore filed a comprehensive bait race review and the regulatory compact significantly improved with the passage of HB 5247. Within Sempra, California, we continue to focus on safety, reliability, and customer affordability. And at Sempra Infrastructure, we're advancing two important sales transactions, and steadily progressing five significant construction projects. All while moving forward on commercial development of Port Arthur LNG phase two. Bottom line, the key takeaway from my perspective is this is certainly an exciting time for Sempra.

2026 should bring a conclusion to the ENCORE base rate review and I'd like to take a moment to list several other potential catalysts that can provide upside. Including number one, continued improvement in earned ROE at Encore due to the UTM. Two, incremental CapEx opportunities, which are expected to materialize in Texas three, ECA LNG Phase one and Cimarron wind earnings contributions coming online at Sempra Infrastructure and four, conclusion of two sales transactions at Sempra Infrastructure, which are expected to unlock value strengthen Sempra's balance sheet, provide investment capital for our growing utility platforms. With that, we'll now take a moment to open the line and answer your questions.

Operator: Thank you. This concludes the prepared remarks. We will now open the line to take your questions. Please make sure your mute function is turned off to allow your signal to reach our equipment. We will pause for just a moment to allow everyone to signal for questions. And our first question will come from Ross Fowler from Bank of America. Your line is open.

Ross Fowler: Good morning, Jeff, Karen. Good morning.

Jeff Martin: Morning. And, Luis, congratulations on full responsibilities of our IR. Well deserved.

Louise Bick: Thank you. Yep. I wanted to dig in a bit

Ross Fowler: on the KKR LOI. Around the Semper Infrastructure Partners sale process. You said in your comments, the LOI is within or potentially above the 15 to 30% range. Depending on valuation conditions. So does that mean to the extent you will or are discussing stake sales with third parties beyond the current investors that the strategic approach here on business mix is that the full stake is beyond that 30% level, or how are you seeing that and where we act actually go at the end of the day?

Jeff Martin: Sure. Let me just start, and I trust you understand that in any M&A deal, Ross, we're we're fairly limited in what we can say. Obviously, we're trying to have a great transaction. What I'll try to do is recap what we've said publicly, then maybe provide a little bit more color to the latter part of your question. We indicated that we've executed an extension to the right of first offer process under the existing limited partnership agreement. And, similarly, we've executed a nonbinding letter of intent with KKR. And, also, though, I would note that LOI contemplates the LOI with the KKR, by the way, contemplates an equity sale in that 15 to 30% range.

And we've also indicated that it could be within or above that. And I would just note that's consistent with, what I said on the Q1 call in May that the ultimate amount of equity being sold will be dependent upon a number of considerations including valuation. I also talked about in May, Ross, I think this is probably important you know, for the listening audience. That we're focused on four value drivers. So we're looking to obviously optimize the implied equity value of SI from the transaction. We wanna make sure we minimize tax leakage.

And it's also very important as we think about that roll forward five-year capital plan that we're thoughtful in the timing and use of proceeds. And finally, I've been very clear, with all of our stakeholders. There's an opportunity here to improve, our balance sheet and put some cushion on the balance sheet. So those are our priorities. We certainly are not trying to quote unquote guide the street to a higher level of equity sell. It's just there's a fair amount of flexibility that we wanna make sure that we're maximizing driving the most value to our owners.

Ross Fowler: And then you mentioned the capital plan, so let me let me touch on that for a second. The incremental capital at Encore in Texas and the transmission awards, that you talk about in the deck, those are still outside the base plan with CCM coming in '27. How do you see the timing of a capital plan update related to those? Given that it's still outside the plan can you just kinda give some color on your level of confidence that spending can be executed?

Jeff Martin: Yeah. I would do a couple things. One is in Encore's press release today, they go through kind of the process and recap of how they approve and roll forward their capital plan. You recall that earlier this year, they announced a base plan at the 100% level of $36 billion. And you're correct. They articulated an opportunity in 2027, '28, and '29 for an improvement to that capital plan by roughly $12 billion. What's important, I think, is Encore has been very clear. They're seeing upward pressure on their capital plan, so we're feeling more confident, obviously, about that $12 billion. And here's the three drivers they've identified. They've had recent legislative developments that have been constructive.

They've had some supportive regulatory decisions, and they're obviously making really good progress, Ross, on the thing we identified in February, which is that $12 billion was associated with projects that needed additional permits on. They're continuing to make steady progress on permits. So I think in combination, we're quite comfortable confirming that we expect them to be at the high end of that $12 billion or more. The way the process will go is, at their board meeting in October, we'll recap that roll forward five plan with the board. And remember, they're in the middle of a base rate review. Obviously, in Austin as well. So sometime in 2026, we'll look to update that plan.

It could be on our February call. It's gonna be driven by resolution of their base rate review. Maybe I might if I could Yeah. Ahead. Yeah. I was gonna say if I could, you know, it might be helpful to your if you allow me. Let's let Alan provide just a little bit more context on the key drivers for that capital plan because I think the growth story continues to get better. Including tailwinds beyond the five-year plan. But, Alan, it might be helpful to Ross if you just cover off on what you're thinking about from a growth standpoint and how that $7.65 overlay will help. You bet, Jeff. And yeah. Thanks, Ross.

As Jeff the growth continues to be very, very strong.

Allen Nye: Really all across our system. We already announced this morning we added 20,000 new premises this quarter. That's fairly consistent. With the number we've been seeing for many, many quarters now. West Texas, we continue to see very, very strong growth out there. The Far West Texas weather zone had a new peak in May, 9.2% above the prior peak. And the two transmission loops by which we serve the Permian, the Culberson and Stanton loops both continue to see really increased peaks. Culberson peaked 23.5% above where it did prior June in June. And Stanton was up about 6.9% over the same period. So West Texas continues to be really strong.

The story remains transmission points of intersection and data centers and LC and I load. And as we announced this morning, our total new transmission POIs are up about 47% year to date with total active POIs up about 38% year to date. Breaking that down a little further, if you look at just traditional LC and I, take data centers out of it, That's up for new about 19%, and total are about up 2% quarter versus same quarter. Breaking that down a little further, that entire queue, there's around 1,100 or so, a little over 1,100 total customers that we're dealing with there.

It's about a 186 gigawatts of data centers about seven gigawatts of what I would call traditional C and I, about five gigawatts of crypto, four gigawatts of kinda oil and gas activity, and then 3% or three rather gigawatts of service to other utilities. So that's what we're seeing there. We continue to have, you know, our high confidence load number for 2031 of 38 gigawatts. Broken down by nine gigawatts of signed interconnection agreements with security provided and another 29.9 gigawatts of high confidence load that we submitted in our officer letter to ERCOT. And finally, Jeff may have mentioned this. I would just refer everyone back to page 16 of the presentation.

That lists out the really kind of amazing transmission opportunities that a lot of this growth is providing us both through the Permian plan as well as through the STEP program or the seven sixty five EHV plan, both of which we've said previously we anticipate Encore will build a significant amount of. That remains true. To the permitting question that Jeff mentioned earlier or stated earlier, I'd simply say this, and I've said this before. I did these for seventeen years before I became general counsel encore. I think I did 60 or so. Of them over about a seventeen year period. We're filing 24 this year. And that'll continue for the next couple years to come.

Jeff Martin: See, Ralph, I wanted you to have that background because it really feeds into that story about why that $12 billion incremental is probably gonna be conservative.

Ross Fowler: Makes a lot of sense. Jeff and Alan, thank you very much for the context. Really appreciate it. Thank you, Ross.

Operator: Thank you. Our next question will come from Steve Fleishman from Wolfe. Your line is open.

Steve Fleishman: Hi, Jeff. So I guess maybe just following on from there, can you just remind us that your plan right now does not include that $12 billion, or does it include some of it?

Jeff Martin: The No. No. It does not include that. You know, we're we're we're 80% of the $30 billion plan, and all of that represents upside to our base plan, Steve.

Steve Fleishman: Okay. So even, like, that business mix, the rate base mix chart, that does not that does not include it yet.

Jeff Martin: That's that's correct.

Steve Fleishman: Okay. And then just thanks for the update. On the Sempra infrastructure. Just I don't know if you can give this answer, but just any sense on timing of moving forward this LOI with KKR? Is this something by the next call, or is there you know, what's kinda gonna drive the timing of that?

Jeff Martin: No. I would just say, Steve, you know, it's a complex structured transaction. Obviously, we're dealing with a party we know very, very well. They're in the boardroom at SI. We're engaged on our side. KKR is actively engaged. Not gonna forecast the time of it right now, but we're pleased with the progress we've made so far. And we'll continue to look to make an update once we reach a definitive agreement. K. And then I guess just how do you feel about being able to kinda time the sale with the this kind of obviously rising CapEx at Encore? Do you feel like you can match that up?

Steve Fleishman: Well, it's a it really is a very insightful question. Obviously, we've got a couple things going on where we're starting our fall planning process. Where we're gonna do a real bottoms up review of how we roll that capital plan forward and the timing of that capital. Then, obviously, we're balancing that, Steve, with not only the timing of potential closing with our counterparty in the transaction, but also how we structure not only their proceeds, but our use of proceeds. So you know, our goal is to make sure that as we roll this plan forward, we're obviously expecting our overall capital program to increase.

It will continue to be increasingly weighted toward Texas, That's the priority inside of our company. And what we wanna do, we talked about this a little bit on the fourth quarter call, is make sure that this program is intended to accomplish several things. Improve our overall EPS forecast, improve our credit, and also make sure that we're minimizing reliance on, additional equity issuances. I think we're in a good spot to do this. You're right. We gotta time this well into 2026. Our goal is to make sure we match up a really efficient use of proceeds and use those proceeds in a way where we're making investments that Wall Street will value the highest.

As I indicated earlier, we certainly think that's around the quality and growth in Texas. Okay.

Jeff Martin: I guess one last thing just on the credit portion of that. How do you mentioned, I think, in the capital recycling potentially getting to the point where you need to consolidate. Just could you talk to how that might impact kind of maybe the metrics and the risk view from a credit standpoint.

Steve Fleishman: Sure. We've provided a little bit of visibility into this in the past. Karen and her team have done a great job of meeting with all the agencies. I've also taken the time to go to New York and meet with all the agencies around not only our capital plan, but also the pending SI transactions. There's really an opportunity here based upon where we land in the equity cell to do a couple things. Number one, one of the thresholds we're evaluating is that when you get to a point where roughly 90% of your earnings comes from regulated utilities, that tends to be a signpost that could allow a reevaluation of what your downgrade threshold is. There's an opportunity in this transaction to move our downgrade thresholds either you know, one notch down or potentially two notch down. That's one point.

The second point is, depending upon where you land in the equity cell, you also have the opportunity to deconsolidate your accounting as well as the debt from SI from Semper's balance sheet. Now this one's a little bit more complex because it really goes across three dimensions. It goes across the level of equity ownership, It goes across issues relating to governance, either positive or negative control. Then it goes to issues of materiality. And as you would expect, Steve, each of the agencies has a little bit different test as they look at that. But that's why we talk about having a little bit of flexibility as we go forward in our transaction.

Is we wanna make sure that we're maximizing the overall value for our investors that will be one of the criteria we'll evaluate in the end.

Steve Fleishman: Okay. Great. Thank you. Appreciate it.

Jeff Martin: Appreciate it, Steve.

Allen Nye: Thank you.

Operator: Our next question will come from Faye Shea from Barclays. Your line is open.

Nick Campanella: Hey. Good good morning. Good afternoon. It's Nick Campanella.

Jeff Martin: Hey, Nick. Everyone's doing well. So

Nick Campanella: Hey. I just wanted to ask one follow-up on the LOI. Just is there a point at which this roofer extension expires?

Jeff Martin: No. We're not gonna go into details on it, but the way to think about it is the most important thing is that extension is designed to give the parties adequate time to do a transaction. And that's something that I think would be evergreen or rolling forward until the parties reach a definitive agreement.

Nick Campanella: Understood. And then maybe on California, any high level thoughts on your kind of participation in a potential AB ten fifty solution this year? As well as maybe just on some of the status of the affording affordability bills that are out there. You know, I know that a lot of folks have seen the governor's proposal. But just how would you kind of characterize stakeholder engagement beyond that? You know, do you see this the state ultimately getting to kind of a constructive outcome here in September?

Jeff Martin: Yeah. Let me try to tackle both these issues. I'll talk about, our view on the wildfire legislation, and I'll transition to affordability. I would note we're pleased to have Caroline Wynn with us today who oversees all of our operations in California. And, certainly, Caroline, please chip in as I go forward. I would start with the wildfire legislation, and I've we've taken, obviously, lots of questions on this. When we've been on the road and on prior calls.

But I'm not sure I can add a lot to I can't add a lot to it publicly, Nick, except to say, we have always thought that we'll get to some progress in stabilizing of the AB 1054 framework this year. Obviously, in the draft bill that was leaked, you'll see that there's also a component to it that talks about a study bill. We also think that's important. We see that as part of any package that takes place this fall. There'll probably be opportunities to continue to improve the AB 1054 framework going into 2026. Several weeks left in the session. Obviously, our team is very much engaged.

The one comment I would say is just as a matter of principle, you know, we're not really supportive from a utility practice and procedure standpoint on the use of shareholder dollars. You may recall this is important to CEPRA because we haven't had a major while in just over eighteen years. I would I would might just say, though, we're gonna look at the totality of the circumstances. We realize there's a broader set of issues for all stakeholders, so that's something that we would continue to evaluate. Caroline, do you wanna add anything else on the wildfire side other than that?

Caroline Winn: You know, I'd maybe just take an opportunity to step back and talk a little bit about how SDG&E is building a better business. As we head into our eighteenth year, since the large wildfire due to utility infrastructure, You know, SDG&E has continued to expand and enhance industry leading wildfire mitigation program. And, you know, this is a team of employees who really have a growth mindset and a strong culture that we need to be better than we were yesterday. Couple leadership areas in my mind is superior situational awareness, have strong community engagement and service mindset. They're a leader in data science. But maybe a few enhancements that we've done this year is expansion of the weather network, and that includes camera. And additional artificial intelligence.

And that's gonna improve our forecasting and our monitoring capabilities. We've deployed a dual Black Hawk helicopter strategy for rapid response and quicker inspections and patrols. We've done enhanced inspection regime that includes drone inspection, of our wildland urban interface areas, and we've expanded our public safety power shutoff preparedness and our capabilities. So we're ready for the season and, really pleased with the conversations that we're having in Sacramento in terms of fund replenishment. And, Nick, the reason I think this is important is obviously, there's a big focus today on you know, financial issues and insurance and the and the 1054 framework, which we think is very important. But the thing that's important inside this business every day is to keep building a better operational program. A better ability to basically mitigate wildfire. I think you were continuing to see this company extend the leadership position there. I'll transition real quickly over to the affordability issue. With roughly four weeks left in the legislative session, my instinct here, Nick, is you're gonna see some of these bills coalesce around a single bill.

Jeff Martin: And what we're focused on is most of these bills are talking about potential long-term impacts, and I think what Carolyn Caroline deserves a lot of credit for is inside the company, we're pushing for that have an immediate impact to customers. That continues to be our message in Sacramento. So we've talked about earlier today filing for an opportunity to pull back about $300 million from programs that we think are not fully serving customers today. You may recall from the rate case, we're passing on about $200 million of tax credit benefits to our customers. Caroline's led a process, Nick, to update our organizational structure in terms of improving how we officially serve customers.

And, obviously, we wanna keep pushing the edge on innovation and new technologies. And I think Caroline in terms of public policy advocacy that your team has led, We're trying to remove the public purpose programs from customers' bills, which are important. As well as make continued improvements to that metering framework. You like to make any closing comments on affordability, Caroline?

Caroline Winn: No. I mean, other than to say you're exactly right, Jeff. We're we are focused on, immediate bill reductions that benefit customers. And I think the transition of the public purpose programs to state budget will save customers a $100 annually. Addressing the $1.3 billion just annual cost shift as part of net energy metering. There's a bill going on that. And we also believe that increasing the climate credit, if we're able double the climate credit, from the state and using GHG funds to do so, especially during the summer months when billed at IS. We think there's just great opportunity to provide that affordability for customers.

Jeff Martin: So, Nick, I know that was probably a longer answer than you anticipated, but we're very engaged on both issues here in the state.

Nick Campanella: Definitely appreciate your thoughts.

Jeff Martin: Have a good day.

Nick Campanella: Thank you, Nick.

Operator: Thank you. Our next question will come from David Arcaro from Morgan Stanley. Your line is open.

David Arcaro: Hey, thanks so much for taking my questions. Wondering if you could give an update on the morning. Wondering if you could give an update on the LNG market and contracting opportunities that you're seeing for Port Arthur. Good to see the Jira agreement move forward. But how does the, you know, how is the macro backdrop and maybe the current administration's efforts been impacting those discussions?

Jeff Martin: Yes. I would just start, and I'll pass it to Justin. We certainly think this one of the understated issues today in the market is the macroeconomic backdrop for LNG continues strengthen in our view, and maybe Justin, you can provide a little bit more color for David. Yeah, David, hello. Yeah. I think we still have a very bullish view on LNG up particularly from The US. We think there's probably growth for two primary reasons. Energy security and affordability in Europe, and then growing demand for gas in Asia. In Europe, you know, the EU ban on transshipments of Russian LNG from earlier this year and Ukraine's rejection of a deal to extend their gas volumes through the pipelines reflect growing confidence in a future without Russian gas, and, therefore, a greater reliance on US LNG? This is part of the reason why we think the Gulf Coast assets Cameron and Port Arthur, are well positioned to meet that demand.

Asia, over the long run, we, as well as many others, expect LNG will continue to penetrate the overshare overall share of the energy supply by replacing coal, and meeting the growing needs of end consumers. Demand is expected to grow through the expansion of natural gas pipeline distribution systems in the developing markets. And then also gas fired generation load is expected to grow to meet peak demands in the summer and winter, as well as support grid reliability. So this, we think, supports the Pacific Coast location as you think about ECA in future expansion at ECA. Again, our overall outlook for demand growth is not changed.

We continue to believe Sempra infrastructures LNG assets are very well positioned to support these needs. And we're seeing that in the marketplace as

Yeah. The only thing I would add, David, is just think about it too as the basis play. Right? You know, we have historically had remarkable production of natural gas here in The United States with very little price volatility. So it's a combination of low price and low volatility relative to the in both Asia and Europe. We continue to think that thesis is intact. And we, we feel very good about the backdrop.

David Arcaro: Great. Yeah. Thanks for that color. Very helpful. And then had a follow-up on the Texas side of things. Appreciate all the details as always, Alan, on the data center pipeline. Obviously, that pipeline has increased a lot, but the high confidence numbers seem to be consistent versus last quarter. So I'm wondering what the dynamic is there. Are you kind of at a limit that you see in terms of what you can connect in through 02/1931? Or what would you see as maybe the cadence of projects getting into that high confidence band that you characterize?

Allen Nye: Yes, David, thanks for the question. I should have clarified that earlier. It's not that there are not more projects out there. It is not that we cannot meet those projects, it's just that those numbers are updated once a year with ERCOT and we continue to see increased demand in that queue, and we continue to work with those parties to execute FEAs and get collateral and advance those projects. So we'll see when we update it but I would anticipate those numbers will continue to increase.

Jeff Martin: Just remarkable too, David. When he went through those numbers earlier on today's call, he's got over 200 gigawatts. Of interconnection request, and he's got a peak load today on the Encore system 31 gigawatts. So the opportunity is really significant, and it's not just leverage the data centers I think it goes across what's unique for his story is how much it goes across a variety of different sectors in the C&I class of customers. Yeah. Very clear. Okay. Great. Thank you so much. Thank you, David.

Operator: Thank you. And we have time for one last question today. And our question will come from Carly Davenport from Goldman Sachs. Your line is open. Hi, Carly.

Carly Davenport: Hey, Jeff. How's it going? Thanks for taking the questions today. Maybe just a quick follow-up on Port Arthur phase two. Obviously, a number of progress points there since last quarter, and it seems like you're still quite constructive on the macro. So just wanted to get a pulse check on your views on the feasibility to reach FID.

Jeff Martin: On that project by the end of this year.

Jeff Martin: Sure. I'll provide some comments, and Justin, feel free to add on the end of it. But we're continuing to see good progress, Carly. I think in the call today, we kind of summarized three points. We've had progress in getting all the major permits for phase two to go forward. We've obviously highlighted the marketing progress with Jira. That's a world class buyer of LNG, by the way, and I think that adds a lot of credibility to the project. And we've also with Faisal Khan's help in Justin, we've been advancing the financing plan, which will also be ported for an FID decision.

Think the takeaway from my perspective is solid progress in Q2, which I think you took away from our earlier comments. I think the project has momentum. And we continue to think there's a few more remaining work streams we're tracking to make sure we're in a position to take FID this year. And, Justin, you want add anything to that? I think you covered it, Jeff.

Carly Davenport: Great. Thank you so much for that. And then maybe just a quick follow-up on Texas as well. Just on the back of the UTM, as you think about that 50 to a 100 basis points of improved ROE, could you just talk a little bit about the timing of those filings and how you'd expect the cadence of that improvement coming to fruition to sort of play out?

Jeff Martin: Sure. Let me let me give you a little bit more color on the UTM, and I'll pass it to Don Clevinger. We've got the CFO from Encore here, and he may be talking about how the timing unfolds. But I'll try to tell most people, Carly, is we put forward a fairly fulsome 8-K on the UTM, which I think does a pretty good job of explaining you know, our expectation that over time, it should have an input a positive impact on the earned ROE of about to a 100 basis points.

I've said several times, though, that it will depend each year on the overall amount of invested capital as well as how much goes into service each year. Given that we don't anticipate currently making our first filing to next year, we anticipate being on the low end of that 50 to a 100 basis point range this year. But as you go forward in that capital plan and more capital gets deployed, obviously, you're gonna move toward the higher end or above that 100 basis points. But, Don, just spend a minute maybe talk about how you're thinking about their timing and cadence of this going forward. Sure. Thanks, Carly.

And if you remember, of the benefits of the House Bill five thousand two forty seven was rolling six filings basically into one, so we would expect, like Jeff said, to file make our first UTM filing in the first half of next year after our rate case is resolved and then annually probably about the same time thereafter.

Carly Davenport: Great. Thanks so much for the color.

Jeff Martin: Thanks for joining the call, Carly.

Operator: Thank you. And 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: Hey, briefly, I just want to thank everyone for joining this morning. I know there's been number of competing calls. We appreciate everyone making time to join us. If there are any follow-up items, please reach out to our IRT with your questions, and we look forward to seeing many of you over the next several weeks. We have a very busy IR schedule, including city, UBS, and Barclays investor conference as well as West Coast NDR towards the August. This concludes our call.

Operator: Thank you for your participation. You may now disconnect.