SRE · Q1 2026 Earnings

Texas as one of several opportunities (Q2 FY2025) → Texas as the primary capital focus, $12B "probably conservative" (Q3 FY2025) → multi-year guide locked, $65B plan, no equity (Q4 FY2025) → incremental-to-the-incremental firming with named ERCOT awards (Q1 FY2026).

The capital growth story has acquired a third layer beyond base + incremental. Two quarters ago Sempra communicated $65B of base plan; last quarter that $65B was paired with the explicit no-equity-issuance funding commitment; this quarter management put a name on the next tier: "The bottom line is it's going to lead to higher levels of capital spending in Texas. And interestingly, internally, Constantine, we refer to this as the incremental to the incremental." The ~4 GW of South Dallas projects (~$2.9B) and ~$9B of total incremental visibility sit above the $65B envelope — not inside it. That is a third axis of capital growth the FY2026–FY2030 plan has not yet captured.

Data center load has shifted from binary upside to a "base plan is indifferent" formulation. Three quarters ago Sempra was disclosing 186 GW of interconnection demand against a 38 GW high-confidence 2031 figure and treating the gap as the story. Last quarter the framing was 19 GW signed and $2.7B of collateral. This quarter management's language is "We've got a base capital plan that's largely indifferent to whether these things happen or don't happen...the data center story, as it matures, becomes significant upside beyond our capital plan." The bull case no longer requires data center load to materialize; it merely benefits if it does. That is a meaningful de-risking of the central thesis.

LNG has been formally subordinated as a capital allocation priority. Last quarter the disclosed mix was 95% regulated utility capex. This quarter management closed the loop: "We've made the decision this is going to be a pure play utility business. So to the heart of your question, we would expect to be reducing our capital allocation to the LNG space." Combined with Port Arthur Phase 1 first LNG next month and SI Partners closing in Q2–Q3 FY2026, the LNG transition from growth segment to contracted JV is on track and explicit.

Texas regulatory lag is now described as structurally reduced, not merely improved. Management's tone on the UTM was operational rather than aspirational: "The UTM helps meaningfully reduce regulatory lag by allowing recovery on these assets and going forward can be filed every 365 days...that's why we took the opportunity to load the balance sheet...the improvement in financial returns...has really unlocked what I think is a significant leg of capital." The 10.28% ROE on SDG&E TO6 (vs. the prior authorized framework) is the California-side analog. Two distinct regulatory unlocks compounding into the EPS guide.

Hedging language has narrowed to FERC and rating-agency timing. The five remaining qualifiers — FERC approval of SDG&E TO6 (H2 FY2026), SI Partners closing (Q2–Q3 FY2026), ECA first LNG timing, rating agency thresholds improving ~6 months post-SI close, and California wildfire framework — are all dated mechanics rather than strategic uncertainty. Compared with Q2 FY2025's open-ended optionality framing, the posture is materially harder.