Q2 2026 Sempra Earnings Call

August 6, 2026

Operator: Good day. Welcome to Sempra's second quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Louise Bick. Please go ahead.

Speaker #1: Good day, and welcome to Sempra's second quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Louise Bick.

Speaker #1: Please go ahead.

Speaker #2: Good morning, and welcome to Sempra's second quarter 2026 earnings call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section.

Louise Bick: Good morning. Welcome to Sempra's Q2 2026 earnings call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations 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 Bird, Executive Vice President of Sempra and Chief Executive Officer of Sempra Infrastructure. Caroline Nguyen, Executive Vice President of Sempra. Allen Nye, Chief Executive Officer of Oncor. Dyan 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.

Speaker #2: 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; and Justin Bird, Executive Vice President of Sempra, and Chief Executive Officer of Sempra Infrastructure.

Speaker #2: Caroline Nguyen, Executive Vice President of Sempra; Alan Nai, Chief Executive Officer of Encore; Diane Wold, Vice President, Controller, and Chief Accounting Officer; and other members of our senior management team.

Louise Bick: Allen Nye, Chief Executive Officer of Oncor. Dyan 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.

Speaker #2: 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.

Speaker #2: 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, filed with the SEC.

Louise Bick: The factors that could cause our actual results to differ materially are discussed in the company's most recent 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 Q ended 30 June 2026. I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, 6 August 2026, 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. Finally, we've established a new corporate updates page within the Sempra Investors website to post investor updates while complying with our disclosure obligations under SEC Regulation FD.

Speaker #2: Earnings per common share amounts in our presentation are shown on a diluted basis, and we will be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures.

Louise Bick: 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 Q ended 30 June 2026. I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, 6 August 2026, 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.

Speaker #2: We also encourage you to review our 10-Q for the quarter ended June 30, 2026. I'd also like to mention that forward-looking statements contained in this presentation speak only as of today, August 6, 2026, 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.

Speaker #2: Finally, we've established a new corporate updates page within the SEMPRA Investors website to post investor updates while complying with our disclosure obligations under SEC regulation FD.

Louise Bick: Finally, we've established a new corporate updates page within the Sempra Investors website to post investor updates while complying with our disclosure obligations under SEC Regulation FD. We encourage you to subscribe to the email alerts so you remain informed of any developments. With that, please turn to slide three, and let me hand the call over to Jeff.

Speaker #2: We encourage you to subscribe to the email alerts so you remain informed of any developments. With that, please turn to slide 3 and let me hand the call over to Jeff.

Louise Bick: We encourage you to subscribe to the email alerts so you remain informed of any developments. With that, please turn to slide three, and let me hand the call over to Jeff.

Speaker #3: Thank you for joining us today. Our operating businesses are executing well, and our employees are aligned around our mission of building America's leading utility growth business.

Jeff Martin: Thank you for joining us today. Our operating businesses are executing well, and our employees are aligned around our mission of building America's leading utility growth business. The strength of our execution can be seen in year-to-date financial results with double-digit gains in adjusted EPS and positive contributions from all three growth segments. Karen will cover our financial results in more detail later in the call, but on this first slide, I thought it'd be helpful to cover our key priorities for Q3. The first is the pending sale of a 45% equity stake in SI Partners. The transaction is expected to close later in the quarter and directly supports our corporate strategy by simplifying our business model, recycling capital into our regulated utilities, displacing the need for common equity in our current base capital plan, and deconsolidating close to $9 billion of debt from Sempra's balance sheet.

Speaker #3: The strength of our execution can be seen in year-to-date financial results, with double-digit gains in adjusted EPS and positive contributions from all three growth segments.

Speaker #3: Karen will cover our financial results in more detail later in the call, but on this first slide, I thought it would be helpful to cover our key priorities for the third quarter.

Speaker #3: The first is the pending sale of a 45% equity stake in SI Partners. The transaction is expected to close later in the quarter and directly supports our corporate strategy by simplifying our business model, recycling capital into our regulated utilities, displacing the need for common equity in our current base capital plan, and deconsolidating close to $9 billion of debt from Sempra's balance sheet.

Jeff Martin: The transaction is expected to close later in the quarter and directly supports our corporate strategy by simplifying our business model, recycling capital into our regulated utilities, displacing the need for common equity in our current base capital plan, and deconsolidating close to $9 billion of debt from Sempra's balance sheet. Our capital recycling program also extends to Mexico, where Sempra Infrastructure is making solid progress on the sale of Ecogas México. They recently received a critical regulatory approval, which puts the transaction on track to close later this month.

Speaker #3: Second, our capital recycling program also extends to Mexico, where Sempra Infrastructure is making solid progress on the sale of EcoGas. They recently received a critical regulatory approval, which puts the transaction on track to close later this month.

Jeff Martin: Our capital recycling program also extends to Mexico, where Sempra Infrastructure is making solid progress on the sale of Ecogas México. They recently received a critical regulatory approval, which puts the transaction on track to close later this month. In addition to the update Sempra Infrastructure provided last week, they remain focused on the commissioning process at ECA LNG Phase 1, which remains a key priority as they continue to move that project toward full commercial operations. Sempra Infrastructure is also pleased with the continued progress at Port Arthur LNG Phase 1 and Phase 2, which remain on time and on budget. Please turn to the next slide. Texas is continuing to experience unprecedented growth in electricity demand, as evidenced by ERCOT's new all-time peak load of 91 gigawatts that was reached last month.

Speaker #3: Finally, in addition to the updates SEMPRA Infrastructure provided last week, they remain focused on the commissioning process at ECA LNG Phase 1, which remains a key priority as they continue to move that project toward full commercial operations.

Jeff Martin: In addition to the update Sempra Infrastructure provided last week, they remain focused on the commissioning process at ECA LNG Phase 1, which remains a key priority as they continue to move that project toward full commercial operations. Sempra Infrastructure is also pleased with the continued progress at Port Arthur LNG Phase 1 and Phase 2, which remain on time and on budget. Please turn to the next slide. Texas is continuing to experience unprecedented growth in electricity demand, as evidenced by ERCOT's new all-time peak load of 91 gigawatts that was reached last month.

Speaker #3: SEMPRA Infrastructure is also pleased with the continued progress at Port Arthur LNG Phase 1 and 2, which remain on time and on budget. Please turn to the next slide.

Speaker #3: Texas is continuing to experience unprecedented growth in electricity demand, as evidenced by ERCOT's new all-time peak load of 91 gigawatts that was reached last month.

Speaker #3: Importantly, with forecasts of significant low growth in the future, Encore is well positioned to participate in what we believe is a multi-decade investment opportunity focused on modernizing and extending the electric grid.

Jeff Martin: Importantly, with forecasts of significant load growth in the future, Oncor is well-positioned to participate in what we believe is a multi-decade investment opportunity focused on modernizing and extending the electric grid. Oncor's current capital plan accounts for major investment drivers, such as new high-voltage transmission projects and other system upgrades. You'll recall that Oncor is executing on a five-year base capital plan of $47.5 billion, with $10 billion of incremental capital opportunities through 2030. Through H1, Oncor's made a lot of progress in firming up these incremental opportunities, specifically the $4 billion of North and Central Texas transmission upgrades that were recently endorsed by ERCOT.

Speaker #3: Encore's current capital plan accounts for major investment drivers, such as new high-voltage transmission projects and other system upgrades. You'll recall that Encore is executing on a five-year base capital plan of $47.5 billion, with $10 billion of incremental capital opportunities through 2030.

Speaker #3: Through the first half of the year, Encore has made a lot of progress in firming up these incremental opportunities. Specifically, the $4 billion of North and Central Texas transmission upgrades that were recently endorsed by ERCOT.

Jeff Martin: Through H1, Oncor's made a lot of progress in firming up these incremental opportunities, specifically the $4 billion of North and Central Texas transmission upgrades that were recently endorsed by ERCOT. Oncor's other incremental capital opportunities include an additional $3 billion of non-Permian Basin reliability plan projects endorsed by ERCOT in 2025 and $3 billion of investment that forms a part of a system resiliency plan filing that Oncor is expected to make next year. We also expect a new set of capital opportunities.

Speaker #3: Oncor's other incremental capital opportunities include an additional $3 billion of non-Permian Basin Reliability Plan projects, endorsed by ERCOT in 2025, and $3 billion of investment that forms a part of the System Resiliency Plan filing that Oncor is expected to make next year.

Jeff Martin: Oncor's other incremental capital opportunities include an additional $3 billion of non-Permian Basin reliability plan projects endorsed by ERCOT in 2025 and $3 billion of investment that forms a part of a system resiliency plan filing that Oncor is expected to make next year. We also expect a new set of capital opportunities. An example, this slide highlights that any additional investments to serve load from the Batch Zero process fall outside of Oncor's $10 billion incremental capital opportunity. Please turn to the next slide, where we'll discuss preliminary expectations related to ERCOT's Batch Zero process. The PUCT recently approved ERCOT's Batch Zero process, which establishes a system-wide approach for selecting and sequencing large load customer interconnection requests.

Speaker #3: As we look ahead, we also expect a new set of capital opportunities. As an example, this slide highlights that any additional investments to serve load from the batch zero process fall outside of Encore's $10 billion incremental capital opportunity.

Jeff Martin: An example, this slide highlights that any additional investments to serve load from the Batch Zero process fall outside of Oncor's $10 billion incremental capital opportunity. Please turn to the next slide, where we'll discuss preliminary expectations related to ERCOT's Batch Zero process. The PUCT recently approved ERCOT's Batch Zero process, which establishes a system-wide approach for selecting and sequencing large load customer interconnection requests.

Speaker #3: Please turn to the next slide where we'll discuss preliminary expectations related to ERCOT's batch zero process. The PUCT recently approved ERCOT's batch zero process, which establishes a system-wide approach for selecting and sequencing large-load customer interconnection requests.

Speaker #3: Although the timeline for the batch process is uncertain, 44 gigawatts of large load requests are expected to be eligible as base or studied load in Oncor's transmission system.

Jeff Martin: Although the timeline for the batch process is uncertain, 44 GW of large load requests are expected to be eligible as base or studied load in Oncor's transmission system. By classification, this includes 27 GW of base load, defined as not requiring additional interconnection studies or allocation, and 17 GW of studied load, which will be evaluated and assigned through a new system-wide reliability analysis. To put the magnitude of these figures in context, 44 GW of additional demand would represent a 140% increase to Oncor's current system peak load of 31 GW. Importantly, this projected load meets all the PUCT eligibility requirements. Oncor holds nearly $6 billion in collateral from large load customers, including over $2 billion for the 44 GW of Batch Zero submissions shown here.

Speaker #3: By classification, this includes 27 gigawatts of base load, defined as not requiring additional interconnection studies or allocation, and 17 gigawatts of studied load, which will be evaluated and assigned through a new system-wide reliability analysis.

Speaker #3: To put the magnitude of these figures in context, 44 gigawatts of additional demand would represent a 140% increase to Encore's current system peak load of 31 gigawatts.

Speaker #3: Importantly, this projected load meets all the PUCT eligibility requirements. Oncor holds nearly $6 billion in collateral from large-load customers, including over $2 billion for the 44 gigawatts of batch zero submissions shown here.

Jeff Martin: Importantly, this projected load meets all the PUCT eligibility requirements. Oncor holds nearly $6 billion in collateral from large load customers, including over $2 billion for the 44 GW of Batch Zero submissions shown here. Of the 44 GW, it's important to note that approximately 8 GW is already connected to the system and continuing to ramp toward full utilization.

Speaker #3: Of the 44 gigawatts, it's important to note that approximately 8 gigawatts are already connected to the system and continuing to ramp toward full utilization.

Jeff Martin: Of the 44 GW, it's important to note that approximately 8 GW is already connected to the system and continuing to ramp toward full utilization. This demonstrates that demand growth in Texas is not just a projection, but is actively occurring on Oncor's network. ERCOT will now study how the projects included in the Batch Zero process impact the existing transmission system and provide the initial results of that study. If ERCOT were to determine additional transmission is required to be built by Oncor, the capital expenditures for those projects would be incremental to Oncor's base capital plan and incremental CapEx opportunities. Looking ahead, Oncor expects to update its five-year plan on our Q4 call. Because ERCOT's current timeline for identifying additional transmission projects is expected to extend beyond February of next year, we don't expect the roll forward plan to include new capital investments associated with Batch Zero.

Speaker #3: This demonstrates that demand growth in Texas is not just a projection, but is actively occurring on Encore's network. ERCOT will now study how the projects included in the batch zero process impact the existing transmission system and provide the initial results of that study.

Jeff Martin: This demonstrates that demand growth in Texas is not just a projection, but is actively occurring on Oncor's network. ERCOT will now study how the projects included in the Batch Zero process impact the existing transmission system and provide the initial results of that study. If ERCOT were to determine additional transmission is required to be built by Oncor, the capital expenditures for those projects would be incremental to Oncor's base capital plan and incremental CapEx opportunities.

Speaker #3: If ERCOT were to determine additional transmission is required to be built by Encore, the capital expenditures for those projects would be incremental to Encore's base capital plan and incremental capex opportunities.

Speaker #3: Looking ahead, Encore expects to update its five-year plan on our fourth quarter call because ERCOT's current timeline for identifying additional transmission projects is expected to extend beyond February of next year; we don't expect the roll-forward plan to include new capital investments associated with batch zero.

Jeff Martin: Looking ahead, Oncor expects to update its five-year plan on our Q4 call. Because ERCOT's current timeline for identifying additional transmission projects is expected to extend beyond February of next year, we don't expect the roll forward plan to include new capital investments associated with Batch Zero.

Speaker #3: The key takeaway here is that we're having growing confidence in Encore's execution of its base capital plan and incremental capital opportunities and believe there's increasing momentum behind Encore's long-term growth, separate and apart from how data center growth materializes in the state.

Jeff Martin: The key takeaway here is that we have a growing confidence in Oncor's execution of its base capital plan and incremental capital opportunities and believe there's increasing momentum behind Oncor's long-term growth, separate and apart from how data center growth materializes in the state. Now please turn to the next slide, where Karen will walk through our financial results.

Speaker #3: Now, please turn to the next slide where Karen will walk through our financial results.

Speaker #2: Thanks, Jeff. Earlier today, SEMPRA reported second quarter 2026 gap earnings of $796 million or $1.21 per share. This compares to second quarter 2025 gap earnings of $461 million or $71 per share.

Karen Sedgwick: Thanks, Jeff. Earlier today, Sempra reported Q2 2026 GAAP earnings of $796 million, or $1.21 per share. This compares to Q2 2025 GAAP earnings of $461 million, or $0.71 per share. On an adjusted basis, Q2 earnings were $762 million, or $1.16 per share. This is a notable increase compared to our Q2 2025 earnings of $583 million, or $0.89 per share. As Jeff noted, we're very pleased with our performance for the H1 of the year and think we're well-positioned to deliver another year of strong financial results. Please turn to the next slide. Next, let's go over the Q2 2026 adjusted earnings variances compared to the same period last year.

Speaker #2: On an adjusted basis, second quarter earnings were $762 million or $1.16 per share. This is of notable increase compared to our second quarter 2025 earnings of $583 million or $89 per share.

Speaker #2: As Jeff noted, we're very pleased with our performance for the first half of the year, and think we're well positioned to deliver another year of strong financial results.

Speaker #2: Please turn to the next slide. Next, let's go over the second quarter of 2026 adjusted earnings variances compared to the same period last year.

Karen Sedgwick: Next, let's go over the Q2 2026 adjusted earnings variances compared to the same period last year. At Sempra Texas, we had $138 million of higher equity earnings from new base rates, including interim rates, the UTM, higher invested capital and customer growth, partially offset by higher depreciation, interest expense, and O&M. Due to the timing of Oncor's comprehensive base rate settlement approved in April 2026, our Q2 earnings include the favorable impact of approximately $50 million related to the Q1 of 2026.

Speaker #2: At Sempra Texas, we had $138 million of higher equity earnings from new base rates, including interim rates, the UTM, higher invested capital, and customer growth, partially offset by higher depreciation, interest expense, and O&M.

Karen Sedgwick: At Sempra Texas, we had $138 million of higher equity earnings from new base rates, including interim rates, the UTM, higher invested capital and customer growth, partially offset by higher depreciation, interest expense, and O&M. Due to the timing of Oncor's comprehensive base rate settlement approved in April 2026, our Q2 earnings include the favorable impact of approximately $50 million related to the Q1 of 2026. This amount reflects the difference between the newly approved rates and the rates previously in effect during that period. Turning to Sempra California, we had $24 million of increased earnings, primarily from higher CPUC base operating margin net of operating expenses and higher electric transmission margin, partially offset by lower AFUDC equity. Sempra California also had $11 million of lower earnings from higher net interest expense and other, partially offset by higher income tax benefits.

Speaker #2: Due to the timing of Encore's comprehensive base rate settlement approved in April 2026, our second quarter earnings, include the favorable impact of approximately $50 million related to the first quarter of 2026.

Speaker #2: This amount reflects the difference between the newly approved rates and the rates previously in effect during that period. Turning to SEMPRA California, we had 24 million dollars of increased earnings, primarily from higher CPUC base operating margin net of operating expenses, and higher electric transmission margin partially offset by lower AFUDC equity.

Karen Sedgwick: This amount reflects the difference between the newly approved rates and the rates previously in effect during that period. Turning to Sempra California, we had $24 million of increased earnings, primarily from higher CPUC base operating margin net of operating expenses and higher electric transmission margin, partially offset by lower AFUDC equity. Sempra California also had $11 million of lower earnings from higher net interest expense and other, partially offset by higher income tax benefits.

Speaker #2: SEMPRA California also had $11 million of lower earnings from higher net interest expense and other, partially offset by higher income tax benefits. At SEMPRA Infrastructure, earnings increased by $26 million, primarily from lower depreciation due to assets held for sale, lower O&M, and other, partially offset by higher income tax expense.

Karen Sedgwick: At Sempra Infrastructure, earnings increased by $26 million, primarily from lower depreciation due to assets held for sale, lower O&M and other, partially offset by higher income tax expense. At Sempra Parent, results were effectively in line with the prior period. Please turn to the next slide. With strong year-to-date results and progress against our key initiatives, we are affirming our full year 2026 adjusted EPS guidance range of $4.80 to $5.30, and 2027 EPS guidance range of $5.10 to $5.70. We are also affirming our projected long-term EPS growth rate of 7% to 9%. We look ahead, our focus remains on execution, including closing the SI Partners transaction, strengthening the balance sheet post-close, and continuing to advance our record $65 billion capital plan. This capital plan is centered on utility growth, with investments increasingly directed towards Sempra Texas.

Speaker #2: At SEMPRA Parent, results were effectively in line with the prior period. Please turn to the next slide. With strong year-to-date results and progress against our key initiatives, we're affirming our full year 2026 adjusted EPS guidance range of $4.80 to $5.30.

Speaker #2: And 2027 EPS guidance range of $5.10 to $5.70. We're also affirming our projected long-term EPS growth rate of 7 to 9 percent. As we look ahead, our focus remains on execution.

Karen Sedgwick: We look ahead, our focus remains on execution, including closing the SI Partners transaction, strengthening the balance sheet post-close, and continuing to advance our record $65 billion capital plan. This capital plan is centered on utility growth, with investments increasingly directed towards Sempra Texas. The growth we see there is supported by robust economic activity, increasing electricity demand, and the need to modernize and expand the electricity network across the state.

Speaker #2: Including closing the SI Partners transaction, strengthening the balance sheet post-close, and continuing to advance our record 65 billion dollar capital plan. This capital plan is centered on utility growth with investments increasingly directed toward SEMPRA Texas.

Speaker #2: The growth we see there is supported by robust economic activity, increasing electricity demand, and the need to modernize and expand the electricity network across the state.

Karen Sedgwick: The growth we see there is supported by robust economic activity, increasing electricity demand, and the need to modernize and expand the electricity network across the state. I would also note that we are considering our improving confidence in Oncor's $10 billion of incremental capital opportunities. We see Texas continuing to become an even larger part of our business, with a goal for it to comprise over 60% of Sempra's total rate base in 2030. Taken together, this investment outlook supports our confidence in Sempra's long-term growth. With one of the highest projected long-term EPS growth rates in the sector, we think Sempra continues to offer investors a compelling mix of current yield, durable earnings growth, and long-term capital appreciation. Let's open it up for your questions.

Speaker #2: I'd also add confidence in Oncor's $10 billion of incremental capital opportunities. We see Texas continuing to become an even larger part of our business, with the goal for it to comprise over 60 percent of Sempra's total rate base in 2030.

Karen Sedgwick: I would also note that we are considering our improving confidence in Oncor's $10 billion of incremental capital opportunities. We see Texas continuing to become an even larger part of our business, with a goal for it to comprise over 60% of Sempra's total rate base in 2030. Taken together, this investment outlook supports our confidence in Sempra's long-term growth.

Speaker #2: Taken together, this investment outlook supports our confidence in SEMPRA's long-term growth. With one of the highest projected long-term EPS growth rates in the sector, we think SEMPRA continues to offer investors a compelling mix of current yield, durable earnings growth, and long-term capital appreciation.

Karen Sedgwick: With one of the highest projected long-term EPS growth rates in the sector, we think Sempra continues to offer investors a compelling mix of current yield, durable earnings growth, and long-term capital appreciation. Let's open it up for your questions.

Speaker #2: Now, let's open it up for your questions.

Speaker #1: Thank you. This concludes the prepared remarks. We will now open the line to take your questions. Please limit your questions to one question and one follow-up.

Operator: Thank you. This concludes the prepared remarks. We will now open the line to take your questions. Please limit your questions to one question and one follow-up. If you would like to ask a question, please signal by pressing star one on your telephone keypad. Please make sure your mute function is turned off. We will pause for just a moment to allow everyone to signal for questions. Our first question will come from Shahriar Pourmand from Wells Fargo. Your line is open.

Speaker #1: If you would like to ask a question, please signal by pressing star one on your telephone keypad. Please make sure your mute function is turned off.

Speaker #1: We will pause for just a moment to allow everyone to signal for questions. And our first question will come from Shar Pereza from Wells Fargo, your line is open.

Speaker #3: Hi, good morning to you. It's actually Constantine here for Shar. Really appreciate the time today.

[Analyst] (Wells Fargo): Hi, good morning, team. It's actually Constantine here for Shar. Really appreciate the time today.

Speaker #1: Thanks, Constantine.

Speaker #3: Thanks, Jeff. Thanks. Just starting off in Texas, the obvious question around the data center pause rhetoric or not. Do you see a threat of pushing for generation or even behind the meter solutions instead of transmission build?

Karen Sedgwick: Hey, Constantine.

Jeff Martin: Hey, Constantine.

[Analyst] (Wells Fargo): Hey, Jeff. Thanks. Just starting off in Texas, the obvious question around the data center pause, rhetoric or not, do you see a threat of pushing for generation or even behind-the-meter solutions instead of transmission build? How does that impact timelines here, especially as you highlight the Batch Zero opportunities going into next year?

Speaker #3: How does that impact timelines here, especially as you highlight the batch zero opportunities of going into next year?

Speaker #4: Thanks, Constantine. I'll address the data center focus first. I think one of the key things that we wanted to approach this call was to send the message that our long-term view at Encore has improved over the last quarter.

Karen Sedgwick: Thanks, Constantine. I'll address the data center focus first. I think one of the key things that we wanted to approach this call was to send a message that our long-term view at Oncor has improved over the last quarter. We continue to think there's a great opportunity here for our base capital plan to move forward, as well as upside capital. One of the key points in our prepared materials was anything related to the Batch process would really be upside beyond that. One of the things I think that we're focused on in this environment is public policy, and a lot of the recent discussions have been focused on protecting Texas families from the new costs associated with expanding the grid to meet new load customers, as you indicated, data centers.

Jeff Martin: Thanks, Constantine. I'll address the data center focus first. I think one of the key things that we wanted to approach this call was to send a message that our long-term view at Oncor has improved over the last quarter. We continue to think there's a great opportunity here for our base capital plan to move forward, as well as upside capital. One of the key points in our prepared materials was anything related to the Batch process would really be upside beyond that.

Speaker #4: So we continue to think there's a great opportunity here for our base capital plan to move forward, as well as upside capital. And one of the key points in our prepared materials was that anything related to the batch process would really be upside beyond that.

Speaker #4: One of the things I think that we're focused on in this environment is that public policy, and a lot of the recent discussions, have been focused on protecting Texas families from the new costs associated with expanding the grid to meet new load customers—as you indicated, data centers.

Jeff Martin: One of the things I think that we're focused on in this environment is public policy, and a lot of the recent discussions have been focused on protecting Texas families from the new costs associated with expanding the grid to meet new load customers, as you indicated, data centers. I think in this area, the Governor and the PUC both have shown a lot of leadership, and I think that's important. I would also note, Constantine, that at Sempra, we're signatories to the president's ratepayer protection plan.

Speaker #4: And I think in this area, the governor and the PEC both have shown a lot of leadership. And I think that's important. I would also note, Constantine, that at SEMPRA, we're signatories to the president's rate payer protection plan.

Karen Sedgwick: I think in this area, the Governor and the PUC both have shown a lot of leadership, and I think that's important. I would also note, Constantine, that at Sempra, we're signatories to the president's ratepayer protection plan. Together with Oncor, we're supportive of the framework that the PUCT is now moving forward with, and I think this is very important relative to your question. That's to ensure that data centers, number 1, cover the full cost of interconnection, and number 2, the lower residential bills by having a portion of their tariff allocated to ratepayer subsidies. You're seeing this model play out across other jurisdictions as well.

Speaker #4: And together with Encore, we're supported by the framework that the PUCT is now moving forward with. And I think this is very important relative to your question.

Jeff Martin: Together with Oncor, we're supportive of the framework that the PUCT is now moving forward with, and I think this is very important relative to your question. That's to ensure that data centers, number 1, cover the full cost of interconnection, and number 2, the lower residential bills by having a portion of their tariff allocated to ratepayer subsidies. You're seeing this model play out across other jurisdictions as well. I think broader stakeholder involvement in the process sets the foundation for a more durable framework. I think this is a very important point for our stakeholders.

Speaker #4: And that's to ensure that data centers, number one, cover the full cost of interconnection. And number two, the lower residential bills by having a portion of their tariff allocated to rate payer subsidies.

Speaker #4: And you're seeing this model play out across other jurisdictions as well. So, overall, I think broader stakeholder involvement in the process sets the foundation for a more durable framework.

Jeff Martin: I think broader stakeholder involvement in the process sets the foundation for a more durable framework. I think this is a very important point for our stakeholders. The process is underway now in Austin. We're receiving more input and more inclusivity in the process. That's designed to create a more durable framework for participants in the market like Oncor to deploy capital. Constantine, when you put that together with the improved regulatory compact that we received through the UTM legislation last year, and the improvements in the recent base rate review, that's obviously key drivers in the improved financial performance you're seeing at Oncor.

Speaker #4: And I think this is a very important point for our stakeholders. The process that's underway now in Austin receiving more input and more inclusivity of the process, that's designed to create a more durable framework for participants in the market like Encore to deploy capital and Constantine, when you put that together, with the improving regulatory compact that we've received, through the UTM legislation last year, and the improvements in the recent base rate review, that's obviously key drivers in the improved financial performance you're seeing at Encore.

Jeff Martin: The process is underway now in Austin. We're receiving more input and more inclusivity in the process. That's designed to create a more durable framework for participants in the market like Oncor to deploy capital. Constantine, when you put that together with the improved regulatory compact that we received through the UTM legislation last year, and the improvements in the recent base rate review, that's obviously key drivers in the improved financial performance you're seeing at Oncor.

Speaker #3: Excellent, thanks for that. Maybe there's a quick follow-up there. So, the quick return from normal kind of helps the Encore CapEx update at year-end. Any way to think about that upside—does the upside kind of convert closer to plan by that timeframe?

[Analyst] (Wells Fargo): Excellent. Thanks for that. Maybe just a quick follow-up there. The quick return to normal kind of helped the Oncor CapEx update at year-end. Do you have any way to think about that upside to the upside kind of converting closer to plan by that timeframe?

Speaker #4: I mean, I think one of the things that we're kind of sending the message here is that there's a lot of flexibility in that base capital plan around how Don Klebinger and Allen move capital around.

Jeff Martin: I think one of the things that we're kind of sending the message here is that there's a lot of flexibility in that base capital plan around how Don Clevenger and Allen move capital around. Obviously, there's been some positive steps to firm up the $10 billion of incremental opportunity. I think that investors can take away from this call that we expect that the roll-forward capital plan at Oncor will go up. I would expect that there's a fair amount of flexibility about how they sequence projects. I think the near-term focus of the team and Allen were to make sure that we're really engaged in the ongoing process, particularly at the PUCT.

Speaker #4: And obviously, there have been some positive steps to firm up the $10 billion of incremental opportunity. So I think that investors can take away from this call that we expect the roll-forward capital plan at Encore will go up.

Speaker #4: And I would expect that there's a fair amount of flexibility regarding how they sequence projects. I think the near-term focus of the team, and Allen, would be to make sure that we're really engaged in the ongoing process, particularly at the PUCT.

Jeff Martin: I think the near-term focus of the team and Allen were to make sure that we're really engaged in the ongoing process, particularly at the PUCT. I think that will also be helpful to them firming up their plans this fall, and we expect to come back to you on the Q4 call with a robust discussion around Oncor. Clearly, Karen made this point, this is becoming a much bigger part of Sempra.

Speaker #4: I think that will also be helpful to them firming up their plans this fall. And we expect to come back to you on the fourth quarter call with a robust discussion around Encore and clearly, on Karen made this point, this is becoming a much bigger part of SEMPRA.

Jeff Martin: I think that will also be helpful to them firming up their plans this fall, and we expect to come back to you on the Q4 call with a robust discussion around Oncor. Clearly, Karen made this point, this is becoming a much bigger part of Sempra. I think as you think about the KKR transaction, Constantine, putting that in context, it's all about our pivot to become a pure-play utility and allocate capital to markets where we think investors will assign the highest value. Certainly, we believe that's Texas. I think the story in Texas continues to get better. Some of these near-term issues need to be dealt with, and that's obviously going to be a priority for Allen's team.

Speaker #4: And I think, as you think about the KKR transaction, Constantine, putting that in context, it's all about our pivot to become a pure-play utility and allocate capital to the markets where we think investors will assign the highest value.

Jeff Martin: I think as you think about the KKR transaction, Constantine, putting that in context, it's all about our pivot to become a pure-play utility and allocate capital to markets where we think investors will assign the highest value. Certainly, we believe that's Texas. I think the story in Texas continues to get better. Some of these near-term issues need to be dealt with, and that's obviously going to be a priority for Allen's team.

Speaker #4: And certainly, we believe that's Texas. So I think the story in Texas continues to get better. Some of these near-term issues need to be dealt with, and that's obviously going to be a priority for Allen's team.

Speaker #3: Excellent. And maybe just a quick housekeeping item on the earlier announced ECO delays. How are you thinking about some of the near-term offsets going into year-end, and any potential recourse of the SIP transaction, or are those two separate tracks?

[Analyst] (Wells Fargo): Excellent. Maybe just a quick housekeeping item on the earlier announced ECA delays. How are you thinking about some of the near-term offsets going into year-end, and any potential re-proof of the SI transaction, or are those two separate tracks?

Speaker #4: Yeah. Thank you for that question. And we put out a press release just over a week ago that gave kind of a comprehensive update on SEMPRA infrastructure.

Jeff Martin: Yeah. Thank you for that question. We put out a press release just over a week ago that gave kind of a comprehensive update on Sempra Infrastructure. I think there's a couple key points here to your question. First off, the two very large projects at Port Arthur, both phase one and phase two, are on time and on budget. They're proceeding very well. Obviously, any time you have a commissioning process like you have at ECA, there's a fair amount of complexity to that. I continue to feel quite constructive about the work that's underway to commission that project. Justin, you'll recall Justin is the CEO of Sempra Infrastructure, Constantine. It would be helpful if you provide some additional details about what you found in the root cause analysis and how you think about the timeline going forward this fall.

Speaker #4: I think there's a couple key points here to your question. First off, the two very large projects at Port Arthur both phase one and phase two, are on time and on budget.

Speaker #4: They're proceeding very well. Obviously, anytime you have a commissioning process, like you have an ECA, there's a fair amount of complexity to that. I continue to feel quite constructive about the work that's underway to commission that project.

Speaker #4: But Justin, you recall, Justin is the CEO of SEMPRA Infrastructure, Constantine. It would be helpful if you provide some additional details about what you found in the root cause analysis and how you think about the timeline going forward this fall.

Jeff Martin: Justin, you'll recall Justin is the CEO of Sempra Infrastructure, Constantine. It would be helpful if you provide some additional details about what you found in the root cause analysis and how you think about the timeline going forward this fall.

Speaker #2: Yeah. Hi, Constantine. So as you recall, after we explored the first cargo out of ECA in July, we shut down the plant for planned maintenance.

Justin Bird: Yeah. Hi, Constantine. As you recall, after we exported the first cargo out of ECA in July, we shut down the plant for planned maintenance and inspections. During that time, we discovered damage to equipment connected to the plant's mixed refrigerant compressors. We are working with our EPC contractor and the OEM, the original equipment vendor, on the root cause and our mediation plan. Given where we are, we expect the project to reach substantial completion in Q4 2026, with sales under our long-term sale and purchase agreements commencing shortly thereafter. We don't anticipate additional delay after that at ECA. Again, the substantial completion of ECA is not a condition precedent under the SI transaction.

Speaker #2: And inspections. And during that time, we discovered damage to equipment connected to the plant's mixed refrigerant compressors. And we are working with our EPC contractor and the OEM, the original equipment vendor, on the root cause and/or remediation plan.

Speaker #2: Given where we are, we expect the project to reach substantial completion in the fourth quarter of 2026, with sales under our long-term sale and purchase agreements commencing shortly thereafter.

Justin Bird: Given where we are, we expect the project to reach substantial completion in Q4 2026, with sales under our long-term sale and purchase agreements commencing shortly thereafter. We don't anticipate additional delay after that at ECA. Again, the substantial completion of ECA is not a condition precedent under the SI transaction.

Speaker #2: So we don't anticipate additional delay after that at ECA. And again, ECA is not the sorry, the substantial completion of ECA is not a condition precedent under the SI transaction.

Speaker #3: Really appreciate that. I've wanted to be clear. Thank you very much.

[Analyst] (Wells Fargo): Really appreciate that, abundantly clear. Thank you very much.

Speaker #4: Thanks a lot, Constantine.

Jeff Martin: Thanks a lot, Constantine.

Speaker #1: Thank you. And as a reminder, we do ask that you please limit yourselves to one question and one follow-up. And our next question will come from Steve Fleischman from Wolf.

Operator: Thank you. As a reminder, we do ask that you please limit yourselves to one question and one follow-up. Our next question will come from Steve Fleishman from Wolfe. Your line is open.

Speaker #1: Your line is open.

Speaker #4: Good afternoon, Steve.

Jeff Martin: Good afternoon, Steve.

Speaker #5: Yeah. Hi, Jeff. And team. The maybe you could just talk to some of the recent political commentary on the 765 KV approval process and thoughts on any risk of that changing or just where does that where do you think that goes from here?

Steven Fleishman: Yeah. Hi, Jeff and team. Maybe you could just talk to some of the recent political commentary on the 765 kV approval process and thoughts on any risk of that changing or just where do you think that goes from here? Any color on that?

Steve Fleishman: Yeah. Hi, Jeff and team. Maybe you could just talk to some of the recent political commentary on the 765 kV approval process and thoughts on any risk of that changing or just where do you think that goes from here? Any color on that?

Speaker #5: Any caller on that?

Speaker #4: Sure. Let me make a couple of points here. As I mentioned in response to Constantine's question, Steve, we continue to think the long-term picture at Encore is intact and improving.

Jeff Martin: Sure. Let me make a couple points here, as I mentioned this to Constantine's question, Steve, we continue to think the long-term picture at Oncor is intact and improving. Obviously, to your point, there's been some important recent developments. I'll make two quick points here. I think the theme as we remain constructive, the most important thing that we're hearing out of Austin is to make sure that we're spending enough time to fully integrate the voices and concerns from landowners. We want to make sure, obviously, that process is inclusive. That's been a clear directive from the governor's office, and I think that's also something that the PUCT is working hard to ensure happens.

Speaker #4: Obviously, to your point, there's been some important recent developments. And I'll make two quick points here. I think the theme is we remain constructive the most important thing that we're hearing out of Austin is to make sure that we're spending enough time to fully integrate the voices and concerns from landowners and we want to make sure, obviously, that that process is inclusive.

Speaker #4: That's been a clear directive from the governor's office. And I think that's also something that the PUCT is working hard to ensure happens. The key theme that I think you're hearing people focus on, Steve, is if it takes a little bit more time in the process stage to get to what we think is a durable framework that allows us to invest capital with more certainty, we think this process will be time well spent.

Jeff Martin: That's been a clear directive from the governor's office, and I think that's also something that the PUCT is working hard to ensure happens. The key theme that I think you're hearing people focus on, Steve, is if it takes a little bit more time in the process stage to get to what we think is a durable framework that allows us to invest capital with more certainty, we think this process will be time well spent. I would also note at recent Senate hearings. It's very clear that there's two priorities being focused on.

Jeff Martin: The key theme that I think you're hearing people focus on, Steve, is if it takes a little bit more time in the process stage to get to what we think is a durable framework that allows us to invest capital with more certainty, we think this process will be time well spent. I would also note at recent Senate hearings. It's very clear that there's two priorities being focused on. One is protecting landowner interest, and secondly, also making sure that Texas has the infrastructure needed to support its continued growth. I think you saw some of that echoed by the lieutenant governor, and obviously we want to make sure that the PUCT process, and Allen and his team will participate.

Speaker #4: I would also note that, at recent Senate hearings, it's very clear that there are two priorities being focused on. One is protecting landowner interests, and secondly, making sure that Texas has the infrastructure needed to support its continued growth.

Jeff Martin: One is protecting landowner interest, and secondly, also making sure that Texas has the infrastructure needed to support its continued growth. I think you saw some of that echoed by the lieutenant governor, and obviously we want to make sure that the PUCT process, and Allen and his team will participate. I know it's been a very high focus for Allen, is making sure that we're being inclusive of all the different voices that have a stake in the outcome here. If I could, Allen, maybe you could provide a little bit more commentary on where you see the 765 process going from here.

Speaker #4: And I think you saw some of that echoed by the lieutenant governor and obviously, we want to make sure that the PUCT process and Allen and his team will participate I know it's been a very high focus for Allen is making sure that we're being inclusive of all the different voices that have a stake in the outcome here.

Jeff Martin: I know it's been a very high focus for Allen, is making sure that we're being inclusive of all the different voices that have a stake in the outcome here. If I could, Allen, maybe you could provide a little bit more commentary on where you see the 765 process going from here.

Speaker #4: And if I could, Allen, maybe you could provide a little bit more commentary on where you see the 765 process going from here.

Speaker #2: Yeah. Sure, Jeff. Thanks, Steve. I think the way we're thinking about the 765 issue right now is obviously, there was a hearing on the 29th that lasted like 15 hours.

Allen Nye: Yeah. Sure, Jeff. Thanks, Steve. I think the way we're thinking about the 765 issue right now is obviously there was a hearing on the 29th. It lasted 15 hours, followed by the statements issued by Chairman Tortner and Lieutenant Governor Patrick. As Jeff said, overall, there's two key themes that we're seeing. One, I think state leaders thoughtfully and appropriately responding to the landowner concerns. Two, I believe clear affirmation that Texas needs a reliable grid and more investment. That's a balance that we've been working hard on to strike across all four of our Permian import projects. Just to give you some examples, we mailed notice to over 12,000 landowners, more than required by the PUC rules. We mailed notice to over 1,000 elected officials. We filed 529 unique routes.

Speaker #2: Followed by the statements issued by Chairman Schwartner and Lieutenant Governor Patrick. And as Jeff said, overall, there's kind of two key themes that we're seeing.

Speaker #2: One, I think state leaders are thoughtfully and appropriately responding to the landowner concerns, and two, I believe there is clear affirmation that Texas needs a reliable grid and more investments.

Speaker #2: So that's a balance that we've been working hard to strike across all four of our permitting import projects. Just to give you some examples, we mailed notice to over 12,000 landowners—more than required by the PUC rules.

Allen Nye: Just to give you some examples, we mailed notice to over 12,000 landowners, more than required by the PUC rules. We mailed notice to over 1,000 elected officials. We filed 529 unique routes. We added 110 link segments in direct response to public feedback, we had 16 days of hearings. At this point, the SOAH, State Office of Administrative Hearings judges have issued PFDs in three of our four dockets. We expect the fourth to come sometime in mid-August. Those proposed orders now go to the PUC. The PUC can accept them, they can deny them, they can modify them, or they can request more evidence.

Speaker #2: We mailed notice to over 1,100—or, I'm sorry, 1,000 elected officials. We filed 529 unique routes. We added 110 link segments in direct response to public feedback.

Allen Nye: We added 110 link segments in direct response to public feedback, we had 16 days of hearings. At this point, the SOAH, State Office of Administrative Hearings judges have issued PFDs in three of our four dockets. We expect the fourth to come sometime in mid-August. Those proposed orders now go to the PUC. The PUC can accept them, they can deny them, they can modify them, or they can request more evidence. We're hopeful that given the significant reliability needs in the Permian, the PUC can reach a timely resolution of those dockets. Whatever they decide, we're committed to, and we look forward to working collaboratively with our regulators, the impacted landowners, obviously our state officials, to advance a reliable grid that meets the needs of Texas and our customers while protecting landowner rights. As Jeff said, we remain constructive.

Speaker #2: And we had 16 days of hearings. At this point, the SOA, State Office of Administrative Hearings, judges have issued PFDs and three of our four dockets.

Speaker #2: We expect the fourth to come sometime in mid-August. Those proposed orders now go to the PUC. The PUC can accept them or deny them.

Speaker #2: They can modify them, or they can request more evidence. We're hopeful that, given the significant reliability needs in the permitting, the PUC can reach a timely resolution of those dockets.

Allen Nye: We're hopeful that given the significant reliability needs in the Permian, the PUC can reach a timely resolution of those dockets. Whatever they decide, we're committed to, and we look forward to working collaboratively with our regulators, the impacted landowners, obviously our state officials, to advance a reliable grid that meets the needs of Texas and our customers while protecting landowner rights. As Jeff said, we remain constructive.

Speaker #2: But whatever they decide. We're committed to and we look forward to working collaboratively with our regulators the impacted landowners obviously, our state officials, to advance a reliable grid that meets the needs of Texas and our customers while protecting landowner rights.

Speaker #2: So as Jeff said, we remain constructive.

Speaker #5: Okay. And one follow-up or, I guess, an unrelated follow-up. Just any sense on how things are developing on the California wildfire liability legislation and related?

Steven Fleishman: Okay. One follow-up, or I guess an unrelated follow-up. Just any sense on how things are developing on the California wildfire liability legislation and related, obviously, issues and just your confidence on something constructive getting done there?

Steve Fleishman: Okay. One follow-up, or I guess an unrelated follow-up. Just any sense on how things are developing on the California wildfire liability legislation and related, obviously, issues and just your confidence on something constructive getting done there?

Speaker #5: Obviously, issues, and just your confidence on something constructive getting done there.

Speaker #4: Yeah, thanks for asking that question, Steve. I mean, I think one of the things that really resonates with me is the central focus for policymakers in the state. I think they are focused on the right thing.

Jeff Martin: Yeah. Thanks for asking that question, Steve. I think one of the things that really resonates with me is the central focus for policymakers in the state, I think, are focused on the right thing. The key theme here is livability. I think people recognize when you think about the white paper from the utilities, the feedback from the CPUC, the report that was provided by the California Earthquake Authority, I think it really recognizes, Steve, that the status quo doesn't work. If we're going to get at this issue of livability, you've got to be willing to address a larger ecosystem of related considerations. I'll offer a few to you.

Speaker #4: The key theme here is livability. And I think people recognize when you think about the white paper from the utilities, the feedback from the CPUC, the report that was provided by the earthquake authority.

Speaker #4: I think it really recognizes, Steve, that the status quo doesn't work. And if we're going to get at this issue of livability, you've got to be willing to address a larger ecosystem of related considerations.

Speaker #4: And I'll offer a few to you. One of which is there's a big focus in this legislative session on ensuring that housing is more accessible and more affordable, that we take steps to create a more vibrant insurance marketplace, that there are steps taken and active considerations to put new safeguards in place, to mitigate risk to California families, and kind of addressing that entire ecosystem I think there's a lot of focus on making sure that providers of utility services remain financially strong.

Jeff Martin: One of which is there's a big focus in this legislative session on ensuring that housing is more accessible and more affordable, that we take steps to create a more vibrant insurance marketplace, that there are steps taken and active considerations to put new safeguards in place to mitigate risk to California families. In addressing that entire ecosystem, I think there's a lot of focus on making sure that providers of utility services remain financially strong. The focus, Steve, here needs to be on good public policy for the state of California and getting at the heart of the livability issue.

Speaker #4: So the focus, Steve, here needs to be on good public policy for the state of California, and getting at the heart of the livability issue.

Speaker #4: And if you look at some of the reports that have come out from both Moody's and S&P, they clearly are focused on making sure that some type of legislation comes out that avoids utilities moving to a higher rate environment and continues to allow California to be economically competitive.

Jeff Martin: If you look at some of the reports that have come out from both Moody's and S&P, they clearly are focused on making sure that some type of legislation comes out that avoids utilities moving to a higher rate environment and continues to allow California to be economically competitive. I would conclude by saying I think Governor Newsom and the leadership of both Houses deserve a ton of credit. They're very much actively working on this issue. This is clearly, Steve, not an easy task, I continue to believe that the right people are focused on the right set of issues. I continue to believe that we'll see solid progress during this legislative session. I'll stop there and see if you want to ask additional questions.

Speaker #4: So I would conclude by saying, I think Governor Newsom and the leadership of both houses deserve a ton of credit. They're very much actively working on this issue.

Speaker #4: This is clearly, Steve, not an easy task. But I continue to believe that the right people are focused on the right set of issues and I continue to believe that we'll see solid progress during this legislative session.

Jeff Martin: This is clearly, Steve, not an easy task, I continue to believe that the right people are focused on the right set of issues. I continue to believe that we'll see solid progress during this legislative session. I'll stop there and see if you want to ask additional questions.

Speaker #4: And I'll stop there and see if you want to ask additional questions.

Speaker #5: No. I appreciate that. I asked my two. So I'll let someone else. Thank you.

Steven Fleishman: No, I appreciate that. I asked my two, I'll let someone else. Thank you.

Steve Fleishman: No, I appreciate that. I asked my two, I'll let someone else. Thank you.

Speaker #4: Okay. Thanks, Steve.

Jeff Martin: Okay. Thanks, Steve.

Speaker #1: Thank you. Our next question will come from David Arcaro from Morgan Stanley. Your line is open.

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

Speaker #4: Good afternoon, David.

Jeff Martin: Good afternoon, David.

David Arcaro: Hey there. Thank you so much. Let me see. One thing I wanted to get a little bit of elaboration on was your large load pipeline in ERCOT. I guess as I'm just thinking about you've updated the overall interconnection queue here to 298 gigawatts at Oncor. I think last quarter you had mentioned 127 gigawatts of advanced pipeline, and now you've got the obviously drilling down further into the Batch Zero at 44 gigawatts. I guess I'm just looking for a little bit of help to understand the relationship there. Is there still a very big advanced pipeline of realistic data centers? When could those come in, and how do you frame that up in the context of Batch Zero?

Speaker #6: you so much. Let me see. One thing I wanted to get a little bit of elaboration on was your large load pipeline in ERCOT.

Speaker #6: Let me see. So, I guess as I'm just thinking about it, you've updated the overall interconnection queue here to 298 gigawatts at Oncor. I think last quarter you had mentioned 127 gigawatts of advanced pipeline.

Speaker #6: And now you've got the, obviously, drilling down further into the batch zero at 44 gigawatts. So I guess I'm just looking for a little bit of help to understand the relationship there.

David Arcaro: I guess I'm just looking for a little bit of help to understand the relationship there. Is there still a very big advanced pipeline of realistic data centers? When could those come in, and how do you frame that up in the context of Batch Zero?

Speaker #6: Is there still a very big, advanced pipeline of realistic data centers? When could those come in, and how do you kind of frame that up in the context of the batch zero?

Speaker #4: Yeah. Thank you for the question. I'll make a couple of comments and pass it to Alan. But the way I would think about it is all across the United States, it doesn't matter whether you're in PJM or you're in the Cal ISO or you're in ERCOT, we as a nation are struggling with ways to address issues around being short or net short dispatchable generation.

Jeff Martin: Yeah. Thank you for the question. I'll make a couple comments and pass it to Allen. The way I would think about it is all across the United States, it doesn't matter whether you're in PJM or you're in the CAISO, you're in ERCOT. We as a nation are struggling with ways to address issues around being short or net short dispatchable generation. We're addressing ways that we can see large load customers come onto the system, and ways that we can meet that growth and make sure that we can allocate costs to protect the residential consumer. Frame this, David, as a starting point as a national issue. What I think is exciting is there is a clear signal that Texas is open for business.

Speaker #4: We're addressing ways that we can see large load customers come onto the system and ways that we can meet that growth and make sure that we can allocate costs to protect the residential consumers.

Speaker #4: So frame this, David, as a starting point—as a national issue. What I think is exciting is there's a clear signal that Texas is open for business.

Jeff Martin: Frame this, David, as a starting point as a national issue. What I think is exciting is there is a clear signal that Texas is open for business. One of the things that there's strong alignment on across the legislature and executive branch is they want to continue to advance the Texas miracle. That comes back to the Batch Zero process that's being led by ERCOT. Think about a situation where you've got close to 500 GW of generation on the sideline waiting to come on the system, and similarly, over 400 GW of large load customers.

Speaker #4: One of the things that there's strong alignment on, across the legislature and executive branch, is they want to continue to advance the Texas Miracle.

Jeff Martin: One of the things that there's strong alignment on across the legislature and executive branch is they want to continue to advance the Texas miracle. That comes back to the Batch Zero process that's being led by ERCOT. Think about a situation where you've got close to 500 GW of generation on the sideline waiting to come on the system, and similarly, over 400 GW of large load customers. That Batch Zero process is intended to sequence generation with large loads. Over time, it will be a sequencing effect that's intended to balance what we think is going to be remarkable load growth. Now, here's the issue. Getting the process right is really important. It's complex, and you've seen a lot of different voices participate in the process. I think the long-term story for Oncor will continue to get better. This state is focused on the right issues.

Speaker #4: And that comes back to the batch process that's being led by ERCOT. Think about a situation where you've got close to 500 gigawatts of generation on the sideline waiting to come on the system.

Speaker #4: And similarly, over 400 gigawatts of large load customers. That batch process is intended to sequence generation with large loads. So over time, it will be a sequencing effect that's intended to balance what we think is going to be remarkable load growth.

Jeff Martin: That Batch Zero process is intended to sequence generation with large loads. Over time, it will be a sequencing effect that's intended to balance what we think is going to be remarkable load growth. Now, here's the issue. Getting the process right is really important. It's complex, and you've seen a lot of different voices participate in the process. I think the long-term story for Oncor will continue to get better. This state is focused on the right issues.

Speaker #4: Now, here’s the issue: getting the process right is really important. It’s complex, and you’ve seen a lot of different voices participate in the process.

Speaker #4: I think the long-term story for Encore will continue to get better. This state is focused on the right issues. And I had a conversation recently with the CEO of the U.S. Chamber, who made a comment, David, that really resonated with me. He said you may not be able to solve all the problems in this country with higher economic growth, but you can't solve any problems without it.

Jeff Martin: I heard someone, I had a conversation recently with the CEO of the U.S. Chamber, who made a comment, David, that really resonated with me, is you may not be able to solve all the problems in this country with higher economic growth, you can't solve any problems without it. I think Texas recognizes that, and I think there's a lot of goodwill being spent making sure that we have the right framework to allow folks to invest the capital needed to meet the needs of stakeholders. If you could, Allen, you mind walking through where you're at with your queue and how you see it unfolding?

Speaker #4: And I think Texas recognizes that. And I think there's a lot of goodwill being spent making sure that we have the right framework to allow folks to invest the capital needed to meet the needs of stakeholders.

Speaker #4: If you could, Alan, do you mind walking through kind of where you're at with your queue and how you see it unfolding?

Speaker #6: Yeah, sure, Jeff. Thanks, David. I think you got the numbers right. I mean, we've got 44 gigawatts in our service territory that's presently in the batch zero process.

Allen Nye: Yeah. Sure, Jeff. Thanks, David. I think you got the numbers right. We have 44 GW in our service territory that's presently in the Batch Zero process. You referenced the 127.5 from the last call. The relationship between those two numbers, the 127.5 was what we had in our RTP submission versus the 44 in the Batch Zero. The delta there is that the Batch Zero rules were finalized in June. They're a different set of rules than the RTP submission rules. Batch required things like finalization of studies, posting financial security of $50,000 a MW, attestations of site control and contracting resources, things like that. That's the difference between the 127.5 and the 44. Regarding your question about, is there a lot still out there, obviously, you also referenced the 298 total overall queue. I think we were at 283 last time.

Speaker #6: You referenced the 127.5 from the last call. The relationship between those two numbers—the 127.5 was what we had in our RTP submission versus the 44 in the batch zero.

Speaker #6: The delta there is that the batch zero rules were finalized in June. They're a different set of rules than the RTP submission rules. Batch required things like finalization of studies, posting financial security of $50,000 a megawatt.

Allen Nye: Batch required things like finalization of studies, posting financial security of $50,000 a MW, attestations of site control and contracting resources, things like that. That's the difference between the 127.5 and the 44. Regarding your question about, is there a lot still out there, obviously, you also referenced the 298 total overall queue. I think we were at 283 last time. I will direct you to our, I think in our earnings release, we talked about some of our growth numbers.

Speaker #6: Attestations of site control and contracting resources, things like that. So that's the difference between the 127.5 and the 44. Regarding your question about is there a lot still out there, obviously, you also referenced the 298 total overall queue.

Speaker #6: I think we were at 283 last time. And then I will direct you to our earnings release. We talked about some of our growth numbers.

Allen Nye: I will direct you to our, I think in our earnings release, we talked about some of our growth numbers. The answer to your question is yes. Is there more out there? Total active requests year to date for transmission TOIs is up 15%. LC&I, minus data centers, new requests are up 8% quarter over same quarter last year, and active are up about 22% Q2 2026 versus Q2 2025. We continue to have really strong growth, really strong interest. Yes, there is more out there.

Speaker #6: But the answer to your question is yes, there's more out there. Total active request year-to-date for transmission POIs is up 15%. LC&I, minus data centers, new requests are up 8% quarter over the same quarter last year.

Allen Nye: The answer to your question is yes. Is there more out there? Total active requests year to date for transmission TOIs is up 15%. LC&I, minus data centers, new requests are up 8% quarter over same quarter last year, and active are up about 22% Q2 2026 versus Q2 2025. We continue to have really strong growth, really strong interest. Yes, there is more out there.

Speaker #6: And ACTIVE are up about 22% in Q2 2026 versus Q2 2025. So we continue to have really strong growth, really strong interest.

Speaker #6: And yes, there is more out there. Excellent. Yeah. Thanks for all that color. Appreciate that. And then relatedly, I just wanted to clarify the additional batch zero capital investment opportunities.

David Arcaro: Excellent. Yeah, thanks for all that color. Appreciate that. Relatedly, just wanted to clarify the additional Batch Zero capital investment opportunities in terms of when you could frame that up and quantify it. Is that something that comes after April of 2027, next year? Is it something we could get mid-year, in terms of the timing, just as ERCOT goes through the Batch process?

Speaker #6: In terms of when you could frame that up and quantify it, is that something that comes after April of 2027—next year? Is it something we could get mid-year, in terms of the timing, just as ERCOT goes through the batch process?

Speaker #4: Thank you, David. I think you've got the I think you've got the timeline correct. We obviously will look to update SEMPRA's roll forward five-year plan as well as Encore's on the Q4 call.

Jeff Martin: Thank you, David. I think you've got the timeline correct. We obviously will look to update Sempra's roll-forward five-year plan as well as Oncor's on the Q4 call. I think in my prepared remarks, we talked about the fact that we think that visibility into additional capital that we require to support the Batch process as it moves forward, and the information we get after that, I think we'll have to revisit how we can continue to be as transparent as possible following Q4. We're excited to bring those additional numbers to you at the right time.

Speaker #4: And I think, in my prepared remarks, we talked about the fact that we think that visibility into additional capital that will be required to support the batch process as it moves forward will be information we get after that.

Speaker #4: I think we'll have to revisit how we can continue to be as transparent as possible following Q4. But we're excited to bring those additional numbers to you at the right time.

Speaker #6: Okay. Great. Makes sense. Thank you.

David Arcaro: Okay, great. Makes sense. Thank you.

Speaker #4: Thank you for joining us.

Jeff Martin: Thank you for joining us.

Speaker #1: Thank you. And our next question comes from Nicholas Campanella from Barclays. Your line is open.

Operator: Thank you. Our next question comes from Nicholas Campanella from Barclays. Your line is open.

Allen Nye: Hi, Nicholas.

Jeff Martin: Hi, Nicholas.

Speaker #5: Hey. Good afternoon.

Allen Nye: Hey, good afternoon. Hey, how are you?

Nicholas Campanella: Hey, good afternoon. Hey, how are you?

Speaker #7: Hey. How are you? I just wanted to ask if we could be a little bit more clear just on the batch process, just the actual next steps.

Jeff Martin: Good.

Nicholas Campanella: I just wanted to ask if we could be a little bit more clear just on the batch process, just the actual next steps. To my understanding, there's a good cause exception request at the PUCT. Do you guys think that that gets acknowledged and then we just kind of keep moving along with the prior schedule? Or are we on pause until we get past November election? Any thoughts from Oncor, if we could see additional legislation in the next session around this too would be helpful. Thanks.

Speaker #7: To my understanding, there's a good cause exception request at the PUCT. Do you think that gets acknowledged, and then we just kind of keep moving along with the prior schedule?

Speaker #7: Or are we kind of on pause until we get past November election and any thoughts from Encore if we could see additional legislation in the next session around this too would be helpful.

Speaker #7: Thanks.

Speaker #4: Yeah. I'll make a couple of comments and Alan, I appreciate if you do as well. I think one of the things we've made clear on this call, and I know you're on top of this, Nick, but is we've laid out a path here where we think we feel good about the base capital plan at Encore.

Jeff Martin: Yeah. I'll make a couple comments, Allen, I appreciate if you do as well. I think one of the things we've made clear on this call, and I know you're on top of this, Nick, but is we've laid out a path here where we think we feel good about the base capital plan at Oncor. We've got improving confidence in the additional capital opportunities, certainly, we think there will be a big backlog of new capital opportunities that fall outside of both of those two first buckets. As this goes forward, we're seeing strong leadership, I think, from Greg Abbott. The PUCT has obviously taken up the issue as well, I think as it goes forward, we'll have more visibility to it in the next few months.

Speaker #4: We've got improving confidence in the additional capital opportunities. And certainly, we think there will be a big backlog of new capital opportunities that fall outside of both of those two first buckets.

Speaker #4: As this goes forward, I mean, we're seeing strong leadership, I think, from Governor Abbott. The PUCT is obviously taking up the issue as well.

Jeff Martin: The PUCT has obviously taken up the issue as well, I think as it goes forward, we'll have more visibility to it in the next few months. Allen, maybe talk about what your expectations are for the process being firmed up and whether you think there'll be potential legislation would be helpful.

Speaker #4: And I think as it goes forward, we'll have more visibility to it in the next few months. But Alan, maybe talk about what your expectations are for the process being firmed up, and whether you think potential legislation would be helpful.

Jeff Martin: Allen, maybe talk about what your expectations are for the process being firmed up and whether you think there'll be potential legislation would be helpful.

Speaker #5: Yeah. You bet. Hey, Nick.

Allen Nye: Yeah, you bet. Hey, Nick. I think the way we're thinking about it is obviously Governor Abbott issued his letter on 3 August calling for the comprehensive verification and audit of all the data centers before they can interconnect. The immediate impact is, I think, exactly the way you described it. ERCOT previously was going to notify TDSPs on 7 August of the loads that could potentially be in Batch Zero, and now ERCOT apparently intends to consult with the PUC on next steps and seek approval for a good cause exception related to the Batch Zero timeline and process at the 20 August PUC open meeting. We've really been focused on 20 August as being the next big event where we may learn more about what's going to go on.

Speaker #6: I think the way we're thinking about it is, obviously, Governor Abbott issued his letter on August 3, calling for the comprehensive verification and audit.

Speaker #6: Of all the data centers, before they can interconnect, the immediate impact—as I think, exactly the way you described it—is that ERCOT previously was going to notify TDSPs on August 7 of the loads that could potentially be in batch zero. Now ERCOT apparently intends to consult with the PUC on next steps and seek approval for a good-cause exception related to the batch zero timeline and process at the August 20 PUC open meeting.

Speaker #6: So, we've really been focused on August 20 as being the next big event where we may learn more about what's going to go on.

Allen Nye: We've really been focused on 20 August as being the next big event where we may learn more about what's going to go on. The only other thing I would say is it's also our perspective that these projects that were going to make it into Batch Zero were always subject to a validation process to ensure that they met the criteria of the new rules.

Speaker #6: The only other thing I would say is, it's also our perspective that these projects that were going to make it into batch zero were always subject to a validation process to ensure that they met the criteria of the new rules.

Allen Nye: The only other thing I would say is it's also our perspective that these projects that were going to make it into Batch Zero were always subject to a validation process to ensure that they met the criteria of the new rules. With the comprehensive audit moving to the front end and effectively reordering the prior process, we think it will benefit the process by allowing more participation on the front end and lead potentially to a more durable framework on the back end. That's probably what we know right now.

Speaker #6: And with the comprehensive audit moving to the front end, and effectively reordering the prior process, we think it will benefit the process by allowing more participation on the front end and potentially lead to a more durable framework on the back end.

Allen Nye: With the comprehensive audit moving to the front end and effectively reordering the prior process, we think it will benefit the process by allowing more participation on the front end and lead potentially to a more durable framework on the back end. That's probably what we know right now.

Speaker #6: That's probably what we know right now.

Speaker #4: Yeah, I think that's a really good point too. The way this is being structured, it's almost like a reordering of existing process, and I think it's designed—I think thoughtfully—by the governor to make sure that there's more input on the front end.

Jeff Martin: Yeah, I think that's a really good point, too, is the way this is being structured, it's almost like a reordering of the existing process. I think it's designed, I think thoughtfully by the governor, to make sure that there's more input on the front end. If we get to a more durable framework on the back end, Nick, I think that's a win for everyone in the process.

Speaker #4: So if we get to a more durable framework on the back end, Nick, I think that's a win for everyone in the process.

Speaker #7: That makes a lot of sense, and thanks for sharing those thoughts. Then, I guess just coming back to the questions on California legislation— I know that there's been wide discussion that this is a broader issue than just utilities for the state, right?

Nicholas Campanella: That makes a lot of sense, thanks for sharing those thoughts. I guess just coming back to the questions on California legislation. I know that there's been wide discussion that this is a more than utilities type problem for the state, right? Everyone has to bring something to the table. Just how do we think about where you guys are drawing the line on maybe trading things like future contributions to phase two funds?

Speaker #7: And everyone has to bring something to the table. Just how do we kind of think about where you guys are drawing the line on maybe trading things like future contributions to Phase Two fund?

Speaker #4: Sure. I'll make a couple of comments here, and then I'll pass it to Caroline and then Nick, who, as you know, runs California. In my earlier remarks on today's call, I think it was really important for Sempra and other participants in the market to frame this correctly.

Jeff Martin: Sure. I'll make a couple comments here, then I'll pass it to Caroline Nguyen, Nick, who you know, who runs California. In my earlier remarks on today's call, I think it was really important that for Sempra and other participants in the market to frame this correctly. I think for us to see successful legislation, it really goes through making sure it's focused primarily on public policy that improves livability, right? As you think about the utility side of it, I think this is less about pushing for a quote unquote utility bailout bill. This is more about making sure that everyone's joined around the exercise of improving the environment for California families. I think an output from that will be there's a lot of benefit to California families when load-serving entities are financially healthy. I think that will be important.

Speaker #4: And I think for us to see successful legislation, it really goes through making sure it's focused primarily on public policy that improves livability, right?

Speaker #4: So as you think about the utility side of it, I think this is less about pushing for a quote-unquote utility bailout bill. This is more about making sure that everyone's joined around the exercise of improving the environment for California families.

Jeff Martin: This is more about making sure that everyone's joined around the exercise of improving the environment for California families. I think an output from that will be there's a lot of benefit to California families when load-serving entities are financially healthy. I think that will be important. In terms of the legislation itself, we have been active. We're working through all the various constituencies. I have been very pleased with the leadership of the state. I really feel great about the role that Gavin Newsom is playing. I think it's a little bit premature for us to front-run the process without having the text of a bill, Nick, in front of us.

Speaker #4: And I think an output from that will be: there's a lot of benefit to California families when load-serving entities are financially healthy.

Speaker #4: So I think that will be important. In terms of the legislation itself, we have been active. We're working through all the various constituencies. I've been very pleased with the leadership of the state.

Jeff Martin: In terms of the legislation itself, we have been active. We're working through all the various constituencies. I have been very pleased with the leadership of the state. I really feel great about the role that Gavin Newsom is playing. I think it's a little bit premature for us to front-run the process without having the text of a bill, Nick, in front of us. I think it's important not to pass judgment there. We'll look at the totality of the bill and the benefits to the entire list of stakeholders before we weigh in on any bright lines around what we might be expecting. Caroline, I know you've done a lot of work in this area. Could you add some additional color for Nick's benefit?

Speaker #4: I really feel great about the role that Governor Newsom is playing. I think it's a little bit premature for us to front-run the process without having the text of a bill Nick in front of us.

Speaker #4: So I think it's important not to pass judgment there. And we'll look at the totality of the bill and the benefits to the entire list of stakeholders.

Jeff Martin: I think it's important not to pass judgment there. We'll look at the totality of the bill and the benefits to the entire list of stakeholders before we weigh in on any bright lines around what we might be expecting. Caroline, I know you've done a lot of work in this area. Could you add some additional color for Nick's benefit?

Speaker #4: Before we weigh in on any bright lines around what we might be expecting. But Caroline, I know you've done a lot of work in this area.

Speaker #4: Could you add some additional color for Nick's benefit?

Speaker #8: Sure. Happy to. Hi, Nick. We are encouraged by not only the ongoing dialogue but importantly the range of solutions that are being discussed. And I'm pleased with the broad recognition that California would benefit from a more durable wildfire framework.

Caroline Nguyen: Sure. Happy to. Hi, Nick. We are encouraged by not only the ongoing dialogue, but importantly, the range of solutions that are being discussed. I am pleased with the broad recognition that California would benefit from a more durable wildfire framework. That said, I'll agree with Jeff that it's premature to assess any specific proposal until there's actual bill language for us to evaluate and a clear understanding of how it would operate as part of the broader package. Count on us to continue to engage constructively over the last three weeks of session, but we don't want to get ahead of the process. I'll just end with this, that our focus remains unchanged, that we're going to operate the system safely. We'll execute on our wildfire mitigation plans, maintain financial discipline, and invest in the system in a way that supports customers, communities, and long-term shareholder value.

Speaker #8: That said, I'll agree with Jeff that it's premature to assess any specific proposal until there's actual bill language for us to evaluate and a clear understanding of how it would operate as part of the broader package.

Speaker #8: But count on us to continue to engage constructively over the last three weeks of session, but we don't want to get ahead of the process.

Caroline Nguyen: Count on us to continue to engage constructively over the last three weeks of session, but we don't want to get ahead of the process. I'll just end with this, that our focus remains unchanged, that we're going to operate the system safely. We'll execute on our wildfire mitigation plans, maintain financial discipline, and invest in the system in a way that supports customers, communities, and long-term shareholder value. We'll evaluate any legislation against those principles, we'll be able to communicate our assessment at the appropriate time. Thanks.

Speaker #8: And I'll just end with this: our focus remains unchanged. We're going to operate the system safely, execute on our wildfire mitigation plans, maintain financial discipline, and invest in the system in a way that supports customers, communities, and long-term shareholder value.

Speaker #8: We'll evaluate any legislation against those principles, and we'll be able to communicate our assessment at the appropriate time.

Caroline Nguyen: We'll evaluate any legislation against those principles, we'll be able to communicate our assessment at the appropriate time. Thanks.

Speaker #4: Thanks, Caroline. And Nick, I would just conclude—and I’ve made this comment before—that a lot of people have sought this out and asked for their views on this.

Jeff Martin: Thanks, Caroline. Nick, I would just conclude, I made this comment before that a lot of people have sought us out and asked for their views on this. I think the thing I keep coming back to is, I think I've been pretty clear, I'm constructive. I actually think we're going to get some solid legislation this session, I'm really pleased with the leadership that we're hearing from key folks. I don't want to get ahead of the process. Caroline's absolutely right. There's a long way to go. We want to see the text language. It's a very complicated exercise. The reason I'm constructive is I think it's the right thing for the state. I think it's the right thing for livability. I think it's the right thing to improve affordability.

Speaker #4: And I think the thing I keep coming back to is, and I think I've been pretty clear, I'm constructive. I actually think we're going to get some solid legislation this session.

Speaker #4: And I'm really pleased with the leadership that we're hearing from key folks. I don't want to get ahead of the process. Caroline's absolutely right.

Speaker #4: There's a long way to go. We want to see the text language. It's a very complicated exercise. But the reason I'm constructive is I think it's the right thing for the state.

Jeff Martin: The reason I'm constructive is I think it's the right thing for the state. I think it's the right thing for livability. I think it's the right thing to improve affordability. When you line it up around what's right from a public policy standpoint, then it becomes just a good old-fashioned leadership challenge. I'm pleased with the people that are stepping forward to address it in Sacramento.

Speaker #4: I think it's the right thing for livability. I think it's the right thing to improve affordability. And when you line it up around what's right from a public policy standpoint, then it becomes just a good old-fashioned leadership challenge.

Jeff Martin: When you line it up around what's right from a public policy standpoint, then it becomes just a good old-fashioned leadership challenge. I'm pleased with the people that are stepping forward to address it in Sacramento.

Speaker #4: And I'm pleased with the people there stepping forward to address it in Sacramento.

Speaker #1: Thank you. And our next question will come from Julian DeMullin-Smith from Jefferies. Your line is open.

Operator: Thank you. Our next question will come from Julien Dumoulin-Smith from Jefferies. Your line is open.

Speaker #4: Hi, Julian.

Jeff Martin: Hi, Julien.

Speaker #9: Hi, Jeff. Hi. Sorry to disappoint, but good afternoon. It's Paul Zimbardo on for Julian today. Thanks for taking the time, team.

Paul Zimbardo: Hi. Sorry to disappoint, but good afternoon. It's Paul Zimbardo on for Julien today. Thank you for taking the time.

Speaker #4: No worries. Thank you.

Jeff Martin: No worries. Thank you.

Speaker #9: I don't know, of course. Thank you very much. I know a lot has been asked already. Just on the good old transmission side of the business—kind of the earlier stage projects—any view on timing changes on some of these certificate of convenience and necessity approvals, just related to what's going on?

Paul Zimbardo: Of course. Thank you very much. I know a lot of it has been asked already. Just on the good old transmission side of the business, kind of the earlier stage projects. Any view on timing changes on some of these Certificate of Convenience and Necessity approvals just related to what's going on, or would you describe things as on track?

Speaker #9: Or would you describe things as on track?

Speaker #4: Yeah, I would describe things as on track. And I'll pass it to Alan. But let me just make a quick point you may find helpful, Paul.

Jeff Martin: Yeah, I wouldn't describe things as on track. I'll pass it to Allen. Let me just make a quick point you may find helpful, Paul. Oncor's base capital plan is $47.5 billion. They only have about $5 billion of that base capital program that's focused on 765 import pathways related to the Permian. I think Allen and Don have enough flexibility in their capital program to adjust the timing and sequencing of those projects if they need to. We continue to feel good about Oncor's five-year capital plan and look forward to coming back in Q4 to update you on how we might grow that going forward. Allen, on the specific issue of where you're at with CCNs, do you feel like things are on track and want to add additional color for Paul's benefit?

Speaker #4: Encore's base capital plan is $47.5 billion. They only have about $5 billion of that base capital program focused on 765 import pathways related to the Permian.

Speaker #4: I think Alan and Don have enough flexibility in their capital program to adjust the timing and sequencing of those projects that they need to.

Speaker #4: We continue to feel good about Encore's five-year capital plan and look forward to coming back in Q4 to update you on how we might grow that going forward.

Jeff Martin: We continue to feel good about Oncor's five-year capital plan and look forward to coming back in Q4 to update you on how we might grow that going forward. Allen, on the specific issue of where you're at with CCNs, do you feel like things are on track and want to add additional color for Paul's benefit?

Speaker #4: But Alan, on the specific issue of where you're at with CCNs, you feel like things are on track, and we'll add additional color for Paul's benefit?

Speaker #2: Yeah, I don't have much to add. I'll simply say I take Chairman Swartner and Lieutenant Governor Patrick's statements very seriously. We intend to work with landowners and work through this process.

Allen Nye: Yeah, I don't have much to add. I'll simply say, I take Chairman Schwertner and Lieutenant Governor Patrick's statements very seriously. We intend to work with landowners and work through this process. Just right now, it's so recent, I don't have really a very good understanding or belief about what's going to happen or what timelines could change or not.

Speaker #2: Just right now, it's so recent. I don't really have a very good understanding or belief about what's going to happen, or what timelines could change or not.

Speaker #2: I think we're just waiting to see.

Jeff Martin: Okay.

Allen Nye: I think we just wait and see.

Speaker #4: Thank you.

Jeff Martin: Thank you.

Speaker #9: Okay, no, understood. And then one follow-up on the batch zero. You mentioned the eight gigawatts of load that's already in process. If you could elaborate on that a little bit.

Paul Zimbardo: Okay. No, understood. One follow-up on the Batch Zero. You mentioned the 8 gigawatts of load that's already in process. If you could elaborate that a little bit, does that require capital to go? Is that in that upside to the upside capital bucket as well? If you could help on that 8 gigawatt. Thank you.

Speaker #9: Does that require capital to go? Is that kind of in that upside to the upside capital bucket as well? If you could help on that eight gigawatt.

Speaker #9: Thank you.

Speaker #4: Yeah. I think when you think about that 44 gigawatts that we've identified in today's call, the reason we called out that eight gigawatts is that's projects that have moved forward.

Jeff Martin: Yeah. I think when you think about that 44 gigawatts that we've identified in today's call, the reason we called out that 8 gigawatts is that's projects that have moved forward and they're already interconnected. All it's pointing to is the customers that have been interconnected, their overall utilization is not at the 8 gigawatt level. They're already connected and their load is expected to increase over time to 8 gigawatts. The reason that's important, and I think we called this out, it shows that that load growth is not just a prospective opportunity. It's something that's coming onto Oncor's system currently.

Speaker #4: And they're already interconnected. So, all it's pointing to is the customers that have been interconnected—their overall utilization is not at the 8-gigawatt level.

Speaker #4: They're already connected and their load is expected to increase over time to eight gigawatts. And the reason that's important, I think we call this out, it shows that that load growth is not just a perspective opportunity.

Jeff Martin: They're already connected and their load is expected to increase over time to 8 gigawatts. The reason that's important, and I think we called this out, it shows that that load growth is not just a prospective opportunity. It's something that's coming onto Oncor's system currently.

Speaker #4: It's something that's coming onto Encore's system currently.

Speaker #9: Okay. No, that's helpful. Thank you very much.

Paul Zimbardo: Okay. No, that's helpful. Thank you very much.

Speaker #4: Thank you, Paul. Thank you for joining.

Jeff Martin: Thank you, Paul. Thank you for joining.

Speaker #1: Thank you. And our next question will come from Richard Sunderland from Truist Securities. Your line is open.

Operator: Thank you. Our next question will come from Richard Sunderland from Truist Securities. Your line is open.

Speaker #4: Hi, Richard.

Jeff Martin: Hi, Richard.

Speaker #10: Hi. Good morning. Thanks for the time today. Sticking with some of these Encore upside capex themes, very clear on the Batch Zero sequencing relative to your Q4 update.

Richard Sunderland: Hi. Good morning. Thanks for the time today. Sticking with some of these Oncor upside CapEx themes, very clear on the Batch Zero sequencing relative to your Q4 update. Can you speak to other opportunities that could fold into the upside bucket on that Q4 update? Presumably, there's things like the SRP that would remain in there, but just trying to think about other things that might translate into upside that aren't currently being discussed right now.

Speaker #10: But can you speak to other opportunities that could fold into the upside bucket on that Q4 update? Presumably, there's things like the SRP that would remain in there, but I'm just trying to think about other things that might translate into upside that aren't currently being discussed right now.

Speaker #4: Thank you for the question, Richard. We outlined how we thought about the upside opportunity for Oncor on our Q4 call. That might be something that you go back and reference.

Jeff Martin: Thank you for the question, Richard. We outlined how we thought about the upside opportunity for Oncor on our Q4 call. That might be something that you go back and reference. In our current materials, if you look at slide four, we're talking about the $47.5 billion base capital plan that we announced four months ago, you can see that we've articulated the three buckets that form what we've referred to as the $10 billion incremental capital opportunity. That's $4 billion associated with these recently endorsed DFW projects, $3 billion associated with non-Permian 765 projects, then you referenced it correctly, they do expect to make a system resiliency plan filing next year. They've earmarked about $3 billion of capital for that. That number can move around a little bit.

Speaker #4: But in our current materials, if you look at slide four, we're talking about the $47.5 billion base capital plan that we announced four months ago.

Speaker #4: And you can see that we've articulated the three buckets that form what we've referred to as the $10 billion incremental capital opportunity. That's $4 billion associated with these recently endorsed DFW projects, $3 billion associated with non-Permian 765 projects, and then you referenced it correctly.

Jeff Martin: That's $4 billion associated with these recently endorsed DFW projects, $3 billion associated with non-Permian 765 projects, then you referenced it correctly, they do expect to make a system resiliency plan filing next year. They've earmarked about $3 billion of capital for that. That number can move around a little bit. To your point, there may be other opportunities that come to us before we announce this next February. I think we're quite constructive on those two buckets together, the $47.5 billion and also this $10 billion opportunity.

Speaker #4: They do expect to make a system resiliency plan filing next year. They've earmarked about $3 billion of capital for that. That number can move around a little bit.

Speaker #4: And to your point, there may be other opportunities that come to us before we announce this next February. But I think we're quite constructive on those two buckets together—the $47.5 billion and also this $10 billion opportunity.

Jeff Martin: To your point, there may be other opportunities that come to us before we announce this next February. I think we're quite constructive on those two buckets together, the $47.5 billion and also this $10 billion opportunity. I think, Richard, one of the key things we've taken a lot of questions on since our last call was how this batch process fit into our current plan. I think it's been a real clear takeaway for us that the batch process is clearly an incremental opportunity beyond the $47.5 billion and beyond the $10 billion of upside capital they have. The challenge will be as that process unfolds, we don't think we'll have a lot more definition on the batch-related capital until later in 2027.

Speaker #4: And I think, Richard, one of the key things we've taken a lot of questions on since our last call was how this batch process fits into our current plan.

Jeff Martin: I think, Richard, one of the key things we've taken a lot of questions on since our last call was how this batch process fit into our current plan. I think it's been a real clear takeaway for us that the batch process is clearly an incremental opportunity beyond the $47.5 billion and beyond the $10 billion of upside capital they have. The challenge will be as that process unfolds, we don't think we'll have a lot more definition on the batch-related capital until later in 2027.

Speaker #4: And I think it's been a real clear takeaway for us that the batch process is clearly an incremental opportunity beyond the $47.5 million and beyond the $10 billion of upside capital they have.

Speaker #4: The challenge will be, as that process unfolds, we don't think we'll have a lot more definition on the batch-related capital until later in 2027.

Speaker #10: Got it. No, thanks for running through all of that. But I'll just, I guess, ask the question in a different way. So is the 10 billion that you currently call out as Encore upside kind of what you're working with and then some of that presumably translates into base on that 4Q update and then the remainder stays as upside?

Richard Sunderland: Got it. Thanks for running through all that. I'll just, I guess, ask the question in a different way. Is the $10 billion that you currently call out as Oncor upside kind of what you're working with, then some of that presumably translates into base on that Q4 update, then the remainder stays as upside? Do you see other opportunities and programs that may backfill whatever moves into base?

Speaker #10: Or do you see other opportunities and programs that may backfill whatever moves into base?

Speaker #4: Well, I appreciate the clarification. Let me go back a little bit, because I think that the past is prologue here. If you go back and look at where we were in February of 2025, at the 100% level, Oncor had a $36 billion capital program, and they had about $12 billion of upside opportunities.

Jeff Martin: Well, I appreciate the clarification. Let me go back a little bit because I think that the past is prologue here. If you go back and look at where we were in February of 2025, at the 100% level, Oncor had a $36 billion capital program, they had about $12 billion of upside opportunities. Through the year, they continued to work on that pipeline, by the time they got to February of this year, they took the $36 billion and the $12 billion and announced a brand-new base capital plan of $47.5 billion. Then, Richard, they re-upped that opportunity bucket back to $10 billion. I think that is probably something like that is what we expect.

Speaker #4: Through the year, they continue to work on that pipeline. And by the time they got to February of this year, they took the 36 and the 12 and announced a brand new base capital plan of 47.5 billion and then, Richard, they re-upped that opportunity bucket back to 10 billion dollars.

Speaker #4: And I think that is probably something like that is what we expect. We expect to see all or portions of the 10 billion dollars get rolled into the 47.5.

Jeff Martin: I think that is probably something like that is what we expect. We expect to see all or portions of the $10 billion get rolled into the $47.5, I'm quite confident that Don and Alan will come back with a very large upside bucket beyond that. That's what we'll cover on the February call.

Jeff Martin: We expect to see all or portions of the $10 billion get rolled into the $47.5, I'm quite confident that Don and Alan will come back with a very large upside bucket beyond that. That's what we'll cover on the February call.

Speaker #4: And I'm quite confident that Don and Al will come back with a very large upside bucket beyond that. That's what we'll cover on the February call.

Speaker #10: All very clear. Thank you very much.

Richard Sunderland: All very clear. Thank you very much.

Speaker #4: Thank you. I appreciate you joining.

Jeff Martin: Thank you. Appreciate you joining.

Speaker #1: Thank you. And our next question will come from Anthony Crodell from Mizuho. Your line is open.

Operator: Thank you. Our next question will come from Anthony Crowdell from Mizuho. Your line is open.

Speaker #11: Hey, good afternoon. Noon team. Just, I guess, one high-level question on Texas, and then one on the balance sheet. Just, Steve had talked earlier about the 765, maybe delays, and some of the news we're hearing there.

Anthony Crowdell: Hey, good afternoon team.

Jeff Martin: Hey, Anthony.

Anthony Crowdell: Just I guess one high-level question on Texas and then one on the balance sheet. Steve had talked earlier about the 765 maybe delays in some of the news we're hearing there. We're talking about delays in the Batch Zero process. Is it the same issue there of nimbyism? Just, it seems the timing of both of them happening or the news we've seen in the last three weeks have just reached a peak. Is it the same issue that's going on in ERCOT?

Speaker #11: We're talking about delays in the batch zero process. Is it the same issue there of NIMBYism? It just seems that the timing of both of them happening was—news we've seen in the last three weeks has just reached a peak.

Speaker #11: Is it the same issue that's going on in ERCOT?

Speaker #12: Look, I think I looked at Anthony like that. All across this country, there's a variety of elections taking place in November. There's a big focus on affordability.

Jeff Martin: Look, I think I look at it, Anthony, like that all across this country, there's a variety of elections taking place in November. There's a big focus on affordability. It doesn't matter whether you're a Republican or a Democrat or an independent. We're looking for ways to release pressure on American families, and I think Texas is not immune from that. Obviously, there's a process going forward where we're doing things at scale, Anthony, that have never been done before. If it's going to happen, it's going to happen in the state of Texas. I think there's an uncommon electricity demand growth opportunity, and I think there's an uncommon associated capital opportunity. I think a lot of people with goodwill are at the table in Austin trying to make sure that we've got a right process. I think Allen has struck the right tone.

Speaker #12: It doesn't matter whether you're a Republican, a Democrat, or an Independent. We're looking for ways to release pressure on American families. I think Texas is not immune from that.

Speaker #12: Obviously, there's a process going forward where we're doing things at scale, Anthony, that have never been done before. And if it's going to happen, it's going to happen in the state of Texas.

Speaker #12: So I think there's an uncommon electricity demand growth opportunity, and I think there's an uncommon associated capital opportunity. I think a lot of people have goodwill or are at the table in Austin, trying to make sure that we've got the right process.

Jeff Martin: I think there's an uncommon electricity demand growth opportunity, and I think there's an uncommon associated capital opportunity. I think a lot of people with goodwill are at the table in Austin trying to make sure that we've got a right process. I think Allen has struck the right tone.

Speaker #12: And I think Alan has struck the right tone. What we want to do is make sure that we're supportive of the process. We're there to make sure that we can address some of the needs of stakeholders, and if the outcome is it takes a little bit longer to make the process better for everybody, and we end up with a durable framework, I think it's great for the state of Texas and for the long run.

Jeff Martin: What we want to do is make sure that we're supportive of the process. We're there to make sure that we can address some of the needs of stakeholders. If the outcome is it takes a little bit longer to make the process better for everybody, and we end up with a durable framework, I think it's great for the State of Texas and that in the long run, we continue to have an increasingly bullish view for Oncor.

Speaker #12: We continue to have an increasingly bullish view for Encore.

Speaker #11: Great. And then if I could pivot slide 11, you talk about Moody's, your BAA2 with the negative outlook. If my memory serves me correctly, they went to a negative outlook back in January of 2025.

Anthony Crowdell: Great. If I could pivot. Slide 11, you talk about Moody's, your Baa2 with a negative outlook. If my memory serves me correct, they went to a negative outlook back in January 2025. Just curious if there's any timing on when they revisit it or any data points they're looking for to change that negative outlook?

Speaker #11: Just curious if there’s any timing on when they revisit it or any data points they’re looking for to change that negative outlook.

Speaker #12: Yeah, thank you for that question. Obviously, the key issue for us at this point is working very closely with Justin and his team to close the KKR transaction.

Jeff Martin: Yeah. Thank you for that question. Obviously, the key issue for us at this point is working very closely with Justin and his team to close the KKR transaction, which is on schedule for this quarter. Karen, perhaps you could talk about the value of that transaction also from a credit standpoint.

Speaker #12: Which is on schedule for this quarter. And Karen, perhaps you could talk about the value of that transaction, also from a credit standpoint.

Speaker #2: Sure. And thanks, Anthony. Yeah, so the priority right now was getting the KKR transaction closed and you'll recall as part of our strategy, we worked closely with the rating agencies to improve the strength of our balance sheet.

Karen Sedgwick: Sure. Thanks, Anthony. Yeah, the priority right now is getting the KKR transaction closed. You'll recall, as part of our strategy, we work closely with the rating agencies to improve the strength of our balance sheet. It's going to help us improve our funding capacity and really help us pay down some parent debt. With the closing of the SI transaction later this quarter, we expect to deconsolidate over $9 billion worth of debt off the balance sheet and see an improvement in those outlooks. Specifically, you asked about Moody's. For them, it's not only closing the SI transaction and deconsolidating, but they also are tracking the progress at the SI projects. In particular, they look for certain milestones. One of the ones they've showed that's important is the pipe installation, which again, as Justin mentioned, we're on track there.

Speaker #2: So it's going to help us improve our funding capacity and really help us pay down some parent debt. So with the closing of the SI transaction later this quarter, we expect to deconsolidate over $9 billion worth of debt off the balance sheet.

Speaker #2: And see an improvement in those outlooks. And specifically, you asked about Moody's. For them, it’s not only closing the SI transaction and deconsolidating, but they also are tracking the progress at the SI projects.

Karen Sedgwick: For them, it's not only closing the SI transaction and deconsolidating, but they also are tracking the progress at the SI projects. In particular, they look for certain milestones. One of the ones they've showed that's important is the pipe installation, which again, as Justin mentioned, we're on track there. We expect that to be where they want it close to the end of the year. I think it'll probably be early next year before they make the changes.

Speaker #2: And in particular, they look for certain milestones. One of the ones they've chosen that's important is the pipe installation, which, again, Justin mentioned we're on track there.

Speaker #2: So we expect that to be where they want it, close to the end of the year. So I think it'll probably be early next year before they make the changes.

Karen Sedgwick: We expect that to be where they want it close to the end of the year. I think it'll probably be early next year before they make the changes. To be clear, we are meeting with the rating agencies regularly. We're on track for what they expect us to do, and we're excited about being able to shore up the balance sheet. On top of that, Jeff and I have talked about having an opportunity to really improve the balance sheet going forward and having cushion there of at least 50 to 150 basis points on average above those thresholds, with those thresholds improving. Excited where this will take us.

Speaker #2: But to be clear, we are meeting with the rating agencies regularly. We're on track for what they expect us to do, and we're excited about being able to shore up the balance sheet.

Karen Sedgwick: To be clear, we are meeting with the rating agencies regularly. We're on track for what they expect us to do, and we're excited about being able to shore up the balance sheet. On top of that, Jeff and I have talked about having an opportunity to really improve the balance sheet going forward and having cushion there of at least 50 to 150 basis points on average above those thresholds, with those thresholds improving. Excited where this will take us.

Speaker #2: And on top of that, Jeff and I have talked about having an opportunity to really improve the balance sheet going forward and having cushion there of at least 50 to 150 basis points, on average, above those thresholds—with those thresholds improving.

Speaker #2: So excited to see where this will take us.

Speaker #12: So I think that's a great point. I mean, I think what you're seeing us do here, Anthony, is we've got an improving equity story.

Jeff Martin: I think that's a great point. I think what you're seeing us do here, Anthony, is we've got an improving equity story. We're posting strong financial results both for the quarter and for H1 of the year, and we have definitely improving credit story and balance sheet story. We're looking to pull all that together in H2 of the year and obviously meet the expectations of our stakeholders on the credit side.

Speaker #12: We're posting strong financial results both for the quarter and for the first half of the year. And we definitely have a proven credit story and balance sheet story.

Speaker #12: So we're looking to pull all that together in the second half of the year and, obviously, meet the expectations of our stakeholders on the credit side.

Speaker #11: Great. Thanks for taking my questions.

Anthony Crowdell: Great. Thanks for taking my questions.

Speaker #12: Thank you.

Jeff Martin: Thank you.

Speaker #1: Thank you. And we do have time for one last question today. Our last question will come from Carly Davenport from Goldman Sachs. Your line is open.

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

Speaker #12: Hi, Carly.

Jeff Martin: Hi, Carly.

Speaker #13: Hey, Jeff, how are you? Thanks for taking the questions. I just had one follow-up on some of the commentary earlier on the call about California.

Carly Davenport: Hey, Jeff. How are you? Thanks for taking the questions. I just had one follow-up on some of the commentary earlier on the call on California. Just as you think about the potential outcomes here, if you don't see any legislation move forward this session, is there anything that you could see changing about your GRC filing or any other parts of your investment strategy in California that we should be keeping in mind?

Speaker #13: Just as you think about the potential outcomes here, if you don’t see any legislation move forward this session, is there anything that you could see changing about your GRC filing or any other parts of your investment strategy in California that we should be keeping in mind?

Speaker #12: Yeah, thank you, Carly. I would go back to some of the information we released in February. You'll recall that at the enterprise level, we're growing our utility platform.

Jeff Martin: Yeah. Thank you, Carly. I would go back to some of the information we released in February. You recall that at the enterprise level, we're growing our utility platform at the enterprise level at about 11% annually. If you folded in the additional upside at Oncor, that number would be closer to 13%. As part of that portfolio of growth, California is now growing a little bit slower. We're growing rate base in California at about 5%, and I think we've got the right approach there in terms of making sure we meet the needs of the state in terms of safety and reliability, and there's a nod to affordability with that. I know this is a question that's come up both for Edison and PG&E, who are in a little bit different situation than us. I think we've got the opportunity to continue to execute our current capital plan.

Speaker #12: At the enterprise level, we're seeing about 11% growth annually. If you fold in the additional upside at Oncor, that number would be closer to 13%. As part of that portfolio of growth, California is now growing a little bit slower.

Speaker #12: We're growing rate-based in California at about 5%. And I think we've got the right approach there, in terms of making sure we meet the needs of the state in terms of safety and reliability, and there's a nod to affordability with that.

Speaker #12: I know this is a question that's come up both for Edison and PG&E, who are in a little bit different situation than us. I think we've got the opportunity to continue to execute our current capital plan.

Jeff Martin: I know this is a question that's come up both for Edison and PG&E, who are in a little bit different situation than us. I think we've got the opportunity to continue to execute our current capital plan. In terms of the legislation itself, I don't want to start speaking to hypotheticals without having the text in front of us. I remain constructive on legislation in the state, and I think we've got our capital plan dialed in at about the appropriate level for the future.

Speaker #12: In terms of the legislation itself, I don't want to start speaking to hypotheticals without having the text in front of us. I remain constructive on legislation in the state.

Jeff Martin: In terms of the legislation itself, I don't want to start speaking to hypotheticals without having the text in front of us. I remain constructive on legislation in the state, and I think we've got our capital plan dialed in at about the appropriate level for the future.

Speaker #12: And I think we've got our capital plan dialed in at about the appropriate level for the future.

Speaker #13: Got it. Okay. Very clear. Thank you very much for the color.

Carly Davenport: Got it. Okay. Very clear. Thank you very much for the color.

Speaker #12: Thank you for joining the call, Carly.

Jeff Martin: Thank you for joining the call, Carly.

Speaker #1: Thank you. 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.

Operator: Thank you. 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.

Speaker #12: Well, let me conclude by thanking everyone for joining today. We certainly appreciate you making the time to join. Before signing off, I'd like to take a moment to congratulate Karen on her appointment as the incoming CEO of the Southern California Gas Company, and also Justin for his appointment as Sempra's incoming Chief Financial Officer.

Jeff Martin: Well, let me conclude by thanking everyone for joining today. We certainly appreciate you making the time to join. Before signing off, I would like to take a moment to congratulate Karen on her appointment as the incoming Chief Executive Officer of the Southern California Gas Company, and also Justin for his appointment as Sempra's incoming Chief Financial Officer. These are important rotational moves that reflect Sempra's long tradition of leadership development across our organization, and we expect these rotations to become effective around the close of the SI Partners transaction, which we are targeting later this quarter. Finally, we hope to see many of you next week at the upcoming Citi conference in Las Vegas. If there are any other follow-up items, please reach out to our IR team with your questions. This concludes our call.

Speaker #12: These are important rotational moves that reflect Sempra's long tradition of leadership development across our organization. We expect these rotations to become effective around the close of the SI Partners transaction, which we're targeting later this quarter.

Jeff Martin: These are important rotational moves that reflect Sempra's long tradition of leadership development across our organization, and we expect these rotations to become effective around the close of the SI Partners transaction, which we are targeting later this quarter. Finally, we hope to see many of you next week at the upcoming Citi conference in Las Vegas. If there are any other follow-up items, please reach out to our IR team with your questions. This concludes our call.

Speaker #12: Finally, we hope to see many of you next week at the upcoming City Conference in Las Vegas. If there are any other follow-up items, please reach out to our IR team with your questions.

Speaker #12: This concludes our call.

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

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