Sempra Announces Strategic Transactions Advancing Goal of Building Leading U.S. Utility Growth Business

Sempra announced a definitive agreement to sell a 45% equity interest in Sempra Infrastructure Partners to affiliates of KKR and CPP Investments for $10 billion in cash, a move expected to fund its 2025-2029 capital plan without equity issuances, strengthen its balance sheet, and shift its earnings mix to approximately 95% from regulated U.S. utilities, with an anticipated $0.20 EPS accretion starting 2027. Concurrently, Sempra Infrastructure Partners reached Final Investment Decision on the Port Arthur LNG Phase 2 project, a 13 Mtpa expansion requiring $12 billion in capital expenditures, which is fully funded by an investor consortium including Blackstone, KKR, Apollo, and Goldman Sachs. The company also affirmed its 2026 adjusted EPS guidance and long-term EPS growth rate.

Analysis

Sempra has announced a significant strategic pivot designed to de-risk its business profile and self-fund future growth, crystallizing value from its infrastructure assets. The cornerstone of this strategy is the sale of a 45% stake in Sempra Infrastructure Partners to a KKR-led consortium for $10 billion in cash, implying a robust $31.7 billion enterprise value for the unit. This transaction is structured to provide a staggered cash infusion, allowing Sempra to efficiently fund its 2025-2029 capital plan without resorting to dilutive equity issuances, while also generating post-closing interest income. The divestment will shift Sempra's earnings mix to approximately 95% from regulated U.S. utilities, enhancing earnings quality and predictability. Management projects this move will be accretive by an average of $0.20 to EPS annually starting in 2027 and will strengthen the company's balance sheet and credit profile. Concurrently, Sempra Infrastructure Partners has reached a final investment decision on the $12 billion Port Arthur LNG Phase 2 expansion. This growth project is significantly de-risked through full equity financing from an external consortium including Blackstone and KKR, long-term offtake agreements with creditworthy partners like ConocoPhillips, and construction continuity with Bechtel. Despite the complexity of these transactions, Sempra has affirmed its 2025 and 2026 adjusted EPS guidance and its long-term 7-9% EPS compound annual growth rate, signaling strong confidence in its execution and future financial performance.

Key Decisions for Investors

• Investors should recognize this as a pivotal de-risking event that transitions Sempra toward a premium regulated utility valuation, as the transaction eliminates the need for equity financing for the 2025-2029 capital plan, thereby removing a key overhang.
• The focus now shifts to execution; monitor the progress toward the transaction's close in Q2-Q3 2026 and the construction milestones for Port Arthur LNG Phase 2, as any delays could affect the timing of projected financial benefits.
• The deal provides a valuation benchmark for Sempra Infrastructure Partners at a $31.7 billion enterprise value, which may unlock sum-of-the-parts value not previously reflected in Sempra's consolidated share price.
• Model for the projected $0.20 annual EPS accretion beginning in 2027 and watch for improvements in key credit metrics, such as FFO-to-debt, which management has highlighted as a key benefit of strengthening the balance sheet.