Sempra (NYSE:SRE) Q3 2023 Earnings Call Transcript

The goal is to optimize the design and reduce the construction cost and project risk. As we previously mentioned, these efforts should position us well to make a final investment decision in 2024, subject to definitive commercial arrangements, project financing, and any needed regulatory extensions. On the PA pipeline and the LA storage that you talked about, look, you recall in the last call we talked about the value of the Port Arthur energy hub. Both Port Arthur pipeline and LA storage are key components of that facility and really support the operations of Port Arthur LNG Phase 1, Port Arthur pipeline, I sometimes call it the Louisiana Connector, has access to the liquid supply hub at Gillis and has the capacity to deliver slightly over 2 Bcf a day of gas to Port Arthur Phase 1.

LA storage is 12.5Bcf. It’s a high turn salt dome storage facility, and it also supports the gas supply strategy for Port Arthur Phase 1, and importantly, future phases. Both Port Arthur pipeline and LA Storage have begun the procurement and engineering process and importantly, we anticipate both to be online in advance of Port Arthur Phase 1. I think the key takeaway is that we continue to make significant progress at SI on our LNG strategy and the associated development, and we’re bullish on both Brownfield projects progressing in the next year. It’s an exciting time to be in the LNG space and that we think our projects are well positioned to support our customers.

Shar Pourreza: Thank you, Justin.

Justin Bird: Thank you, Shar.

Shar Pourreza: A couple days. Bye.

Operator: Thank you. One moment for our next question, please. Our next question will come from Carly Davenport from Goldman Sachs. Your line is open.

Jeff Martin: Hi, Carly.

Carly Davenport: Hey, good morning. Thanks for taking the questions. Maybe to start, just as you think about the drivers for potential CapEx upside you mentioned, I think at Encore, new retail connections, being a key driver there, are there any other factors that you’d point to as big contributors to that potential upside on the capital spend?

Jeff Martin: I think, one of the most important things we’re tracking right now, Carly, is making sure that we have a successful execution of our general rate case here in California that continues to go well. We’ve got a track record of working well with all stakeholders to get to good outcomes for our rate payers. So that’s one that we’re following. We’ve obviously got several things that Justin just went over in terms of development opportunities related to Port Arthur Phase 2 and Cameron Phase 2, both of those are significant opportunities for our company. And I think Justin and his team have a fair amount of momentum on both of those projects. And what might be helpful to you is to give a little bit color about some of the drivers, specifically in Texas, having spent more time out there.

It is really quite remarkable. I’ve been in the business for almost three decades, and it’s quite remarkable the type of growth and how diversified the growth is in Texas. And maybe if we could, Allen, if you could provide a little bit more color about where some of the growth is coming from and why it’s impacting your capital plan so strongly.

Allen Nye: Yes, you bet, Jeff. Thank you. And thanks for the question, Carly. As Jeff said, our growth in Encore continues to be just very strong across the board. And I know I mentioned some of this in my opening remarks as well as in our press release, but just for example, premise growth for this quarter versus last quarter or versus same quarter last year up 43%. Total transmission points of interconnection are up 34% versus the same quarter last year. New requests for transmission points of interconnection are up 34%. Retail points of interconnection totals are up 28%. Generation points of interconnection up 38%. So really strong premise growth. Really strong growth on our transmission system for transmission POIs. And then, as I alluded to earlier in my remarks, West Texas continues to perform very, very well.

Far West Texas weather zone peak increase of 16.6% over the 2022 peak. And then really strong growth on both our Culberson loop and our Stanton loop, with Culberson up 16.5% and Stanton up over 23% – about 23.5%. Really strong developments in our economic development area. New projects up 21%, RFIs up 21%. So really just strong growth everywhere across our system, as I think is shown on Slide 6 of the deck. The real diversity of our growth, not only from an industry perspective, but from a geographic perspective as well. And that growth is what has been a consistent driver for our CapEx plan ever since we announced the $7.5 billion over five-year regulatory commitment, when we announced a simpler transaction all the way through till where we are now at 19.2 [ph] over five.

And we expect that trend to continue as we work with our Board. We met in October, began discussing with our Board our CapEx plan, our five-year plan, and what we need for next year. As Jeff said, we’re going to announce that on the fourth quarter call with the other Sempra companies. But we expect that it will be a significant increase if we continue to see what we’re seeing right now on our system. And we also expect there’ll be some additional opportunities related to House Bill 2555, the resiliency bill. So we feel very good about where we are with our CapEx plan right now going into these additional meetings with our Board and we’ll be announcing later. Lastly, I just have to say, and I know I said it earlier, but we’re really pleased that we’ve been able to navigate this really exceptional period of growth while maintaining our operational excellence.

And I think the example of that is the fact that our customers are seeing seven fewer minutes of outages than they did in the prior year, an improvement of about 9%. And also our employees have been doing an excellent job of staying safe. So all credit to them. But, Jeff, that’s kind of where we are in those issues.