Sempra (SRE): SWOT Analysis [Nov-2025 Updated]

You're looking for a clear-eyed view of Sempra (SRE), and the short answer is this: it's a high-quality utility with massive, regulated capital investment driving predictable growth, but that growth is heavily exposed to the complex regulatory environment of California and the execution risk of its liquefied natural gas (LNG) infrastructure build-out. Honestly, the regulated utility business is a money-making machine when executed well, and Sempra is leaning into that with a projected 2025 capital plan of over $8.5 billion. Still, that projected 2025 adjusted EPS of around $9.50 is defintely sensitive to regulatory decisions, so let's map out the near-term risks and opportunities you need to act on.

Sempra (SRE) - SWOT Analysis: Strengths

Strong 2025 earnings growth driven by regulated rate base expansion.

You're looking for stability and predictable growth, and Sempra delivers this by focusing on its core regulated utility business. The company is actively transitioning to a model where approximately 95% of its future earnings will come from regulated U.S. utilities, which significantly lowers overall business risk. This strategic shift is already reflected in the 2025 outlook.

Management affirmed its full-year 2025 adjusted earnings per share (EPS) guidance in the range of $4.30 to $4.70. Looking ahead, Sempra also reaffirmed its long-term projected EPS compound annual growth rate (CAGR) of 7% to 9% through 2029. This is a defintely strong, consistent growth profile for a utility holding company.

Projected 2025 capital plan of over $8.5 billion, mostly regulated.

The company's commitment to modernizing its infrastructure provides a clear, long-term runway for rate base growth. Sempra's capital plan targets an investment of roughly $13 billion in energy infrastructure for 2025. Critically, over $10 billion of that total is allocated toward growing its U.S. utilities, which are regulated assets. This heavy investment in the regulated segment ensures a high probability of capital recovery and a consistent return on investment.

Here's the quick math: A large, regulated capital expenditure program like this is the engine for future earnings growth in the utility sector.

Diversified utility footprint across high-growth markets like Texas and California.

Sempra operates in two of the most economically significant and fastest-growing regions in the U.S., serving nearly 40 million consumers. This dual-market presence provides both scale and a hedge against localized economic or regulatory shifts.

The company's utility assets are substantial:

• Sempra Texas: Includes Oncor Electric Delivery Company LLC, positioned to benefit from massive population and industrial growth. Oncor's five-year capital plan (2025-2029) is $36 billion, driven by rising electricity demand from customers like North Texas data centers. The Texas rate base was an estimated $27 billion.
• Sempra California: Comprises San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas). The California rate base is approximately $29 billion. This provides stable, regulated cash flows in a high-value market.

The increased focus on Texas is particularly compelling, with analysts raising the consolidated company's EPS growth expectations to over 10% for 2025-2029, largely due to the Texas subsidiary, Oncor.

Significant exposure to critical, high-demand LNG export infrastructure.

While Sempra is sharpening its focus on regulated utilities, its stake in Sempra Infrastructure, particularly its Liquefied Natural Gas (LNG) franchise, remains a powerful strategic asset. This exposure to global energy security is a major differentiator from most pure-play U.S. utilities.

A key milestone in 2025 was reaching the Final Investment Decision (FID) for the Port Arthur LNG Phase 2 project in Texas. This phase alone is expected to add approximately 13 million tonnes per annum (Mtpa) of liquefaction capacity. This capacity is already substantially de-risked with long-term Sales and Purchase Agreements (SPAs) in place with major global energy players, including a 20-year SPA for 4 Mtpa with ConocoPhillips and a 20-year SPA for 2 Mtpa with EQT Corp. from Phase 2.

Plus, the ECA LNG Phase 1 project in Mexico, with a capacity of 3.25 Mtpa, is over 94% complete and is expected to start generating revenue from commissioning cargoes in the spring of 2026. This LNG portfolio provides a valuable, high-growth, non-regulated component that is being efficiently funded through the sale of a minority equity stake in Sempra Infrastructure Partners, eliminating the need for common equity issuances in the 2025-2029 capital plan.

Sempra (SRE) - SWOT Analysis: Weaknesses

Heavy reliance on California regulatory approval for rate increases.

Your earnings power in the California market, which includes San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas), is heavily constrained by the California Public Utilities Commission (CPUC). This regulatory reliance creates significant uncertainty and lag in recovering capital investments.

A recent Proposed Decision (PD) from the CPUC in November 2025 for SDG&E's 2024 General Rate Case (GRC) Track 2 illustrates this risk clearly. The PD denied a substantial portion of requested costs, including $193 million of Operation and Maintenance (O&M) costs and $242 million of capital costs related to wildfire mitigation and grid hardening. This decision authorizes a total Track 2 revenue requirement that is $427 million lower than SDG&E's request for the 2019 through 2027 period. You simply don't get all the cost recovery you ask for in this environment.

The PD also proposes to lower the authorized Return on Common Equity (ROE) by 35 basis points for both SDG&E and SoCalGas, effective January 1, 2026, which directly crimps future earnings potential. The CPUC maintains a conservative, authorized capital structure with an equity layer of 52% for these subsidiaries, which limits the ability to optimize financing structures.

High debt load, with a debt-to-capital ratio often exceeding 55%.

The company maintains a high degree of financial leverage, which is typical for a capital-intensive utility but amplifies risk during rising interest rate periods. As of September 2025, the calculated Debt-to-Capital ratio sits at approximately 51.2%, based on the latest reported figures. This level of debt, while slightly below the 55% threshold, highlights a reliance on debt financing to fund the massive capital plan.

Here's the quick math on the leverage for the quarter ending September 2025:

The Total Debt of $32.693 billion is a heavy anchor, and any sustained increase in borrowing costs will directly pressure the interest coverage ratio, which stood at 2.92x as of February 2025. This ratio is adequate now, but it is one of the first metrics to strain under a high-debt, high-rate scenario.

Execution risk and capital intensity of large-scale Sempra Infrastructure projects.

The company's ambitious growth hinges on the flawless execution of massive infrastructure projects, which inherently carries significant risk of delays, cost overruns, and operational setbacks. The total capital plan for 2025-2029 is a record $56 billion, with approximately $13 billion slated for investment in 2025 alone.

The Sempra Infrastructure segment, though strategic, is the source of much of this execution risk. The Final Investment Decision (FID) on Port Arthur LNG Phase 2, a key growth driver, commits the company to a substantial outlay:

• Incremental project capital expenditures estimated at $12 billion.
• An approximate $2 billion payment for shared common facilities.
• Commercial operations for the new trains are not expected until 2030 and 2031.

The sheer scale of these projects introduces operational hazards, as tragically evidenced by the loss of three Bechtel employees during the construction of the Port Arthur LNG facility. To be fair, the recent sale of a 45% stake in Sempra Infrastructure for $10 billion to KKR is a smart move to fund the capital plan without issuing new equity, but it also means the company is relying on a complex, multi-year transaction to manage its balance sheet.

Sensitivity to interest rate hikes impacting financing costs for capital plan.

The multi-billion-dollar capital plan is highly sensitive to the cost of money. Since a large portion of the spending is debt-financed, rising interest rates directly translate into higher interest expense, which eats into net income. The company is already seeing this impact.

During the second quarter of 2025, the parent company reported a $16 million increase in net interest expense, which partially offset higher income tax benefits and investment gains. This is a clear, near-term headwind. Sustained high interest rates will make the financing of the $56 billion capital plan more expensive than originally modeled, potentially leading to lower-than-expected returns on invested capital (ROIC) for new assets in the regulated utility businesses.

Sempra (SRE) - SWOT Analysis: Opportunities

You're looking for where Sempra's massive scale translates into clear growth, and honestly, the opportunities are centered on two things: Texas's insatiable demand for power and the global need for U.S. liquefied natural gas (LNG). The company's $13 billion capital plan for 2025, with over $10 billion aimed at U.S. utilities, is a direct map to these tailwinds.

Massive infrastructure investment in grid modernization and resiliency

The need for a more resilient and modern grid is a non-negotiable growth driver, not a wish list. Sempra's subsidiary, Oncor Electric Delivery Company, is a prime example, with a $36 billion five-year capital plan for 2025-2029 to manage the unprecedented growth in Texas. This investment is largely protected because it's required for safety and reliability, and the Public Utility Commission of Texas (PUCT) approved nearly $3 billion for Oncor's System Resiliency Plan (SRP) alone. This is a utility-focused strategy that locks in rate base growth for years.

For 2025 specifically, Oncor is set to deploy $7.1 billion in capital. This spending is the engine for future earnings, as regulated utilities earn a return on their rate base (the value of their invested assets). The company is defintely positioning itself to produce over 50% of its earnings from Texas by the end of the decade.

Expansion of the LNG portfolio, especially Port Arthur LNG Phase 1

The global energy security crisis means American LNG exports are a huge opportunity, and Sempra Infrastructure is capitalizing on it. The Port Arthur LNG Phase 1 project in Texas, which is already under construction, has an estimated cost of approximately $13 billion and a nameplate capacity of about 13 million tonnes per annum (Mtpa). This project is fully subscribed with long-term contracts, which de-risks the investment significantly.

But the real kicker is Phase 2. Sempra reached a Final Investment Decision (FID) for Port Arthur LNG Phase 2 in September 2025. This second phase will double the facility's capacity and involves incremental capital expenditures of over $12 billion, totaling about $14 billion including common facilities. Securing external funding for Phase 2, including a 49.9% minority equity investment led by Blackstone Credit & Insurance, allows Sempra to retain a majority stake while mitigating capital strain. That's smart capital allocation.

Favorable demographic growth in Texas, boosting Oncor's rate base

Texas is booming, and Oncor is the direct beneficiary. Population and economic expansion drove Oncor to add a near-record 77,000 new premises in 2024. More importantly, the growth isn't just residential; it's high-demand commercial and industrial (C&I) load, with almost a quarter of new interconnection requests coming from data centers. This 'hyper-growth' is why Oncor filed an early base rate review in June 2025.

To keep pace, they are seeking an additional $834 million in annual revenue, which would represent a 13% increase over current annualized revenues of $6.4 billion. This rate case, if approved, will directly translate the massive capital investments into a larger rate base and higher, regulated earnings. It's a direct link between Texas growth and Sempra's bottom line.

Potential for federal funding for decarbonization and clean energy projects

The federal government's push for decarbonization is a huge, albeit complex, opportunity for Sempra's utility segments in California and Texas. The Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL) offer hundreds of billions in tax credits and funding for clean energy and grid upgrades. This is a massive pool of capital that can offset Sempra's own investment needs.

For example, Sempra's subsidiary, San Diego Gas & Electric Company (SDG&E), was awarded an estimated $600 million of projects through the California Independent System Operator's 2024-2025 Transmission Plan to support local load growth and evolving grid conditions. While the political landscape adds uncertainty, the core legislative framework remains a strong incentive for Sempra to pursue projects like:

• Accelerated transmission upgrades to integrate intermittent renewable sources.
• Tax credits (Investment Tax Credit/Production Tax Credit) that directly boost project economics.
• Funding for clean hydrogen and carbon capture initiatives, aligning with SoCalGas's long-term strategy.

The sheer size of the federal incentives means Sempra has a competitive advantage in financing its clean energy transition projects.

Sempra (SRE) - SWOT Analysis: Threats

Here's the quick math: If Sempra hits the high end of its projected 2025 adjusted EPS guidance of $4.70, that's solid, but that number is defintely sensitive to regulatory decisions.

What this estimate hides is the potential for a major regulatory setback in California, which could shave a significant amount off that bottom line. Still, the long-term infrastructure demand is undeniable.

Finance: Track the final California Public Utilities Commission (CPUC) decision on the next General Rate Case by the end of the quarter.

Unfavorable outcomes in California General Rate Cases reducing allowed returns.

The biggest threat to Sempra's California utilities-San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas)-is the risk of the California Public Utilities Commission (CPUC) limiting their authorized revenue and returns. This is not a hypothetical risk; it's a constant reality of operating in a regulated market.

In the recent 2024-2027 General Rate Case (GRC), the CPUC adopted a 2024 Test Year revenue requirement for SoCalGas that was $628.7 million lower than what the company had requested. This clearly shows the regulator's willingness to push back on proposed spending.

More recently, a proposed CPUC decision in November 2025 for the 2026-2028 Cost of Capital proceeding suggests a reduction in the authorized return on equity (ROE) by 35 basis points. A lower ROE directly shrinks the profit Sempra can earn on its rate base (the value of assets on which a utility is permitted to earn a specified rate of return). The proposed returns on rate base are:

• SDG&E: 7.39%
• SoCalGas: 7.49%

Any final decision that cuts these authorized returns further will immediately compress earnings for the utility segment, which is the core of Sempra's business model.

Rising political and public pressure to lower utility bills and increase scrutiny.

The political climate in California is increasingly hostile toward high utility bills, and Sempra's subsidiaries are often the target. This pressure translates directly into the CPUC's conservative GRC decisions.

For example, the delayed implementation and amortization of under-collected revenues from the 2024 GRC decision resulted in a significant, one-time bill shock for customers in early 2025. A typical residential non-CARE (California Alternate Rates for Energy) customer saw an approximate monthly increase of $80 for SoCalGas and $180 for SDG&E electric service due to this amortization. This kind of increase fuels public outrage and invites legislative scrutiny, making it harder for Sempra to get future rate increases approved.

The political risk is simple: California lawmakers need to be seen as protecting consumers, so they push regulators to limit utility revenue. This public-facing fight is a constant headwind.

Environmental opposition and permitting delays for new LNG facilities.

Sempra Infrastructure's liquefied natural gas (LNG) projects, while offering high growth potential, face significant regulatory and environmental threats, especially from the U.S. government's increased scrutiny of non-Free Trade Agreement (non-FTA) export permits.

The White House's pause on issuing new non-FTA LNG export licenses, which began in early 2024, creates a major hurdle for future expansion. While Sempra is targeting a Final Investment Decision (FID) for Port Arthur LNG Phase 2 in 2025, that decision is contingent on securing all necessary permits and financing. Any further delays in the Department of Energy (DOE) approval process will push back the project's timeline and increase its cost.

The Energía Costa Azul (ECA) Phase 1 project in Mexico is already seeing delays. Originally targeting a 2025 start, labor and productivity challenges have pushed the commercial operations date to spring 2026. In September 2025, Sempra had to request a six-month extension from the DOE on its non-FTA export deadline for ECA, highlighting the ongoing execution risk.

Wildfire liabilities and insurance costs in Southern California Edison's service territory.

The threat of catastrophic wildfire liability remains a defining risk for California utilities, including SDG&E. While SDG&E has a strong track record of mitigation compared to its peers, the principle of inverse condemnation (where a utility is liable for property damage caused by its equipment, even without negligence) still applies.

The 2025 Wildfire Legislation introduced a Continuation Account, a state-administered fund providing up to $18 billion in additional liquidity for the Wildfire Fund. SDG&E intends to participate, but this participation requires a shareholder contribution of $387 million spread over time, which is a direct cost to shareholders.

Furthermore, the CPUC is not fully approving all requested wildfire mitigation costs. A November 2025 proposed decision on SDG&E's wildfire mitigation cost recovery approved only $1,036 million of the company's $1,472 million request for 2019-2027 costs. This means Sempra's subsidiary was disallowed from recovering $436 million, a significant financial hit that must be absorbed by the company, not passed to ratepayers. This is a clear example of the financial risk associated with cost recovery for safety-related capital expenditures.