San Diego-based Sempra plans to add to its five-year $32 billion capital expenditure (capex) budget, with most for the utilities in California and Texas, senior executives reported on Tuesday.
Since last year the California utilities Southern California Gas Co. (SoCalGas) and San Diego Gas and Electric Co (SDG&E) have added $900 million to capex plans for the next five years in two service areas that are home to 26 million people.
“Our utility story is the No. 1 story inside of Sempra, and we are going to make sure our balance sheet supports that story,” said CEO Jeff Martin.
The holding company has the advantage of owning “leading utility franchises in markets like California and Texas, both of which have historically benefitted from above-average economic and demographic growth.” Sempra is focused on the “lower risk portion” of the energy value chain.
Expanding infrastructure outside of the utilities, including for liquefied natural gas facilities (LNG) in the Lower 48 and Mexico, will not impact the utilities, he said.
The overall spending plan is centered on “strong organic growth primarily centered around U.S. utility businesses,” said CFO Trevor Mihalik.
Group President Kevin Sagara, who oversees the California utilities, said SoCalGas has nearly met the state-mandated goal of cutting greenhouse gas emissions 20% by 2025. It should lead to an emissions reduction of 40% by 2030 for the gas-only utility pipeline and related operations.
SDG&E in June also renewed its long-negotiated renewal of a long-term franchise agreement with the city of San Diego. Sagara said it was an “important milestone” in continuing ongoing collaboration with local political leaders.
“Customer demand has been robust, and it is expected to double over the next quarter of a century,” he said. “Overall, this creates a very favorable environment for the utilities to operate in and invest in critical energy infrastructure.” Rate base is expected to grow annually at a 10% rate through 2025, he said.
In Texas, Sempra holds an 80% interest in Oncor Electric Delivery Co., which operates 139,000 miles of transmission and distribution electric infrastructure, as well as 1,100 substations. Oncor is slated to spend $12.2 billion in capex over the next five years, said CEO Allen Nye.
The California and Texas utilities are innovating with advanced technologies to streamline ongoing operations and transition to a carbon-neutral world using renewable natural gas (RNG), carbon capture utilization and storage (CCUS), green hydrogen and electrification.
SoCalGas is voluntarily targeting 5% of core gas supplies to come from RNG by next year, and 20% by 2030, Sagara said.
The infrastructure businesses also are investigating the feasibility of tying in CCUS projects and eventually producing and transporting hydrogen.
California and Texas each offer opportunities for CCUS, said Martin. “This is something we are looking at on both the utility and nonutility sides of our business.”
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