Sempra’s Texas growth engine gets a bigger capital pipeline

Sempra (NYSE:SRE) is heading into the final stretch of 2026 with two very different stories: Texas is presenting a bigger utility investment opportunity, while California is threatening to trim the earnings outlook. The company reported third-quarter GAAP earnings of US$877 million, or US$1.34 per diluted share, compared with US$77 million, or US$0.12, a year earlier.

Adjusted earnings, which exclude selected regulatory, tax, derivative and asset-sale items, rose to US$917 million, or US$1.40 per diluted share, from US$728 million, or US$1.11. The adjusted comparison is less distorted than the GAAP result, because the prior-year quarter included a US$514 million tax expense linked to assets held for sale.

Texas demand expands Oncor’s capital pipeline

The clearest growth signal came from Oncor Electric Delivery. The utility recorded a new system peak demand of 33.3 gigawatts during the quarter, up 6% from the previous year’s record, and Sempra said Oncor expects its 2027-2031 base capital plan to increase by approximately 20% compared with the 2026-2030 plan.

That projection is tied to reliability work and load growth across the ERCOT market, rather than a single customer or project. Oncor has conditionally classified approximately 24GW of large load as base load within its footprint, including 10GW already energised, while a further 21GW has been classified as studied load. The figures indicate a substantial pipeline, but they remain dependent on planning, regulatory and project execution outcomes.

Asset sale is expected to reshape 2026 GAAP earnings

Sempra said the planned sale of a 45% equity interest in Sempra Infrastructure Partners to affiliates of KKR remains on track to close in November. The transaction is embedded in the company’s updated full-year guidance, which includes an estimated gain of US$2.00 billion to US$2.40 billion and estimated ancillary costs of US$325 million to US$400 million.

The company now guides to 2026 GAAP EPS of US$7.41 to US$8.41 and expects adjusted EPS to land at the high end of its US$4.80 to US$5.30 range. It has also affirmed 2027 EPS guidance of US$5.10 to US$5.70 and its projected long-term EPS growth rate of 7% to 9%. The transaction’s effect means the GAAP range should not be read as a clean measure of recurring operating performance.

California decision creates a 2027 earnings constraint

The principal setback came from California. The California Public Utilities Commission issued a proposed decision denying Southern California Gas and San Diego Gas & Electric’s request to correct a capital attrition mechanism in the 2024 General Rate Case for 2027. Sempra recorded a US$149 million after-tax regulatory disallowance in the first nine months, including US$216 million at SoCalGas and a US$67 million benefit at SDG&E from related decisions.

Sempra California said that, unless it succeeds through other regulatory avenues or offsets the impact through business initiatives, its 2027 earnings would be at the low end of the segment guidance range. That qualification sits awkwardly beside the company’s Texas growth narrative: the investment opportunity is expanding, but the regulatory recovery of existing California investment remains unsettled.