Sempra SRE

The energy transition in California and elsewhere, including decarbonization goals, goals and increasingly divergent investor sentiment regarding climate change efforts, has introduced led to contradictory expectations from various investors and other stakeholders and uncertainty in long-term investor support, leading including some to reduce investment investors reducing participation in or divest divesting from our sector. Maintaining investor confidence and attracting capital at a competitive cost will depend, in part, on demonstrating our ability to address material business risks related to climate and our efforts to help achieve the goals of our consumers and the markets and jurisdictions where we operate. In an effort to maintain a sustainable and durable business risk profile and continue to focus on value creation, Sempra has evaluated and updated its climate aspirations to reflect the changing policy, regulatory, commercial and technological landscape, including stakeholders’ evolving focus on reliability, resiliency and affordability and the pace and impact of climate and other public policies. Following this evaluation, Sempra now aims to have net-zero scope 1 and 2 GHG emissions by 2050, with 2050 and has an interim target aim of 50% scope 1 and 2 GHG emissions reductions by 2035 (this interim target is relative to a 2019 baseline, applies to Sempra California California’s operations and Sempra Infrastructure’s Mexico (non-LNG) operations operations, and may be subject to further revision if Sempra’s planned sale of a portion of its equity interest in SI Partners is relative to a 2019 baseline). While the company no longer has a specific goal to achieve net-zero scope 3 GHG emissions by 2050, the capabilities we are developing through our energy transition action plan could also support the reduction of scope 3 GHG emissions and help meet regulatory, consumer and market demand for lower- and zero-carbon energy. completed). Sempra’s, SDG&E’s and SoCalGas’ abilities to advance their respective net-zero and other climate objectives and meet the demand for lower-carbon and reliable energy in California and elsewhere will depend on many factors, some of which we do not control, including supportive federal and state energy laws, policies, incentives, tax credits and regulatory decisions; cost and affordability considerations; development, commercialization and regulatory acceptance of affordable, alternative and lower-carbon energy sources, including cleaner fuels; successful research and development efforts focused on lower carbon technologies that are economically and technically feasible; cooperation from our partners, financing sources and commercial counterparties; customer participation in conservation and energy efficiency programs; our ability to execute our planned investments in our infrastructure; and consumers’ decisions and preferences. In addition, we will need to continue to expend capital and employee resources to develop and deploy new technologies and modernize grid systems, which may not be recoverable in rates or, with respect to our businesses that are not regulated utilities, may not be able to be passed through to customers. Even if such costs are recoverable, these costs, coupled with necessary safety and reliability investments, may negatively impact the affordability of SDG&E’s and SoCalGas’ services and, for our businesses that are not regulated utilities, may cause costs to increase to levels that reduce customer demand and growth. Moreover, forecasting to 2035, 2045 and 2050 specified targets over longer-term periods is inherently speculative without knowing uncertain and could be significantly impacted by the trajectory of the energy transition. As a result, although we are dedicated to making progress on our climate aims and are continuing to develop capabilities designed to reduce GHG emissions from our own operations as well as to support consumers’ and markets’ own climate goals, goals and applicable legislative and regulatory mandates, we may not be successful in achieving these objectives. We could suffer difficulties attracting investors and business partners, reputational harm and other negative effects if we do not meet or if we further modify our GHG emissions reduction aims or there are negative views about our environmental disclosures or practices generally.

SDG&E is exposed to the risk that the participating California electric IOUs may incur third-party wildfire costs for which they will seek recovery from the Wildfire Fund with respect to wildfires that have occurred since enactment of the 2019 Wildfire Legislation in July 2019. In such a situation, SDG&E may recognize a reduction of its Wildfire Fund asset and record accelerated amortization against earnings when available coverage is reduced due to recoverable claims from any of the participating IOUs. PG&E is seeking reimbursement from the Wildfire Fund for losses associated with the Dixie Fire, which burned from July 2021 through October 2021. In the case of the recent LA fires, the causes of these fires have not been determined and therefore these fires may not impact the Wildfire Fund. If any California electric IOUs’ assets are determined to be a cause of fires, including fires of the size and scope of the recent LA Fires, payments of claims associated with those events could have a material adverse effect on the Wildfire Fund and on SDG&E’s and Sempra’s financial condition and results of operations up to the The carrying value of our SDG&E’s Wildfire Fund asset, with additional potential material exposure if SDG&E’s equipment is determined to be a cause of a fire. In addition, the Wildfire Fund could be completely exhausted due to fires in the other California electric IOUs’ service territories, by fires in SDG&E’s service territory or by a combination thereof. In the event that the Wildfire Fund is materially diminished, exhausted or terminated, SDG&E will lose the protection afforded by the Wildfire Fund, and as a consequence, a fire in SDG&E’s service territory could have a material adverse effect on SDG&E’s and Sempra’s results of operations, financial condition, cash flows and/or prospects. asset totaled $260 million at December 31, 2025.

Amendments to Mexico’s Electricity Industry Law. Law - Resolved. In March 2021, the Mexican government published a decree with amendments to Mexico’s Electricity Industry Law the LIE that include some included public policy changes, including establishing priority of dispatch for CFE plants over privately owned plants. The decree further purports to permit ones and allowing the CRE CNE to revoke self-supply permits granted under the former electricity law, which were grandfathered when law under certain circumstances. In 2024, the new Electricity Industry Law was enacted, if it considers them to have been obtained improperly. According Mexican government adopted changes to the decree, Mexican Constitution to reinforce state control over strategic sectors by granting a central role to government entities like the CFE and PEMEX. Following these amendments were to become effective constitutional reforms, in March 2021, and SENER, 2025, the CRE and Centro Nacional de Control de Energía (Mexico’s National Center for Mexican government adopted the 2025 Energy Control) were to have 180 calendar days to modify, as necessary, all resolutions, policies, criteria, manuals and other regulations applicable to Laws, which repealed the power industry to conform with this decree. Numerous legal actions were taken against the decree, which resulted in Mexican courts issuing a suspension of the decree later in March 2021. LIE.

ECA LNG Phase 1 is a VIE because its total equity at risk is not sufficient to finance its activities without additional subordinated financial support. We expect that ECA LNG Phase 1 will require future capital contributions or other financial support to finance the construction of the facility. Sempra is the primary beneficiary of this VIE because we have the power to direct the activities related to the construction and future operation and maintenance of the liquefaction facility. As a result, we consolidate ECA LNG Phase 1. Sempra consolidated $ 1,758 15,950 million and $ 1,580 8,177 million of assets at December 31, 2024 2025 and 2023, December 31, 2024, respectively, consisting primarily of PP&E, net, and restricted cash attributable to ECA LNG Phase 1 these VIEs that could be used only to settle obligations of this VIE these VIEs and that are not available to settle obligations of Sempra, and $ 1,080 6,335 million and $ 1,029 2,664 million of liabilities at December 31, 2024 2025 and 2023, 2024, respectively, consisting primarily of long-term debt and accounts payable attributable to ECA LNG Phase 1 these VIEs for which creditors do not have recourse to the general credit of Sempra. Additionally, At December 31, 2025, these assets and liabilities are classified as we discuss in held for sale (see Note 6, IEnova and TotalEnergies SE have provided guarantees for 83.4 % and 16.6 %, respectively, of the loan facility supporting construction of the liquefaction facility. 6).