Sempra

SRE · NYSE · USD

Does Oncor's Texas transmission buildout deliver the regulated growth the capital plan assumes, or do permitting, load-queue and California wildfire risks delay the returns?

Last 4 earnings calls · through Q2 FY2026

Bull case

  • Texas transmission buildout

    The bull case rests on Texas, where the grid operator has already designated most of Oncor's transmission projects, so growth depends on building rather than on winning customers.

  • Regulated returns on capital

    Because Oncor earns a regulated return on whatever it builds, the size of the capital program matters more than whether any single data center actually gets connected.

  • Portfolio simplification

    Selling a stake in the international business makes Sempra almost entirely a regulated utility and removes the need to issue new shares to fund the base plan.

  • End-of-decade earnings target

    Management has replaced a vague long-term growth rate with a specific earnings range for the end of the decade, giving the plan a checkable target.

Bear case

  • Permitting and queue delays

    The bear case is that Texas spending rests on approvals that keep slipping, from the Permian high-voltage lines to the load queue, so capital arrives later than planned.

  • Negative free cash flow

    The program is funded with debt and operating cash flow while free cash flow is negative, so the balance sheet carries the risk if projects or rate decisions slip.

  • LNG commissioning delays

    The gas liquefaction plant exported one cargo, then shut for repairs, pushing contracted revenue out again and showing how equipment problems reset a timetable.

  • California wildfire exposure

    California remains the weaker half, with wildfire liability unresolved, the gas utility under pressure, and rate cases that fix returns for years at a time.

Bull and bear points

Growth & Execution

In short: Texas load growth supports a large capital plan, though permitting and LNG commissioning dates have slipped.

Bull · 2

  • Oncor's base capital plan rose to $47.5 billion from $36 billion

    ERCOT accelerated the Permian reliability projects to 2030 and added new transmission, and another $10 billion of Oncor projects sits just outside the base plan. The growth is work the grid operator has already required.

    Q4 FY2025 call

  • Management now publishes a 2030 earnings range

    A year ago the company restated a long-term growth rate without an end-of-decade number; it now gives a 2030 earnings range tied to the approved capital plan. That makes the growth claim checkable.

    Tone shiftQ3 FY2025 → Q4 FY2025
Bear · 2

  • ECA LNG slipped from summer to the fourth quarter

    The plant shipped a cargo in July, then inspections found damage to the mixed refrigerant compressors. Contracted revenue now waits on repairs, and the delay comes after management described the project as nearly complete.

    Tone shiftQ1 FY2026 → Q2 FY2026

  • Load-queue transmission capital is left out of the plan

    Capital needed to serve the batch zero projects is excluded from the roll-forward plan because ERCOT's timetable runs past the update, so the largest potential Texas spending is not in any published number.

    Q2 FY2026 call

Profitability & Financial Strength

In short: Returns at Oncor are rising and no new shares are needed, but free cash flow is negative and leverage is high.

Bull · 2

  • New share sales are no longer part of the base plan

    A year ago management described a multi-step program to strengthen the balance sheet while the financing plan still assumed common equity. Proceeds from the stake sale and higher operating cash flow now cover the $65 billion plan.

    Tone shiftQ3 FY2025 → Q4 FY2025

  • Oncor's approved equity layer and return both increased

    The Texas commission approved a 43.5% equity layer and 9.75% return on equity, and a new tracker puts assets into rates within a year instead of waiting for a rate case, so earned returns should approach allowed ones.

    Q1 FY2026 call
Bear · 2

  • Free cash flow is negative while capital spending runs high

    Free cash flow was negative $5.2 billion over the last twelve months, so the buildout is funded with debt until new assets start earning. A delayed project stretches the period before cash covers the outlay.

    Filed financials

  • A ratings downgrade would raise funding costs

    Moody's keeps its outlook negative until the stake sale closes and construction milestones are met, and a downgrade would lift the interest cost on the debt that funds the utilities' construction.

    10-K, filed 2026-02-26

Market Position

In short: Oncor builds most Texas transmission, while California wildfire liability stays unresolved.

Bull · 2

  • Oncor builds more than half of ERCOT's transmission expansion

    ERCOT estimates $32 billion to $35 billion for the full 765-kV and Permian buildout, and Oncor's service area covers much of it. That share comes from the grid operator's plan rather than from competitive bidding.

    Q4 FY2025 call

  • SB 254 limits SDG&E's wildfire fund contribution

    The California law splits wildfire fund costs between utilities and customers and fixes SDG&E's share at about 4.3%, or just under $13 million a year through 2045, which caps shareholder exposure after a fire.

    Q3 FY2025 call
Bear · 2

  • Permian 765-kV timelines are no longer called on track

    Management once said the Permian lines would be done by 2030 and that it had every intention of meeting that date; after landowner hearings and statements from state leaders it says it cannot judge how timelines may change.

    Tone shiftQ3 FY2025 → Q2 FY2026

  • No wildfire liability bill text exists yet in California

    The state's earthquake authority published options in April, but the legislature has not produced bill language, so who pays for future fires and how utilities recover costs remains unsettled for SDG&E and SoCalGas.

    Q2 FY2026 call