Sempra (SRE) Balance Sheet

The sequential asset growth from $106.9B in 2025Q3 to $115.3B in 2026Q2 reflects a deliberate push into Texas transmission and LNG infrastructure, with CAPEX nearly doubling quarter-over-quarter. This pace of investment, if sustained, should translate into regulated equity growth, though the lag between spending and rate base recognition means near-term earnings may not fully capture the expansion. The 2026Q2 CAPEX of $4.7B represents a 147% increase from the prior year, suggesting management is front-loading capital into high-return projects.

The dramatic PPE reduction coincides with a $15.4B increase in total assets, indicating that Sempra may be consolidating less of its infrastructure assets while retaining economic exposure through equity stakes, particularly in LNG ventures. This accounting shift obscures the true scale of the rate base, as the 80% Oncor stake and LNG projects are now likely captured under equity method accounting rather than as consolidated PPE. Investors should adjust for this reclassification when comparing rate base growth across periods, as the underlying physical assets continue to generate regulated returns.

The equity base expanded from $31.7B to $32.7B over the same period, a modest increase that cannot fully offset the $3.8B rise in total debt, implying the D/E improvement is partly a function of asset reclassification. The current ratio of 1.64 in 2026Q2, up from 0.48 a year earlier, indicates improved short-term liquidity, but this may reflect timing of commercial paper issuance rather than structural strength. With rising interest expenses in the Parent & Other segment, the cost of carrying this debt load warrants close monitoring, especially as the CAPEX program requires continued external financing.

The equity-to-assets ratio held steady at 0.38, but the absolute gap between asset growth and equity growth suggests increasing reliance on debt and hybrid securities to fund the CAPEX pipeline. ROE of 1.9% in 2026Q2, though depressed by AFUDC timing, implies that the earnings contribution from new rate base is not yet materializing at a level that would organically support the equity base. Dividend coverage remains adequate at 3.8x operating cash flow, but if the CAPEX surge continues, management may need to access ATM equity programs, which could dilute existing shareholders.

The minimal cash balance, combined with a current ratio of 1.64, indicates that Sempra is operating with a thin liquidity buffer, relying on committed revolvers and commercial paper to bridge timing gaps between capital outlays and regulatory recovery. This is not unusual for a utility in heavy construction mode, but the scale of the LNG and Texas transmission projects means any delay in rate case approvals or project financing could strain liquidity. The $2.0M cash position in 2025Q4 highlights the volatility in cash balances, underscoring the importance of the $8B+ credit facility in maintaining financial flexibility.

The gap between capital investment and cash recovery is typical during a rate case cycle, but the magnitude here suggests Sempra is funding growth ahead of regulatory approval, which introduces execution risk if rate cases are delayed or disallowed. The Texas transmission expansion benefits from a more constructive regulatory environment, while California's decoupling mechanisms provide stability but slower recovery timelines. Investors should monitor the timing of the next CPUC and PUCT rate case decisions, as any slippage could pressure the balance sheet and force additional external financing.