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SEMPRA – INVESTMENTS IN UNCONSOLIDATED ENTITIES | 12 Months Ended
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Dec. 31, 2023
Investments [Abstract] |
SEMPRA – INVESTMENTS IN UNCONSOLIDATED ENTITIES | SEMPRA – INVESTMENTS IN UNCONSOLIDATED ENTITIES We generally account for investments under the equity method when we have significant influence over, but do not have control of, these entities. Equity earnings and losses, both before and net of income tax, are combined and presented as Equity Earnings on the Consolidated Statements of Operations. Distributions received from equity method investees are classified in the Consolidated Statements of Cash Flows as either a return on investment in operating activities or a return of investment in investing activities based on the “nature of the distribution” approach. Our equity method investments include various domestic and foreign entities. Our domestic equity method investees are typically partnerships that are pass-through entities for income tax purposes and therefore they do not record income tax. Sempra’s income tax on earnings from these equity method investees, other than Oncor Holdings as we discuss below, is included in Income Tax Expense on the Consolidated Statements of Operations. Our foreign equity method investees are generally corporations whose operations are taxable on a standalone basis in the countries in which they operate, and we recognize our equity in such income or loss net of investee income tax. See Note 8 for information on how equity earnings and losses before income taxes are factored into the calculations of our pretax income or loss and ETR. We provide the carrying values of our investments and earnings on these investments by segment in the following tables.
EQUITY METHOD AND OTHER INVESTMENTS(1)
(Dollars in millions)
| Percent ownership |  | Investment balance
| December 31,
| 2023 |  | 2022 |  | 2023 |  | 2022
Sempra Texas Utilities: |  |  |  |  |  |  |
Oncor Holdings(2) | 100 | % |  | 100 | % |  | $ | 14,266 |  |  | $ | 13,665 |
Sempra Texas Utilities: |  |  |  |  |  |  |
Sharyland Holdings(3) | 50 | % |  | 50 | % |  | $ | 114 |  |  | $ | 107 |
Sempra Infrastructure: |  |  |  |  |  |  |
Cameron LNG JV(4) | 50.2 |  |  | 50.2 |  |  | 1,008 |  |  | 886 |
IMG(5) | 40 |  |  | 40 |  |  | 620 |  |  | 591 |
TAG Norte(6) | 50 |  |  | 50 |  |  | 501 |  |  | 428 |
Parent and other: |  |  |  |  |  |  |
Other |  |  |  |  | 1 |  |  | — |
Total |  |  |  |  | $ | 2,244 |  |  | $ | 2,012 |
(1) All amounts are before NCI, where applicable. (2) The carrying value of our equity method investment is $2,870 and $2,856 higher than the underlying equity in the net assets of the investee at December 31, 2023 and 2022, respectively, due to $2,868 of equity method goodwill and $69 in basis differences in AOCI, offset by $67 and $81 at December 31, 2023 and 2022, respectively, due to a tax sharing liability to TTI under a tax sharing agreement. (3) The carrying value of our equity method investment is $41 higher than the underlying equity in the net assets of the investee due to equity method goodwill. (4) The carrying value of our equity method investment is $262 and $270 higher than the underlying equity in the net assets of the investee at December 31, 2023 and 2022, respectively, primarily due to guarantees, interest capitalized on the investment prior to the JV commencing its operations, and amortization of guarantee fees and capitalized interest thereafter. (5) The carrying value of our equity method investment is $5 higher than the underlying equity in the net assets of the investee due to guarantees. (6) The carrying value of our equity method investment is $130 higher than the underlying equity in the net assets of the investee due to equity method goodwill.
EARNINGS FROM EQUITY METHOD INVESTMENTS(1)
(Dollars in millions)
|  | Years ended December 31,
|  | 2023 |  | 2022 |  | 2021
EARNINGS RECORDED BEFORE INCOME TAX(2): |  |  |  |  |  |
Sempra Texas Utilities: |  |  |  |  |  |
Sharyland Holdings |  | $ | 7 |  |  | $ | 7 |  |  | $ | 5 |
Sempra Infrastructure: |  |  |  |  |  |
Cameron LNG JV(3) |  | 586 |  |  | 659 |  |  | 559 |
Parent and other: |  |  |  |  |  |
RBS Sempra Commodities |  | 40 |  |  | — |  |  | 50 |
|  | 633 |  |  | 666 |  |  | 614 |
EARNINGS RECORDED NET OF INCOME TAX: |  |  |  |  |  |
Sempra Texas Utilities: |  |  |  |  |  |
Oncor Holdings |  | 694 |  |  | 735 |  |  | 617 |
Sempra Infrastructure: |  |  |  |  |  |
ESJ |  | — |  |  | — |  |  | 2 |
IMG |  | 40 |  |  | 68 |  |  | 83 |
TAG Norte |  | 114 |  |  | 29 |  |  | 27 |
|  | 848 |  |  | 832 |  |  | 729 |
Total |  | $ | 1,481 |  |  | $ | 1,498 |  |  | $ | 1,343 |
(1) All amounts are before NCI, where applicable. (2) We provide our ETR calculation in Note 8. (3) Includes $9, $12 and $3 of basis differences in equity earnings related to AOCI in 2023, 2022 and 2021, respectively. We provide the contributions to and distributions from our investments by segment in the following tables.
EXPENDITURES FOR INVESTMENTS
(Dollars in millions)
|  | Years ended December 31,
|  | 2023 |  | 2022 |  | 2021
Sempra Texas Utilities: |  |  |  |  |  |
Oncor Holdings |  | $ | 363 |  |  | $ | 341 |  |  | $ | 566 |
Sharyland Holdings |  | 4 |  |  | 5 |  |  | — |
|  | 367 |  |  | 346 |  |  | 566 |
Sempra Infrastructure: |  |  |  |  |  |
Cameron LNG JV |  | 15 |  |  | 30 |  |  | 2 |
ESJ |  | — |  |  | — |  |  | 65 |
|  | 15 |  |  | 30 |  |  | 67 |
Total |  | $ | 382 |  |  | $ | 376 |  |  | $ | 633 |
DISTRIBUTIONS FROM INVESTMENTS
(Dollars in millions)
|  | Years ended December 31,
|  | 2023 |  | 2022 |  | 2021
Sempra Texas Utilities: |  |  |  |  |  |
Oncor Holdings(1) |  | $ | 441 |  |  | $ | 340 |  |  | $ | 681 |
Sharyland Holdings |  | 4 |  |  | 5 |  |  | 7 |
|  | 445 |  |  | 345 |  |  | 688 |
Sempra Infrastructure: |  |  |  |  |  |
Cameron LNG JV |  | 456 |  |  | 509 |  |  | 623 |
ESJ |  | — |  |  | — |  |  | 4 |
IMG |  | 11 |  |  | — |  |  | — |
TAG Norte |  | 36 |  |  | 32 |  |  | 45 |
|  | 503 |  |  | 541 |  |  | 672 |
Total |  | $ | 948 |  |  | $ | 886 |  |  | $ | 1,360 |
(1) When including payments received under a tax sharing arrangement, distributions would total $558, $443 and $753 in 2023, 2022 and 2021, respectively. At December 31, 2023 and 2022 our share of the undistributed earnings of equity method investments was $2.5 billion and $2.0 billion, respectively, including $496 million at December 31, 2023 in undistributed earnings from investments for which we have less than 50% equity interests. ONCOR HOLDINGS We account for our 100% equity ownership interest in Oncor Holdings, which owns an 80.25% interest in Oncor, as an equity method investment. Sempra does not control Oncor Holdings or Oncor, and the ring-fencing measures, governance mechanisms and commitments in effect limit our ability to direct the management, policies and operations of Oncor Holdings and Oncor, including the deployment or disposition of their assets, declarations of dividends, strategic planning and other important corporate issues and actions. We also have limited representation on the Oncor Holdings and Oncor boards of directors. Oncor is a domestic partnership for U.S. federal income tax purposes and is not included in the consolidated income tax return of Sempra. Rather, only our pretax equity earnings from our investment in Oncor Holdings (a disregarded entity for tax purposes) are included in our consolidated income tax return. A tax sharing agreement with TTI, Oncor Holdings and Oncor provides for the calculation of an income tax liability substantially as if Oncor Holdings and Oncor were taxed as corporations and requires tax payments determined on that basis. While partnerships are not subject to income taxes, in consideration of the tax sharing agreement and Oncor being subject to the provisions of U.S. GAAP governing rate-regulated operations, Oncor recognizes amounts determined under cost-based regulatory rate-setting processes (with such costs including income taxes), as if it were taxed as a corporation. As a result, since Oncor Holdings consolidates Oncor, we recognize equity earnings from our investment in Oncor Holdings net of its recorded income tax. We provide summarized income statement and balance sheet information for Oncor Holdings in the following table.
SUMMARIZED FINANCIAL INFORMATION – ONCOR HOLDINGS
(Dollars in millions)
| Years ended December 31,
| 2023 |  | 2022 |  | 2021
Operating revenues | $ | 5,586 |  |  | $ | 5,243 |  |  | $ | 4,764 |
Operating expenses | (4,026) |  |  | (3,682) |  |  | (3,397) |
Income from operations | 1,560 |  |  | 1,561 |  |  | 1,367 |
Interest expense | (536) |  |  | (445) |  |  | (413) |
Income tax expense | (192) |  |  | (203) |  |  | (163) |
Net income | 849 |  |  | 893 |  |  | 760 |
NCI held by TTI | (170) |  |  | (179) |  |  | (152) |
Earnings attributable to Sempra(1) | 679 |  |  | 714 |  |  | 608 |
|  |  | December 31,
|  |  | 2023 |  | 2022
Current assets |  |  | $ | 1,431 |  |  | $ | 1,223 |
Noncurrent assets |  |  | 34,649 |  |  | 31,703 |
Current liabilities |  |  | 1,625 |  |  | 1,579 |
Noncurrent liabilities |  |  | 19,727 |  |  | 17,405 |
NCI held by TTI |  |  | 3,338 |  |  | 3,141 |
(1) Excludes adjustments to equity earnings related to amortization of a tax sharing liability associated with a tax sharing arrangement and changes in basis differences in AOCI within the carrying value of our equity method investment. SHARYLAND HOLDINGS We account for our 50% ownership interest in Sharyland Holdings, a JV with SU Investment Partners, L.P. that owns a 100% interest in Sharyland Utilities, as an equity method investment. CAMERON LNG JV Cameron LNG JV is a JV between Sempra and three project partners, TotalEnergies SE, Mitsui & Co., Ltd., and Japan LNG Investment, LLC, a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha. We account for SI Partners’ 50.2% investment in Cameron LNG JV under the equity method. Sempra Promissory Note for SDSRA Distribution Cameron LNG JV’s debt agreements require Cameron LNG JV to maintain the SDSRA, which is an additional reserve account beyond the Senior Debt Service Accrual Account, where funds accumulate from operations to satisfy senior debt obligations due and payable on the next payment date. Both accounts can be funded with cash or authorized investments. In June 2021, Sempra Infrastructure received a distribution of $165 million based on its proportionate share of the SDSRA, for which Sempra provided a promissory note and letters of credit to secure a proportionate share of Cameron LNG JV’s obligation to fund the SDSRA. Sempra’s maximum exposure to loss is replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA, or $165 million. We recorded a guarantee liability of $22 million in June 2021, with an associated carrying value of $19 million at December 31, 2023, for the fair value of the promissory note, which is being reduced over the duration of the guarantee through Sempra Infrastructure’s investment in Cameron LNG JV. The guarantee will terminate upon full repayment of Cameron LNG JV’s debt, scheduled to occur in 2039, or replenishment of the amount withdrawn by Sempra Infrastructure from the SDSRA. Sempra Support Agreement for CFIN In July 2020, CFIN entered into a financing arrangement with Cameron LNG JV’s four project owners and received aggregate proceeds of $1.5 billion from two project owners and from external lenders on behalf of the other two project owners (collectively, the affiliate loans), based on their proportionate ownership interest in Cameron LNG JV. CFIN used the proceeds from the affiliate loans to provide a loan to Cameron LNG JV. The affiliate loans mature in 2039. Principal and interest will be paid from Cameron LNG JV’s project cash flows from its three-train natural gas liquefaction facility. Cameron LNG JV used the proceeds from its loan to return equity to its project owners. Sempra Infrastructure’s $753 million proportionate share of the affiliate loans, based on SI Partners’ 50.2% ownership interest in Cameron LNG JV, was funded by external lenders comprised of a syndicate of eight banks (the bank debt) to whom Sempra has provided a guarantee pursuant to a Support Agreement under which: ▪Sempra has severally guaranteed repayment of the bank debt plus accrued and unpaid interest if CFIN fails to pay the external lenders; ▪the external lenders may exercise an option to put the bank debt to Sempra Infrastructure upon the occurrence of certain events, including a failure by CFIN to meet its payment obligations under the bank debt; ▪the external lenders will put some or all of the bank debt to Sempra Infrastructure on the fifth, tenth, or fifteenth anniversary date of the affiliate loans, except the portion of the debt owed to any external lender that has elected not to participate in the put option six months prior to the respective anniversary date; ▪Sempra Infrastructure also has a right to call the bank debt back from, or to refinance the bank debt with, the external lenders at any time; and ▪the Support Agreement will terminate upon full repayment of the bank debt, including repayment following an event in which the bank debt is put to Sempra Infrastructure. In exchange for this guarantee, the external lenders pay a guarantee fee that is based on the credit rating of Sempra’s long-term senior unsecured non-credit enhanced debt rating, which guarantee fee Sempra Infrastructure recognizes as interest income as earned. Sempra’s maximum exposure to loss is the bank debt plus any accrued and unpaid interest and related fees, subject to a liability cap of 130% of the bank debt, or $979 million. We measure the Support Agreement at fair value, net of related guarantee fees, on a recurring basis (see Note 12). At December 31, 2023, the fair value of the Support Agreement was $23 million, of which $7 million is included in Other Current Assets and $16 million is included in Other Long-Term Assets on Sempra’s Consolidated Balance Sheet. ESJ As we discuss in Note 5, in March 2021, SI Partners’ completed the acquisition of the remaining 50% equity interest in ESJ and ESJ became a consolidated subsidiary. Prior to the acquisition date, SI Partners’ owned 50% of ESJ and accounted for its interest as an equity method investment. IMG SI Partners’ has a 40% interest in IMG, a JV with a subsidiary of TC Energy Corporation, and accounts for its interest as an equity method investment. IMG owns and operates the Sur de Texas-Tuxpan natural gas marine pipeline, which is fully contracted under a 35-year natural gas transportation service contract with the CFE. TAG NORTE SI Partners’ has a 50% beneficial ownership interest in TAG Norte, a JV with TETL JV Mexico Norte, S. de R.L. de C.V. and Bravo N Mergeco, S. de R.L. de C.V. that holds a 50% interest in the Los Ramones Norte pipeline. Sempra Infrastructure accounts for its 50% interest in TAG Norte as an equity method investment. RBS SEMPRA COMMODITIES RBS Sempra Commodities is a United Kingdom limited liability partnership formed by Sempra and RBS in 2008 to own and operate the commodities-marketing businesses previously operated through wholly owned subsidiaries of Sempra. We and RBS sold substantially all of the partnership’s businesses and assets in four separate transactions completed in 2010 and 2011. Since 2011, our investment balance has reflected our share of the remaining partnership assets, including amounts retained by the partnership to help offset unanticipated future general and administrative costs necessary to complete the dissolution of the partnership and the distribution of the partnership’s remaining assets, if any. We account for our investment in RBS Sempra Commodities under the equity method. In 2018, we fully impaired our remaining equity method investment in RBS Sempra Commodities. In 2020, we recorded a charge of $100 million in Equity Earnings on Sempra’s Consolidated Statement of Operations for losses from our investment in RBS Sempra Commodities. In 2021, we reduced this charge by $50 million based on the favorable outcome of a settlement with HMRC and revised assumptions on the High Court of Justice case. In 2023, we reduced this estimate by an additional $40 million based on the settlement reached with the Liquidating Companies. We discuss matters related to RBS Sempra Commodities further in “Legal Proceedings – Other Sempra” in Note 16. SUMMARIZED FINANCIAL INFORMATION We present summarized financial information below, aggregated for all other equity method investments (excluding Oncor Holdings and RBS Sempra Commodities) for the periods in which we were invested in the entities. The amounts below represent the results of operations and aggregate financial position of 100% of each of Sempra’s other equity method investments.
SUMMARIZED FINANCIAL INFORMATION – OTHER EQUITY METHOD INVESTMENTS
(Dollars in millions)
| Years ended December 31,
| 2023 |  | 2022 |  | 2021(1)
Gross revenues | $ | 3,083 |  |  | $ | 2,959 |  |  | $ | 2,721 |
Operating expenses | (776) |  |  | (772) |  |  | (719) |
Income from operations | 2,307 |  |  | 2,187 |  |  | 2,002 |
Interest expense | (570) |  |  | (505) |  |  | (548) |
Net income/Earnings(2)(3) | 1,499 |  |  | 1,537 |  |  | 1,388 |
|  |  | December 31,
|  |  | 2023 |  | 2022
Current assets |  |  | $ | 1,216 |  |  | $ | 1,008 |
Noncurrent assets |  |  | 14,826 |  |  | 14,786 |
Current liabilities |  |  | 1,255 |  |  | 1,147 |
Noncurrent liabilities |  |  | 10,786 |  |  | 11,130 |
(1) In March 2021, Sempra Infrastructure completed the acquisition of the remaining 50% equity interest in ESJ and ESJ became a consolidated subsidiary. (2) Except for our investments in Mexico, there was no income tax recorded by the entities, as they are primarily domestic partnerships. (3) Amounts for Cameron LNG JV exclude adjustments to equity earnings related to amortization of capitalized interest and guarantee fees within the carrying value of our equity method investment and changes in basis differences in equity earnings related to AOCI.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (a)(3) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481687/323-10-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481687/323-10-50-3 Reference 3: http://www.xbrl.org/2003/role/recommendedDisclosureRef -Topic 323 -SubTopic 740 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481543/323-740-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 323 -Publisher FASB -URI https://asc.fasb.org//323/tableOfContent + Details
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