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COMMITMENTS, CONTINGENCIES AND GUARANTEES | 6 Months Ended
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Jun. 30, 2026
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS, CONTINGENCIES AND GUARANTEES | COMMITMENTS, CONTINGENCIES AND GUARANTEES LEGAL PROCEEDINGS We accrue losses for a legal proceeding when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. However, the uncertainties inherent in legal proceedings make it difficult to reasonably estimate the costs and effects of resolving these matters. Accordingly, actual costs incurred may differ materially from amounts accrued, may exceed, and in some cases have exceeded, applicable insurance coverage and could materially adversely affect our business, results of operations, financial condition, cash flows and/or prospects. Unless otherwise indicated, we are unable to reasonably estimate possible losses or a range of losses in excess of any amounts accrued. At June 30, 2026, loss contingency accruals for legal matters that are probable and estimable are $32 million for Sempra, $3 million for SDG&E and $14 million for SoCalGas. SDG&E City of San Diego Franchise Agreements Pending. In 2021, a lawsuit was filed in the California Superior Court challenging various aspects of the natural gas and electric franchise agreements granted by the City of San Diego to SDG&E. The lawsuit sought to void the franchise agreements. In October 2023, the trial court ruled in favor of SDG&E and the City of San Diego, upholding all terms of the franchise agreements, except for the two-thirds City Council vote requirement for termination if the City decides to terminate under certain circumstances. Under the court’s ruling, the City can instead terminate on a majority vote, so long as it satisfies repayment provisions under the franchise agreements. Both sides appealed the ruling and, in May 2026, the California Court of Appeal upheld the trial court’s judgment, which is subject to a petition for review. SoCalGas LA Fires Palisades Fire Litigation - Pending. There is a consolidated legal action pending in Los Angeles County Superior Court related to the January 2025 Palisades fire. Various plaintiffs named nineteen defendants in a December 2025 master complaint, including but not limited to SoCalGas, Sempra, Edison, Edison International, the J. Paul Getty Trust, the City of Los Angeles, Los Angeles County, and the State of California (collectively, the Palisades Defendants). At this early stage of the legal process, it is unclear how many plaintiffs are asserting claims against the Palisades Defendants. The plaintiffs seek an award of economic and noneconomic damages, punitive damages, attorneys’ fees, litigation costs and pre-judgment interest. On July 15, 2026, the Superior Court dismissed Sempra (but not SoCalGas) as a defendant, struck the plaintiffs’ requests for punitive damages against SoCalGas, and provided the plaintiffs an opportunity to amend their master complaint with respect to certain causes of action against SoCalGas that were dismissed. Eaton Fire Litigation - Pending. There is a separate consolidated legal action pending in Los Angeles County Superior Court related to the January 2025 Eaton fire. The first of these lawsuits was filed against Edison in January 2025. In January 2026, Edison and Edison International filed cross-complaints in Los Angeles County Superior Court against more than a dozen defendants, including but not limited to SoCalGas, the City of Pasadena, Pasadena Water and Power, Los Angeles County, and Genasys Inc. (collectively, the Eaton Cross-Defendants) in connection with underlying litigation related to the January 2025 Eaton fire. The Edison cross-complaints against the Eaton Cross-Defendants seek indemnity, compensatory damages, attorneys’ fees, litigation costs and pre-judgment interest. In April 2026, SoCalGas filed a cross-complaint against Edison seeking compensatory damages for damage to SoCalGas’ infrastructure and costs associated with service restoration, attorneys’ fees, litigation costs and pre-judgment interest. The court has scheduled a January 2027 trial for certain plaintiffs. Other Sempra Energía Costa Azul Land Dispute - Pending. Energía Costa Azul, S. de R.L. de C.V. has been engaged in a long-running land dispute relating to property adjacent to and owned by its ECA Regas Facility (the facility and the ECA LNG projects in development and under construction are not situated on the land that is the subject of this dispute). A claimant to the adjacent property filed suit to reinitiate an administrative procedure at SEDATU to obtain the property title for the disputed property, which title had previously been issued in a ruling by the federal Agrarian Court and subsequently reversed by a federal court in Mexico. In April 2021, the proceeding in the Agrarian Court concluded with the court ordering that the administrative procedure be restarted. The administrative procedure at SEDATU may continue if SEDATU decides to reopen the matter. Environmental and Social Impact Permits - Resolved. Several administrative challenges were pending before Mexico’s Secretariat of Environment and Natural Resources (the Mexican environmental protection agency) and Federal Tax and Administrative Courts, seeking revocation of the environmental impact authorization issued to the ECA Regas Facility in 2003. These cases generally alleged that the conditions and mitigation measures in the environmental impact authorization were inadequate and challenged findings that the activities of the terminal were consistent with regional development guidelines. In addition, a group of residents filed an administrative appeal in June 2021 against various federal and state authorities alleging deficiencies in the public consultation process for the environmental and social impact permits issued by each of ASEA and SENER to ECA LNG authorizing natural gas liquefaction activities at the ECA Regas Facility. The request for an administrative appeal was denied. The claimants appealed this ruling via a constitutional challenge (an amparo trial) but were not successful. The lower court’s ruling was favorable to the ECA Regas Facility, as the court determined that no harm has been caused to the plaintiffs and dismissed the lawsuit. The claimants appealed the rulings and, in June 2026, the Second Federal Collegiate Court ruled in favor of the ECA Regas Facility, definitively resolving this matter. Port Arthur LNG I Construction Incident - Pending. In April 2025, an incident occurred at the site of the PA LNG Phase 1 project that resulted in the deaths of three Bechtel employees and injuries to two Bechtel employees. In November 2025, the cases were transferred to a multidistrict litigation pretrial court and, in March 2026, the cases were assigned to a judge to oversee pretrial proceedings. As of August 3, 2026, there are two pending lawsuits filed by 12 plaintiffs in the 172nd Judicial District Court in Jefferson County, Texas and the 295th Judicial District Court in Harris County, Texas. The complaints collectively name as defendants Port Arthur LNG I, SI Partners, Sempra and/or other Sempra affiliates, Bechtel and/or Bechtel Corporation, and ConocoPhillips. Plaintiffs assert negligence and gross negligence and additional causes of action for wrongful death, survival and bystander claims and are seeking compensatory and punitive damages. Bechtel is providing indemnity pursuant to the terms of Port Arthur LNG I’s EPC contract and is continuing construction of the PA LNG Phase 1 project. Ordinary Course Litigation We are also defendants in ordinary routine litigation incidental to our businesses, including personal injury, employment litigation, product liability, property damage and other claims. Juries have demonstrated an increasing willingness to grant large awards, including punitive damages, in these types of cases. LEASES We discuss leases further in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report. Lessee Accounting We have operating and finance leases for real and personal property (including office space, land, fleet vehicles, aircraft, tugboats, machinery and equipment, warehouses and other operational facilities) and PPAs with renewable energy, energy storage and peaker plant facilities. Leases That Have Not Yet Commenced SDG&E has four PPAs, of which SDG&E expects three will commence in 2027 and one will commence in 2028. SDG&E expects the future minimum lease payments to be $12 million in 2027, $23 million in 2028, $25 million in each of 2029 and 2030 and $290 million thereafter (through expiration in 2043). SI Partners has a lease agreement for tugboat services for the Port Arthur LNG liquefaction project that it expects will commence in 2027. SI Partners expects the future minimum lease payments to be $10 million in 2027, $12 million in each of 2028 through 2030, and $186 million thereafter (through expiration in 2047, exclusive of certain renewal options) and total future minimum fixed payments for operation and maintenance services to be $184 million. Lessor Accounting SI Partners is a lessor for certain of its natural gas and ethane pipelines, compressor stations, liquid petroleum gas storage facilities, a rail facility and refined products terminals, which we account for as operating or sales-type leases. We provide information below for leases for which we are the lessor.
LESSOR INFORMATION ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
| Three months ended June 30, |  | Six months ended June 30,
| 2026 |  | 2025 |  | 2026 |  | 2025
Sempra – Sales-type leases: |  |  |  |  |  |  |
Interest income | $ | 1 |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 2 |
Total revenues from sales-type leases(1) | $ | 1 |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 2 |
Sempra – Operating leases: |  |  |  |  |  |  |
Fixed lease payments | $ | 97 |  |  | $ | 90 |  |  | $ | 197 |  |  | $ | 176 |
Variable lease payments | 9 |  |  | 6 |  |  | 17 |  |  | 11 |
Total revenues from operating leases(1) | $ | 106 |  |  | $ | 96 |  |  | $ | 214 |  |  | $ | 187 |
Depreciation expense(2) | $ | — |  |  | $ | 17 |  |  | $ | — |  |  | $ | 35 |
(1) Included in Revenues: Energy-Related Businesses on the Condensed Consolidated Statements of Operations. (2) We stopped recording depreciation expense when these assets were classified as held for sale in September 2025. CONTRACTUAL COMMITMENTS We discuss below significant changes in the first six months of 2026 to contractual commitments discussed in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report. Natural Gas Contracts SoCalGas’ natural gas contracts and transportation commitments have increased by approximately $580 million since December 31, 2025, reflecting a decrease related to amounts that settled during the first six months of 2026 and increases from entering into natural gas transportation contracts in the first six months of 2026. At June 30, 2026, we expect future payments to decrease by $34 million in 2026, and increase by $49 million in 2027, $65 million in 2028, $77 million in 2029, $79 million in 2030, and $344 million thereafter compared to December 31, 2025. LNG Purchase Agreement SI Partners has an SPA for the supply of LNG to the ECA Regas Facility, which is included within the disposal group that is classified as held for sale. The commitment amount is calculated using a predetermined formula based on estimated forward prices of the index applicable from 2026 to 2029. Although this agreement specifies a number of cargoes to be delivered, under its terms, the supplier may divert certain cargoes, which would reduce amounts paid under the agreement by SI Partners. At June 30, 2026, we expect the commitment amount to decrease by $217 million in 2026 and $57 million in 2027, and increase by $34 million in 2028 and $28 million in 2029 compared to December 31, 2025, reflecting changes in estimated forward prices since December 31, 2025 and actual transactions in the first six months of 2026. These LNG commitment amounts are based on the assumption that all LNG cargoes under the agreement are delivered, less those already confirmed to be diverted as of June 30, 2026. Actual LNG purchases in the current and prior years have been significantly lower than the maximum amount provided under the agreement due to the supplier electing to divert cargoes as allowed by the agreement. PPAs Not Accounted for as Leases SDG&E’s PPA commitments have increased by approximately $101 million since December 31, 2025, primarily from entering into energy storage agreements in the first six months of 2026. At June 30, 2026, we expect future payments to increase by $7 million in 2026, $4 million in 2027, $6 million in each of 2028 through 2030, and $72 million thereafter compared to December 31, 2025. ENVIRONMENTAL ISSUES We disclose any proceeding under environmental laws to which a government authority is a party when the potential monetary sanctions, exclusive of interest and costs, exceed the lesser of $1 million or 1% of current assets, which is $363 million for Sempra, $18 million for SDG&E and $13 million for SoCalGas at June 30, 2026. SEMPRA – GUARANTEES 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 $16 million at June 30, 2026, 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. This guarantee will remain with Sempra after the planned sale of a portion of our equity interest in SI Partners, which we discuss in Note 6. 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 are 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 banks (the bank debt) to whom Sempra has provided a guarantee pursuant to the 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 ▪on March 28, 2028, March 28, 2030 and March 28, 2035, the agent for the external lenders, on behalf of such external lenders, is obligated to put all of the then outstanding bank debt to Sempra Infrastructure, except to the extent any external lender elects not to participate in the put three months prior to the applicable put exercise 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 ▪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 9). At June 30, 2026, the fair value of the Support Agreement is $38 million, of which $8 million is included in Other Current Assets and $30 million is included in Other Long-Term Assets on Sempra’s Condensed Consolidated Balance Sheet. This guarantee will remain with Sempra after the planned sale of a portion of our equity interest in SI Partners, which we discuss in Note 6.

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