XML 48 R23.htm IDEA: XBRL DOCUMENT

GENERAL INFORMATION AND OTHER FINANCIAL DATA

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

GENERAL INFORMATION AND OTHER FINANCIAL DATA

PRINCIPLES OF CONSOLIDATION

Sempra

Sempra’s Condensed Consolidated Financial Statements include the accounts of Sempra Energy, a California-based holding company doing business as Sempra, and its consolidated entities. In the fourth quarter of 2021, we formed Sempra Infrastructure, which resulted in a change to our reportable segments. Historical segment disclosures have been restated to conform with the current presentation of our four separate reportable segments, which we discuss in Note 12. All references in these Notes to our reportable segments are not intended to refer to any legal entity with the same or similar name.

SDG&E

SDG&E’s common stock is wholly owned by Enova Corporation, which is a wholly owned subsidiary of Sempra.

SoCalGas

SoCalGas’ common stock is wholly owned by Pacific Enterprises, which is a wholly owned subsidiary of Sempra.

BASIS OF PRESENTATION

This is a combined report of Sempra, SDG&E and SoCalGas. We provide separate information for SDG&E and SoCalGas as required. We have eliminated intercompany accounts and transactions within the consolidated financial statements of each reporting entity.

We have prepared our Condensed Consolidated Financial Statements in conformity with U.S. GAAP and in accordance with the interim period reporting requirements of Form 10-Q and applicable rules of the SEC. The financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods. These adjustments are only of a normal, recurring nature. Results of operations for interim periods are not necessarily indicative of results for the entire year or for any other period. We evaluated events and transactions that occurred after June 30, 2022 through the date the financial statements were issued and, in the opinion of management, the accompanying statements reflect all adjustments necessary for a fair presentation.

All December 31, 2021 balance sheet information in the Condensed Consolidated Financial Statements has been derived from our audited 2021 Consolidated Financial Statements in the Annual Report. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the interim period reporting provisions of U.S. GAAP and the SEC.

We describe our significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report and the impact of the adoption of new accounting standards on those policies in Note 2 below. We follow the same accounting policies for interim period reporting purposes.

The information contained in this report should be read in conjunction with the Annual Report.

Regulated Operations

SDG&E, SoCalGas and Sempra Infrastructure’s natural gas distribution utility, Ecogas, prepare their financial statements in accordance with the provisions of U.S. GAAP governing rate-regulated operations. We discuss revenue recognition and the effects of regulation at our utilities in Notes 3 and 4 below and in Notes 1, 3 and 4 of the Notes to Consolidated Financial Statements in the Annual Report.

Our Sempra Texas Utilities segment is comprised of our equity method investments in holding companies that own interests in regulated electric transmission and distribution utilities in Texas.

Our Sempra Infrastructure segment includes the operating companies of our subsidiary, IEnova, as well as certain holding companies and risk management activity. Certain business activities at IEnova are regulated by the CRE and meet the regulatory accounting requirements of U.S. GAAP. Pipeline projects currently under construction at IEnova that meet the regulatory accounting requirements of U.S. GAAP record the impact of AFUDC related to equity. We discuss AFUDC below and in Note 1 of the Notes to Consolidated Financial Statements in the Annual Report.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash equivalents are highly liquid investments with original maturities of three months or less at the date of purchase.

Restricted cash includes:

▪for Sempra Infrastructure, funds fully drawn against Gazprom’s letters of credit, including draws associated with its LNG storage and regasification agreement that we discuss in Note 11, and funds denominated in Mexican pesos to pay for rights-of-way, license fees, permits, topographic surveys and other costs pursuant to trust and debt agreements related to pipeline projects

▪for Parent and other, funds held in a delisting trust for the purpose of purchasing the remaining publicly owned IEnova shares

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on Sempra’s Condensed Consolidated Balance Sheets to the sum of such amounts reported on Sempra’s Condensed Consolidated Statements of Cash Flows.


RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(Dollars in millions)
	June 30, 2022		December 31, 2021
Cash and cash equivalents	$	1,931	$	559
Restricted cash, current	103		19
Restricted cash, noncurrent	59		3
Total cash, cash equivalents and restricted cash on the Condensed Consolidated Statements of Cash Flows	$	2,093	$	581

CREDIT LOSSES

We are exposed to credit losses from financial assets measured at amortized cost, including trade and other accounts receivable, amounts due from unconsolidated affiliates, our net investment in sales-type leases and a note receivable. We are also exposed to credit losses from off-balance sheet arrangements through Sempra’s guarantee related to Cameron LNG JV’s SDSRA, which we discuss in Note 6.

We regularly monitor and evaluate credit losses and record allowances for expected credit losses, if necessary, for trade and other accounts receivable using a combination of factors, including past-due status based on contractual terms, trends in write-offs, the age of the receivables and customer payment patterns, historical and industry trends, counterparty creditworthiness, economic conditions and specific events, such as bankruptcies, pandemics and other factors. We write off financial assets measured at amortized cost in the period in which we determine they are not recoverable. We record recoveries of amounts previously written off when it is known that they will be recovered.

In 2021, SDG&E and SoCalGas applied, on behalf of their customers, for financial assistance from the California Department of Community Services and Development under the California Arrearage Payment Program, which provided funds of $63 million and $79 million for SDG&E and SoCalGas, respectively. In the first quarter of 2022, SDG&E and SoCalGas received and applied the amounts directly to eligible customer accounts to reduce past due balances. In June 2022, AB 205 was approved establishing, among other things, the 2022 California Arrearage Payment Program. SDG&E and SoCalGas expect to apply for funding from this program on behalf of their residential customers with past due balances and, if approved, receive such funding in the first quarter of 2023.

We provide below allowances and changes in allowances for credit losses for trade receivables and other receivables. SDG&E and SoCalGas record changes in the allowances for credit losses related to Accounts Receivable – Trade in regulatory accounts.


RECEIVABLES – ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	2022		2021
Sempra:
Allowances for credit losses at January 1	$	136	$	138
Provisions for expected credit losses	77		66
Write-offs	(36)		(12)
Allowances for credit losses at June 30	$	177	$	192
SDG&E:
Allowances for credit losses at January 1	$	66	$	69
Provisions for expected credit losses	37		13
Write-offs	(18)		(7)

Allowances for credit losses at June 30	$	85	$	75
SoCalGas:
Allowances for credit losses at January 1	$	69	$	68
Provisions for expected credit losses	37		52
Write-offs	(18)		(5)
Allowances for credit losses at June 30	$	88	$	115

Allowances for credit losses related to accounts receivable are included in the Condensed Consolidated Balance Sheets as follows:


ALLOWANCES FOR CREDIT LOSSES
(Dollars in millions)
	June 30,		December 31,
	2022		2021
Sempra:
Accounts receivable – trade, net	$	142	$	94
Accounts receivable – other, net	33		39
Other long-term assets	2		3
Total allowances for credit losses	$	177	$	136
SDG&E:
Accounts receivable – trade, net	$	62	$	42
Accounts receivable – other, net	22		22
Other long-term assets	1		2
Total allowances for credit losses	$	85	$	66
SoCalGas:
Accounts receivable – trade, net	$	76	$	51
Accounts receivable – other, net	11		17
Other long-term assets	1		1
Total allowances for credit losses	$	88	$	69

As we discuss below in “Transactions with Affiliates,” we have loans due from unconsolidated affiliates with varying tenors, interest rates and currencies. On a quarterly basis, we evaluate credit losses and record allowances for expected credit losses on amounts due from unconsolidated affiliates, if necessary, based on credit quality indicators such as external credit ratings, published default rate studies, the maturity date of the instrument and past delinquencies. However, we do not record allowances for expected credit losses related to accrued interest receivable on loans due from unconsolidated affiliates because we write off such amounts, if any, through a reversal of interest income in the period we determine such amounts are uncollectible. In the absence of external credit ratings, we may utilize an internally developed credit rating based on our analysis of a counterparty’s financial statements to determine our expected credit losses. At December 31, 2021, $1 million of expected credit losses are included in noncurrent Due From Unconsolidated Affiliates on Sempra’s Condensed Consolidated Balance Sheet.

As we discuss below in “Note Receivable,” we have an interest-bearing promissory note due from KKR. On a quarterly basis, we evaluate credit losses and record allowances for expected credit losses on this note receivable, including compounded interest and unamortized transaction costs, based on published default rate studies, the maturity date of the instrument and an internally developed credit rating. At June 30, 2022 and December 31, 2021, $7 million and $8 million, respectively, of expected credit losses are included in Other Long-Term Assets on Sempra’s Condensed Consolidated Balance Sheets.

As we discuss below in Note 6, Sempra provided a guarantee for the benefit of Cameron LNG JV related to amounts withdrawn

by Sempra Infrastructure from the SDSRA. On a quarterly basis, we evaluate credit losses and record liabilities for expected credit losses on this off-balance sheet arrangement based on external credit ratings, published default rate studies and the maturity date of the arrangement. At June 30, 2022 and December 31, 2021, $6 million and $7 million, respectively, of expected credit losses are included in Deferred Credits and Other on Sempra’s Condensed Consolidated Balance Sheets.

INVENTORIES

The components of inventories are as follows:


INVENTORY BALANCES
(Dollars in millions)
	Sempra				SDG&E				SoCalGas
	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Natural gas	$	138	$	164	$	—	$	—	$	102	$	114
LNG	31		27		—		—		—		—
Materials and supplies	208		198		124		123		67		58
Total	$	377	$	389	$	124	$	123	$	169	$	172

NOTE RECEIVABLE

In October 2021, Sempra loaned $300 million to KKR in exchange for an interest-bearing promissory note that is due in full no later than October 2029 and bears compound interest at 5% per annum, which may be paid quarterly or added to the outstanding principal at the election of KKR. At June 30, 2022 and December 31, 2021, Other Long-Term Assets includes $308 million and $297 million, respectively, of outstanding principal, compounded interest and unamortized transaction costs, net of allowance for credit losses, and at December 31, 2021, Other Current Assets includes $3 million of interest receivable on Sempra’s Condensed Consolidated Balance Sheets.

CAPITALIZED FINANCING COSTS

Capitalized financing costs include capitalized interest costs and AFUDC related to both debt and equity financing of construction projects. We capitalize interest costs incurred to finance capital projects and interest at equity method investments that have not commenced planned principal operations.

The table below summarizes capitalized financing costs, comprised of AFUDC and capitalized interest.


CAPITALIZED FINANCING COSTS
(Dollars in millions)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Sempra	$	60	$	55	$	117	$	114
SDG&E	26		28		54		58
SoCalGas	17		15		35		31

VARIABLE INTEREST ENTITIES

We consolidate a VIE if we are the primary beneficiary of the VIE. Our determination of whether we are the primary beneficiary is based on qualitative and quantitative analyses, which assess:

▪the purpose and design of the VIE;

▪the nature of the VIE’s risks and the risks we absorb;

▪the power to direct activities that most significantly impact the economic performance of the VIE; and

▪the obligation to absorb losses or the right to receive benefits that could be significant to the VIE.

We will continue to evaluate our VIEs for any changes that may impact our determination of whether an entity is a VIE and if we are the primary beneficiary.

SDG&E

SDG&E’s power procurement is subject to reliability requirements that may require SDG&E to enter into various PPAs that include variable interests. SDG&E evaluates the respective entities to determine if variable interests exist and, based on the qualitative and quantitative analyses described above, if SDG&E, and indirectly Sempra, is the primary beneficiary.

SDG&E has agreements under which it purchases power generated by facilities for which it supplies all of the natural gas to fuel the power plant (i.e., tolling agreements). SDG&E’s obligation to absorb natural gas costs may be a significant variable interest. In addition, SDG&E has the power to direct the dispatch of electricity generated by these facilities. Based on our analysis, the ability to direct the dispatch of electricity may have the most significant impact on the economic performance of the entity owning the generating facility because of the associated exposure to the cost of natural gas, which fuels the plants, and the value of electricity produced. To the extent that SDG&E (1) is obligated to purchase and provide fuel to operate the facility, (2) has the power to direct the dispatch, and (3) purchases all of the output from the facility for a substantial portion of the facility’s useful life, SDG&E may be the primary beneficiary of the entity owning the generating facility. SDG&E determines if it is the primary beneficiary in these cases based on a qualitative approach in which it considers the operational characteristics of the facility, including its expected power generation output relative to its capacity to generate and the financial structure of the entity, among other factors. If SDG&E determines that it is the primary beneficiary, SDG&E and Sempra consolidate the entity that owns the facility as a VIE.

In addition to tolling agreements, other variable interests involve various elements of fuel and power costs, and other components of cash flows expected to be paid to or received by our counterparties. In most of these cases, the expectation of variability is not substantial, and SDG&E generally does not have the power to direct activities, including the operation and maintenance activities of the generating facility, that most significantly impact the economic performance of the other VIEs. If our ongoing evaluation of these VIEs were to conclude that SDG&E becomes the primary beneficiary and consolidation by SDG&E becomes necessary, the effects could be significant to the financial position and liquidity of SDG&E and Sempra.

SDG&E determined that none of its PPAs and tolling agreements resulted in SDG&E being the primary beneficiary of a VIE at June 30, 2022 and December 31, 2021. PPAs and tolling agreements that relate to SDG&E’s involvement with VIEs are primarily accounted for as finance leases. The carrying amounts of the assets and liabilities under these contracts are included in PP&E, net, and finance lease liabilities with balances of $1,206 million and $1,217 million at June 30, 2022 and December 31, 2021, respectively. SDG&E recovers costs incurred on PPAs, tolling agreements and other variable interests through CPUC-approved long-term power procurement plans. SDG&E has no residual interest in the respective entities and has not provided or guaranteed any debt or equity support, liquidity arrangements, performance guarantees or other commitments associated with these contracts other than the purchase commitments described in Note 16 of the Notes to Consolidated Financial Statements in the Annual Report. As a result, SDG&E’s potential exposure to loss from its variable interest in these VIEs is not significant.

Sempra Texas Utilities

Oncor Holdings is a VIE. Sempra is not the primary beneficiary of this VIE because of the structural and operational ring-fencing and governance measures in place that prevent us from having the power to direct the significant activities of Oncor Holdings. As a result, we do not consolidate Oncor Holdings and instead account for our ownership interest as an equity method investment. See Note 6 of the Notes to Consolidated Financial Statements in the Annual Report for additional information about our equity method investment in Oncor Holdings and restrictions on our ability to influence its activities. Our maximum exposure to loss, which fluctuates over time, from our interest in Oncor Holdings does not exceed the carrying value of our investment, which was $13,301 million at June 30, 2022 and $12,947 million at December 31, 2021.

Sempra Infrastructure

Cameron LNG JV

Cameron LNG JV is a VIE principally due to contractual provisions that transfer certain risks to customers. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of Cameron LNG JV, including LNG production and operation and maintenance activities at the liquefaction facility. Therefore, we account for our investment in Cameron LNG JV under the equity method. The carrying value of our investment, including amounts recognized in AOCI related to interest-rate cash flow hedges at Cameron LNG JV, was $723 million at June 30, 2022 and $514 million at December 31, 2021. Our maximum exposure to loss, which fluctuates over time, includes the carrying value of our investment and our obligation under the SDSRA, which we discuss in Note 6.

CFIN

As we discuss in Note 6, in July 2020, Sempra entered into a Support Agreement for the benefit of CFIN, which is a VIE. Sempra is not the primary beneficiary of this VIE because we do not have the power to direct the most significant activities of CFIN, including modification, prepayment, and refinance decisions related to the financing arrangement with external lenders and Cameron LNG JV’s four project owners as well as the ability to determine and enforce remedies in the event of default. The conditional obligations of the Support Agreement represent a variable interest that we measure at fair value on a recurring basis (see Note 9). Sempra’s maximum exposure to loss under the terms of the Support Agreement is $979 million.

ECA LNG Phase 1

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 development activities related to the construction of the liquefaction facility, which we consider to be the most significant activities of ECA LNG Phase 1 during the construction phase of its natural gas liquefaction export project. As a result, we consolidate ECA LNG Phase 1. Sempra consolidated $767 million and $632 million of assets at June 30, 2022 and December 31, 2021, respectively, consisting primarily of PP&E, net, and Accounts Receivable – Other attributable to ECA LNG Phase 1 that could be used only to settle obligations of this VIE and that are not available to settle obligations of Sempra, and $532 million and $455 million of liabilities at June 30, 2022 and December 31, 2021, respectively, consisting primarily of long-term debt, short-term debt and accounts payable attributable to ECA LNG Phase 1 for which creditors do not have recourse to the general credit of Sempra. Additionally, as we discuss in Note 7, Sempra and TotalEnergies SE have provided guarantees for the loan facility supporting construction of the liquefaction facility based on their respective proportionate ownership interest in ECA LNG Phase 1.

PENSION AND OTHER POSTRETIREMENT BENEFITS

Net Periodic Benefit Cost

The following three tables provide the components of net periodic benefit cost. The components of net periodic benefit cost, other than the service cost component, are included in the Other (Expense) Income, Net, table below.


NET PERIODIC BENEFIT COST – SEMPRA
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended June 30,
	2022		2021		2022		2021
Service cost	$	42	$	36	$	6	$	5
Interest cost	29		28		7		7
Expected return on assets	(45)		(43)		(16)		(15)
Amortization of:
Prior service cost	2		2		—		—
Actuarial loss (gain)	5		11		(3)		(2)
Net periodic benefit cost (credit)	33		34		(6)		(5)
Regulatory adjustments	24		22		6		5
Total expense recognized	$	57	$	56	$	—	$	—

	Six months ended June 30,
	2022		2021		2022		2021
Service cost	$	83	$	73	$	13	$	11
Interest cost	59		56		14		14
Expected return on assets	(91)		(86)		(32)		(30)
Amortization of:
Prior service cost (credit)	5		5		(1)		(1)
Actuarial loss (gain)	11		22		(7)		(4)
Settlement charges	—		7		—		—
Net periodic benefit cost (credit)	67		77		(13)		(10)
Regulatory adjustments	(3)		(7)		13		10
Total expense recognized	$	64	$	70	$	—	$	—


NET PERIODIC BENEFIT COST – SDG&E
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended June 30,
	2022		2021		2022		2021
Service cost	$	10	$	9	$	1	$	1
Interest cost	6		6		2		2
Expected return on assets	(11)		(13)		(3)		(3)
Amortization of:
Actuarial loss (gain)	1		1		—		(1)
Net periodic benefit cost (credit)	6		3		—		(1)
Regulatory adjustments	7		11		—		1
Total expense recognized	$	13	$	14	$	—	$	—

	Six months ended June 30,
	2022		2021		2022		2021
Service cost	$	20	$	17	$	3	$	2
Interest cost	13		12		3		3
Expected return on assets	(22)		(25)		(5)		(5)
Amortization of:
Actuarial loss (gain)	1		1		(1)		(1)
Net periodic benefit cost (credit)	12		5		—		(1)
Regulatory adjustments	2		9		—		1
Total expense recognized	$	14	$	14	$	—	$	—


NET PERIODIC BENEFIT COST – SOCALGAS
(Dollars in millions)
	Pension benefits				Other postretirement benefits
	Three months ended June 30,
	2022		2021		2022		2021
Service cost	$	28	$	25	$	5	$	4
Interest cost	21		20		6		6
Expected return on assets	(33)		(30)		(14)		(12)
Amortization of:
Prior service cost	2		2		—		—
Actuarial loss (gain)	4		10		(3)		(2)
Net periodic benefit cost (credit)	22		27		(6)		(4)
Regulatory adjustments	17		11		6		4
Total expense recognized	$	39	$	38	$	—	$	—

	Six months ended June 30,
	2022		2021		2022		2021
Service cost	$	56	$	50	$	10	$	8
Interest cost	41		40		11		11
Expected return on assets	(64)		(58)		(27)		(24)
Amortization of:
Prior service cost (credit)	4		4		(1)		(1)
Actuarial loss (gain)	8		19		(6)		(3)
Net periodic benefit cost (credit)	45		55		(13)		(9)
Regulatory adjustments	(5)		(16)		13		9
Total expense recognized	$	40	$	39	$	—	$	—

RABBI TRUST

In support of its Supplemental Executive Retirement, Cash Balance Restoration and Deferred Compensation Plans, Sempra maintains dedicated assets, including a Rabbi Trust and investments in life insurance contracts, which totaled $498 million and $567 million at June 30, 2022 and December 31, 2021, respectively.

SEMPRA EARNINGS PER COMMON SHARE

Basic EPS is calculated by dividing earnings attributable to common shares by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.


EARNINGS PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Numerator:
Earnings attributable to common shares	$	559	$	424	$	1,171	$	1,298

Denominator:
Weighted-average common shares outstanding for basic EPS(1)	314,845		307,800		315,595		304,372
Dilutive effect of stock options and RSUs(2)	1,022		807		1,052		846
Dilutive effect of mandatory convertible preferred stock	—		—		—		1,066
Weighted-average common shares outstanding for diluted EPS	315,867		308,607		316,647		306,284

EPS:
Basic	$	1.78	$	1.38	$	3.71	$	4.27
Diluted	$	1.77	$	1.37	$	3.70	$	4.24

(1) Includes 399 and 447 fully vested RSUs held in our Deferred Compensation Plan for the three months ended June 30, 2022 and 2021, respectively, and 403 and 454 of such RSUs for the six months ended June 30, 2022 and 2021, respectively. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.

(2) Due to market fluctuations of both Sempra common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10 of the Notes to Consolidated Financial Statements in the Annual Report, dilutive RSUs may vary widely from period-to-period.

The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for the three months and six months ended June 30, 2022 excludes 8,899 and 173,064 potentially dilutive shares, respectively, and the computation of diluted EPS for the three months and six months ended June 30, 2021 excludes 145,247 and 287,061 potentially dilutive shares, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.

In 2021, the potentially dilutive impact from mandatory convertible preferred stock was calculated under the if-converted method until the mandatory conversion date. After the mandatory conversion date, the converted shares are included in weighted-average common shares outstanding for basic EPS. We converted all of our series A preferred stock into common stock on January 15, 2021 and all of our series B preferred stock into common stock on July 15, 2021. The computation of diluted EPS for both the three months and six months ended June 30, 2021 excludes 4,256,725 potentially dilutive shares.

In January 2022, pursuant to Sempra’s share-based compensation plans, the Compensation and Talent Committee of Sempra’s board of directors granted 219,898 nonqualified stock options, 338,080 performance-based RSUs and 150,286 service-based RSUs.

We discuss share-based compensation plans and related awards and the terms and conditions of Sempra’s equity securities further in Notes 10, 13 and 14 of the Notes to Consolidated Financial Statements in the Annual Report.

COMPREHENSIVE INCOME

The following tables present the changes in AOCI by component and amounts reclassified out of AOCI to net income, after amounts attributable to NCI.


CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1)
(Dollars in millions)
	Foreign currency translation adjustments		Financial instruments		Pension and other postretirement benefits		Total accumulated other comprehensive income (loss)
	Three months ended June 30, 2022 and 2021
Sempra:
Balance at March 31, 2022	$	(76)	$	(78)	$	(75)	$	(229)

OCI before reclassifications	1		37		1		39
Amounts reclassified from AOCI(2)	10		11		2		23
Net OCI(2)	11		48		3		62
Balance at June 30, 2022	$	(65)	$	(30)	$	(72)	$	(167)

Balance at March 31, 2021	$	(69)	$	(239)	$	(91)	$	(399)

OCI before reclassifications(3)	(19)		(36)		(2)		(57)
Amounts reclassified from AOCI	—		10		2		12
Net OCI(3)	(19)		(26)		—		(45)
Balance at June 30, 2021	$	(88)	$	(265)	$	(91)	$	(444)
SDG&E:




Balance at March 31, 2022 and June 30, 2022					$	(10)	$	(10)





Balance at March 31, 2021 and June 30, 2021					$	(10)	$	(10)
SoCalGas:
Balance at March 31, 2022			$	(13)	$	(17)	$	(30)

Amounts reclassified from AOCI			1		—		1
Net OCI			1		—		1
Balance at June 30, 2022			$	(12)	$	(17)	$	(29)

Balance at March 31, 2021			$	(13)	$	(18)	$	(31)
Amounts reclassified from AOCI			—		1		1
Net OCI			—		1		1
Balance at June 30, 2021			$	(13)	$	(17)	$	(30)

(1) All amounts are net of income tax, if subject to tax, and after NCI.

(2) Total AOCI includes $9 of foreign currency translation adjustments associated with sale of NCI to ADIA, which we discuss below in “Other Noncontrolling Interests – Sempra Infrastructure.” This transaction did not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).

(3) Total AOCI includes $24 of foreign currency translation adjustments and $14 of financial instruments associated with the IEnova exchange offer, which we discuss below in “Other Noncontrolling Interests – Sempra Infrastructure.” This transaction did not impact the Condensed Consolidated Statement of Comprehensive Income (Loss).


CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) BY COMPONENT(1) (CONTINUED)
(Dollars in millions)
	Foreign currency translation adjustments		Financial instruments		Pension and other postretirement benefits		Total accumulated other comprehensive income (loss)
	Six months ended June 30, 2022 and 2021
Sempra:
Balance as of December 31, 2021	$	(79)	$	(156)	$	(83)	$	(318)

OCI before reclassifications	4		111		7		122
Amounts reclassified from AOCI(2)	10		15		4		29
Net OCI(2)	14		126		11		151
Balance as of June 30, 2022	$	(65)	$	(30)	$	(72)	$	(167)

Balance as of December 31, 2020	$	(64)	$	(331)	$	(105)	$	(500)
OCI before reclassifications(3)	(24)		37		5		18
Amounts reclassified from AOCI	—		29		9		38
Net OCI(3)	(24)		66		14		56
Balance as of June 30, 2021	$	(88)	$	(265)	$	(91)	$	(444)
SDG&E:





Balance at December 31, 2021 and June 30, 2022					$	(10)	$	(10)





Balance at December 31, 2020 and June 30, 2021					$	(10)	$	(10)
SoCalGas:
Balance as of December 31, 2021			$	(13)	$	(18)	$	(31)

Amounts reclassified from AOCI			1		1		2
Net OCI			1		1		2
Balance as of June 30, 2022			$	(12)	$	(17)	$	(29)

Balance as of December 31, 2020			$	(13)	$	(18)	$	(31)

Amounts reclassified from AOCI			—		1		1
Net OCI			—		1		1
Balance as of June 30, 2021			$	(13)	$	(17)	$	(30)

(1) All amounts are net of income tax, if subject to tax, and after NCI.


RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Details about accumulated other comprehensive income (loss) components	Amounts reclassified from accumulated other comprehensive income (loss)				Affected line item on Condensed Consolidated Statements of Operations
	Three months ended June 30,
	2022		2021
Sempra:
Foreign currency translation adjustments	$	1	$	—	Operation and Maintenance

Financial instruments:
Interest rate instruments	$	—	$	(1)	Interest Expense
Interest rate instruments	13		19		Equity Earnings(1)
Foreign exchange instruments	(1)		—		Revenues: Energy-Related Businesses
	1		—		Other (Expense) Income, Net

Interest rate and foreign exchange instruments	(1)		—		Interest Expense
	—		(7)		Other (Expense) Income, Net
Total, before income tax	12		11
	(4)		(1)		Income Tax Expense
Total, net of income tax	8		10
	3		—		Earnings Attributable to Noncontrolling Interests
Total, net of income tax and after NCI	$	11	$	10

Pension and other postretirement benefits(2):
Amortization of actuarial loss	$	2	$	1	Other (Expense) Income, Net
Amortization of prior service cost	1		1		Other (Expense) Income, Net

Total, before income tax	3		2
	(1)		—		Income Tax Expense
Total, net of income tax	$	2	$	2

Total reclassifications for the period, net of income tax and NCI	$	14	$	12












SoCalGas:
Financial instruments:
Interest rate instruments	$	1	$	—	Interest Expense

Pension and other postretirement benefits(2):

Amortization of prior service cost	$	—	$	1	Other Income (Expense), Net




Total reclassifications for the period, net of income tax	$	1	$	1

(1) Equity earnings at our foreign equity method investees are recognized after tax.

(2) Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).


RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (CONTINUED)
(Dollars in millions)
Details about accumulated other comprehensive income (loss) components	Amounts reclassified from accumulated other comprehensive income (loss)				Affected line item on Condensed Consolidated Statements of Operations
	Six months ended June 30,
	2022		2021
Sempra:
Foreign currency translation adjustments	$	1	$	—	Operation and Maintenance

Financial instruments:
Interest rate instruments	$	(1)	$	1	Interest Expense
Interest rate instruments	27		38		Equity Earnings(1)
Foreign exchange instruments	(2)		1		Revenues: Energy-Related Businesses
	1		—		Other (Expense) Income, Net
Foreign exchange instruments	(1)		1		Equity Earnings(1)
Interest rate and foreign exchange instruments	(1)		—		Interest Expense
	(6)		(1)		Other (Expense) Income, Net
Total, before income tax	17		40
	(5)		(9)		Income Tax Expense
Total, net of income tax	12		31
	3		(2)		Earnings Attributable to Noncontrolling Interests
Total, net of income tax and after NCI	$	15	$	29

Pension and other postretirement benefits(2):
Amortization of actuarial loss	$	4	$	3	Other (Expense) Income, Net
Amortization of prior service cost	2		2		Other (Expense) Income, Net
Settlement charges	—		7		Other (Expense) Income, Net
Total, before income tax	6		12
	(2)		(3)		Income Tax Expense
Total, net of income tax	$	4	$	9

Total reclassifications for the period, net of income tax and NCI	$	20	$	38












SoCalGas:
Financial instruments:
Interest rate instruments	$	1	$	—	Interest Expense

Pension and other postretirement benefits(2):
Amortization of actuarial loss	$	1	$	—	Other Income (Expense), Net
Amortization of prior service cost	—		1		Other Income (Expense), Net
Total, before income tax	1		1
	—		—		Income Tax Expense
Total, net of income tax	$	1	$	1

Total reclassifications for the period, net of income tax	$	2	$	1

(1) Equity earnings at our foreign equity method investees are recognized after tax.

(2) Amounts are included in the computation of net periodic benefit cost (see “Pension and Other Postretirement Benefits” above).

For the three months and six months ended June 30, 2022 and 2021, reclassifications out of AOCI to net income were negligible for SDG&E.

SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS

Sempra Series A Preferred Stock

On January 15, 2021, we converted all 17,250,000 shares of series A preferred stock into 13,781,025 shares of our common stock based on a conversion rate of 0.7989 shares of our common stock for each issued and outstanding share of series A preferred stock. As a consequence, no shares of series A preferred stock were outstanding after January 15, 2021 and the 17,250,000 shares that were formerly series A preferred stock returned to the status of authorized and unissued shares of preferred stock.

Sempra Common Stock Repurchases

On January 11, 2022, we entered into an ASR program under which we prepaid $200 million to repurchase shares of our common stock in a share forward transaction. A total of 1,472,756 shares were purchased under this program at an average price of $135.80 per share. The total number of shares purchased was determined by dividing the $200 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of January 12, 2022 through February 11, 2022, minus a fixed discount. The ASR program was completed on February 11, 2022.

On April 6, 2022, we entered into an ASR program under which we prepaid $250 million to repurchase shares of our common stock in a share forward transaction. A total of 1,471,957 shares were purchased under this program at an average price of $169.84 per share. The total number of shares purchased was determined by dividing the $250 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of April 7, 2022 through April 25, 2022, minus a fixed discount. The ASR program was completed on April 25, 2022.

Other Noncontrolling Interests

The following table provides information about NCI held by others in subsidiaries or entities consolidated by us and recorded in Other Noncontrolling Interests in Total Equity on Sempra’s Condensed Consolidated Balance Sheets.


OTHER NONCONTROLLING INTERESTS
(Dollars in millions)
	Percent ownership held by noncontrolling interests				Equity held by noncontrolling interests
	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Sempra Infrastructure:
SI Partners	30.0	%	20.0	%	$	2,146	$	1,384
SI Partners subsidiaries(1)	0.1 - 16.6		0.1 - 16.6		46		34
Total Sempra					$	2,192	$	1,418

(1) SI Partners has subsidiaries with NCI held by others. Percentage range reflects the highest and lowest ownership percentages among these subsidiaries.

Sempra Infrastructure

Sale of NCI in SI Partners to ADIA. On June 1, 2022, Sempra and ADIA consummated the transaction contemplated under a purchase and sale agreement dated December 21, 2021 (the ADIA Purchase Agreement). Pursuant to the ADIA Purchase Agreement, ADIA acquired Class A Units representing a 10% NCI in SI Partners for a purchase price of $1.7 billion. Following the closing of the transaction, Sempra, KKR and ADIA directly or indirectly own 70%, 20%, and 10%, respectively, of the outstanding Class A Units of SI Partners, which excludes the non-voting Sole Risk Interests held only by Sempra. As a result of this sale to ADIA, we recorded a $709 million increase in equity held by NCI and an increase in Sempra’s shareholders’ equity of $709 million, net of $12 million in transaction costs and $301 million in tax impacts. Transaction costs include $10 million paid to ADIA for reimbursement of certain expenses that ADIA incurred in connection with closing the transaction.

At the closing of the sale of NCI in SI Partners to ADIA, SI Partners indirectly owned 99.9% of the outstanding shares of IEnova. To the extent we acquire additional shares of IEnova after the closing, such additional shares will be acquired by SI Partners, and KKR and ADIA will provide 20% and 10%, respectively, of the funding.

At the closing, KKR and ADIA (the Minority Partners) and Sempra entered into a second amended and restated agreement of limited partnership of SI Partners (the Amended LP Agreement), which governs their respective rights and obligations in respect of their ownership of SI Partners. Under the Amended LP Agreement, matters are decided generally by majority vote and the managers designated by Sempra, KKR and ADIA each, as a group, have voting power equivalent to the ownership percentage of their respective designating limited partner. Sempra maintains control of SI Partners. However, SI Partners and its controlled subsidiaries are prohibited from taking certain limited actions without the prior written approval of the Minority Partners (subject

to each Minority Partner maintaining certain ownership thresholds in SI Partners). The minority protections held by ADIA constitute a subset of the minority protections granted to KKR.

The terms of the Amended LP Agreement applicable to ADIA in relation to capital contributions and distributions are generally consistent with those granted to KKR, with adjustments and limitations to take into account ADIA’s relative ownership percentage, including limiting ADIA’s priority distribution rights to the failure of certain proposed projects to receive a positive final investment decision by a certain date or to achieve specified thresholds of projected internal rates of return or leverage. The transfer rights and restrictions and registration rights in the Amended LP Agreement applicable to ADIA are also generally consistent with those granted to KKR, with adjustments and limitations to take into account ADIA’s relative ownership percentage, including a general restriction on ADIA transferring its interests in SI Partners to third parties (other than pursuant to certain specified permitted transfers) for a specified period following its entry into the Amended LP Agreement.

SI Partners Subsidiaries. In May 2021, we acquired 381,015,194 publicly owned shares of IEnova in exchange for 12,306,777 newly issued shares of our common stock upon completion of our exchange offer launched in the U.S. and Mexico, which increased our ownership interest in IEnova from 70.2% to 96.4%. We acquired the IEnova shares at an exchange ratio of 0.0323 shares of our common stock for each one IEnova share. In connection with the exchange offer, we recorded a $1.4 billion decrease in equity held by NCI and an increase in Sempra’s shareholders’ equity of $1.4 billion, net of $12 million in transactions costs.

Following the exchange offer we completed in May 2021 and a subsequent cash tender offer we completed in September 2021, IEnova’s shares were delisted from the Mexican Stock Exchange effective October 15, 2021. In connection with the delisting, we are maintaining a trust for the purpose of purchasing the 1,212,981 IEnova shares that remained publicly owned as of the completion of the cash tender offer for 78.97 Mexican pesos per share, the same price per share that was offered in our cash tender offer. The trust was to be in place through the earlier of April 14, 2022 or the date on which we acquired all the remaining publicly owned IEnova shares. On April 13, 2022, the term of the trust was amended so that it will remain in place until we terminate it, subject to any maximum term under applicable Mexican law. As of August 1, 2022, an aggregate of 851,211 of the remaining publicly owned IEnova shares had been acquired by such trust.

TRANSACTIONS WITH AFFILIATES

We summarize amounts due from and to unconsolidated affiliates at Sempra, SDG&E and SoCalGas in the following table.


AMOUNTS DUE FROM (TO) UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	June 30, 2022		December 31, 2021
Sempra:
Sempra Infrastructure – IMG – Note due March 15, 2023(1)	$	626	$	2
Various affiliates	20		21
Total due from unconsolidated affiliates – current	$	646	$	23

Sempra Infrastructure – IMG – Note due March 15, 2022, net of allowance for credit losses of $1 at December 31, 2021(1)	$	—	$	637
Total due from unconsolidated affiliates – noncurrent	$	—	$	637




Sempra Infrastructure(2):
TAG Pipelines Norte, S. de R.L. de C.V.:
5.5% Note due January 9, 2024	$	(39)	$	(69)
5.5% Note due January 14, 2025	(22)		(21)
5.5% Note due July 16, 2025	(21)		(20)
5.5% Note due January 14, 2026	(18)		—
TAG – 5.74% Note due December 17, 2029	(182)		(177)
Total due to unconsolidated affiliates – noncurrent	$	(282)	$	(287)
SDG&E:



Sempra	$	(26)	$	(40)
SoCalGas	(30)		(48)
Various affiliates	(12)		(9)
Total due to unconsolidated affiliates – current	$	(68)	$	(97)

Income taxes due from Sempra(3)	$	21	$	19
SoCalGas:
SDG&E	$	30	$	48
Various affiliates	1		1
Total due from unconsolidated affiliates – current	$	31	$	49

Sempra	$	(36)	$	(36)
Total due to unconsolidated affiliates – current	$	(36)	$	(36)

Income taxes due from Sempra(3)	$	6	$	6

(1) At December 31, 2021, represents a Mexican peso-denominated revolving line of credit for up to 14.2 billion Mexican pesos or approximately $691 U.S. dollar-equivalent at a variable interest rate based on the 91-day Interbank Equilibrium Interest Rate plus 220 bps. In March 2022, Sempra Infrastructure amended and restated the revolving line of credit to a U.S. dollar-denominated note in the amount of $625 at a variable interest rate based on the adjusted 1-month Secured Overnight Financing Rate plus 180 bps (3.41% at June 30, 2022) and extended the maturity date to March 15, 2023. At June 30, 2022 and December 31, 2021, $1 and $2 of accrued interest receivable, respectively, is included in Due from Unconsolidated Affiliates – Current. In July 2022, this note receivable was paid in full.

(2) U.S. dollar-denominated loans at fixed interest rates. Amounts include principal balances plus accumulated interest outstanding.

(3) SDG&E and SoCalGas are included in the consolidated income tax return of Sempra, and their respective income tax expense is computed as an amount equal to that which would result from each company having always filed a separate return. Amounts include current and noncurrent income taxes due to/from Sempra.

The following table summarizes income statement information from unconsolidated affiliates.


INCOME STATEMENT IMPACT FROM UNCONSOLIDATED AFFILIATES
(Dollars in millions)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Sempra:
Revenues	$	15	$	7	$	22	$	15
Cost of sales	—		—		—		11
Interest income	4		12		14		27
Interest expense	4		3		8		7
SDG&E:
Revenues	$	4	$	2	$	8	$	4
Cost of sales	26		27		50		55
SoCalGas:
Revenues	$	23	$	23	$	49	$	48
Cost of sales(1)	(4)		—		(4)		3

(1) Includes net commodity costs from natural gas transactions with unconsolidated affiliates.

Guarantees

Sempra provided guarantees related to Cameron LNG JV’s SDSRA and CFIN’s Support Agreement, which remain outstanding. We discuss these guarantees in Note 6 below and in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

OTHER (EXPENSE) INCOME, NET

Other (expense) income, net, consists of the following:


OTHER (EXPENSE) INCOME, NET
(Dollars in millions)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Sempra:
Allowance for equity funds used during construction	$	34	$	34	$	69	$	72
Investment (losses) gains, net(1)	(34)		19		(47)		28
(Losses) gains on interest rate and foreign exchange instruments, net	(1)		7		5		(23)
Foreign currency transaction (losses) gains, net(2)	(3)		26		(22)		7
Non-service components of net periodic benefit (cost) credit	(9)		(15)		32		14
Interest on regulatory balancing accounts, net	4		2		5		3
Sundry, net	8		(1)		(5)		6
Total	$	(1)	$	72	$	37	$	107
SDG&E:
Allowance for equity funds used during construction	$	21	$	22	$	42	$	45
Non-service components of net periodic benefit (cost) credit	(2)		(4)		9		5
Interest on regulatory balancing accounts, net	3		2		4		3
Sundry, net	—		2		1		4
Total	$	22	$	22	$	56	$	57
SoCalGas:
Allowance for equity funds used during construction	$	13	$	11	$	26	$	23
Non-service components of net periodic benefit (cost) credit	(6)		(9)		26		19
Interest on regulatory balancing accounts, net	1		—		1		—
Sundry, net	(4)		(4)		(15)		(5)
Total	$	4	$	(2)	$	38	$	37

(1) Represents net investment (losses) gains on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are offset by corresponding changes in compensation expense related to the plans, recorded in O&M on the Condensed Consolidated Statements of Operations.

(2) Includes losses of $11 in the six months ended June 30, 2022 and gains of $28 and $5 in the three months and six months ended June 30, 2021, respectively, from translation to U.S. dollars of a Mexican peso-denominated loan to IMG, which are offset by corresponding amounts included in Equity Earnings on the Condensed Consolidated Statements of Operations.

INCOME TAXES

We provide our calculations of ETRs in the following table.


INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
Sempra:
Income tax expense	$	80		$	139		$	414		$	297

Income before income taxes and equity earnings	$	364		$	281		$	1,029		$	1,049
Equity earnings, before income tax(1)	159			185			302			320
Pretax income	$	523		$	466		$	1,331		$	1,369

Effective income tax rate	15		%	30		%	31		%	22		%
SDG&E:
Income tax expense	$	42		$	33		$	106		$	78
Income before income taxes	$	218		$	219		$	516		$	476
Effective income tax rate	19		%	15		%	21		%	16		%
SoCalGas:
Income tax expense	$	19		$	8		$	103		$	102
Income before income taxes	$	107		$	103		$	525		$	604
Effective income tax rate	18		%	8		%	20		%	17		%

(1) We discuss how we recognize equity earnings in Note 6 of the Notes to Consolidated Financial Statements in the Annual Report.

Sempra, SDG&E and SoCalGas record income taxes for interim periods utilizing a forecasted ETR anticipated for the full year. Unusual and infrequent items and items that cannot be reliably estimated are recorded in the interim period in which they occur, which can result in variability in the ETR.

For SDG&E and SoCalGas, the CPUC requires flow-through rate-making treatment for the current income tax benefit or expense arising from certain property-related and other temporary differences between the treatment for financial reporting and income tax, which will reverse over time. Under the regulatory accounting treatment required for these flow-through temporary differences, deferred income tax assets and liabilities are not recorded to deferred income tax expense or benefit, but rather to a regulatory asset or liability, which impacts the ETR. As a result, changes in the relative size of these items compared to pretax income, from period to period, can cause variations in the ETR. The following items are subject to flow-through treatment:

▪repairs expenditures related to a certain portion of utility plant fixed assets

▪the equity portion of AFUDC, which is non-taxable

▪a portion of the cost of removal of utility plant assets

▪utility self-developed software expenditures

▪depreciation on a certain portion of utility plant assets

▪state income taxes

The AFUDC related to equity recorded for regulated construction projects at Sempra Infrastructure has similar flow-through treatment.

In the six months ended June 30, 2022, we recognized income tax expense of $120 million for a deferred income tax liability related to outside basis differences in our foreign subsidiaries that we had previously considered to be indefinitely reinvested.