Good morning. And welcome to Sempra Energy’s second quarter 2020 earnings call. A live webcast of this teleconference and slide presentation is available on our website under the Investor section. Several members of our management team are on the line with us today, including Jeff Martin, Chairman and Chief Executive Officer; Trevor Mihalik, Executive Vice President and Chief Financial Officer; Justin Bird, Chief Executive Officer of Sempra LNG; Allen Nye, Chief Executive Officer of Oncor; Kevin Sagara, Group President; and Peter Wall, Senior Vice President, Controller and Chief Accounting Officer. Before starting, I would like to remind everyone that we will be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today. The factors that could cause our actual results to differ materially are discussed in the company’s most recent 10-K and 10-Q filed with the SEC. All the earnings per share amounts in our presentation are shown on a diluted basis and we will be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for reconciliation to GAAP measures. I would also like to mention that the forward-looking statements contained in this presentation speak only as of today, August 5, 2020, and the company does not assume any obligation to update or revise any of these forward-looking statements in the future. With that, please turn to Slide 4 and let me hand the call over to Jeff.

Thank you, Faisel, and thank you all for joining us today. Two years ago, we laid out a strategic plan to divest non-core assets and reposition our business in the most attractive growth markets right here in North America. The plan also called for concentrating our investments in a more narrow segment of the energy value chain with the goal of improving our financial results. I'm proud to report that our strategy is working. You recall that our financial results in 2019 significantly exceeded our original guidance, and this year we're pleased to have increased our 2020 EPS guidance range. We completed our capital rotation program, generating total gross proceeds of $8.3 billion, continued executing our utility-centered capital program while deferring about $500 million of infrastructure capital, and at the end of last week, we reached substantial completion at Cameron Train 3, with commercial operations and full cash flows from all three trains expected in the coming days. Given the quality and strength of our earnings and particularly the visibility we now have to our future growth, we believe recent share price performance doesn't reflect the value of our company nor its growth prospects. Because of this, we've made the decision to buy back $500 million of our stock and received approval from our board for a new authority of $2 billion for share repurchases. We're committed to being prudent stewards of your capital and will continue to look for ways to drive additional value back to our shareholders. Turning to our financial results for the quarter, we are benefiting from more concentrated investments in our T&D portfolio. Our adjusted earnings results for the first half of 2020 are up over 50% when compared to last year, primarily driven by results from U.S. utilities and Cameron. We're already touched on our revised EPS guidance range for 2020, but I'd also like to highlight that we're affirming our 2021 EPS guidance range as well. Now please turn to slide 5, where I'll provide an overview of our recently completed capital rotation program. The sale of our Chilean businesses in June for approximately $2.2 billion was the final transaction in our strategic capital rotation program and really sets us up well for the future. When we set out on this path at the end of 2017, we had just finished the year with adjusted earnings per share of $5.42. Since then, we've recycled approximately $27 billion in firm value back into our business with the focus on T&D infrastructure. Invested close to $16 billion of growth capital at our utility and infrastructure businesses and raised the midpoint of our 2020 adjusted EPS guidance range from $7.10 to $7.50, close to a 40% projected increase over our 2017 results. Our company-wide commitment to operational excellence has led to the strong execution of this strategy, and our employees deserve a ton of credit. We are today more strategically focused, more profitable, and more optimistic about our future growth prospects, and it's all tied to making further progress on our mission to build North America's premier energy infrastructure company. Please turn to the next slide. Our ongoing focus on safety and reliability remains paramount and is a critical component of our overall mission. Here at Sempra, our number one priority continues to be the health and well-being of all of our employees, customers, and the communities we serve. We've built a strong safety and performance culture throughout our organization. I could not be more proud of the ongoing commitment and dedication of all of our employees to providing essential, safe, and reliable service to over 35 million consumers. We also continue to support our communities through charitable giving, donating over $13 million to local health and welfare areas since the start of the pandemic. As we look ahead, we're continuing to plan for the safe re-entry back to the workplace. We continue to be thoughtful and strategic about returning to the office in a phased approach that considers specific work locations and personnel requirements while adhering to the latest safety guidelines. From an operational perspective, we built a strong and sustainable business that can successfully operate in a variety of challenging environments by decoupling revenues that are T&D utilities in California, investments in the largest T&D provider in Texas with no exposure to generation and regulatory protection from retail risk, tolling contracts with A-rated customers that are also our equity partners at Cameron LNG, and critical operating infrastructure in Mexico with dollar-denominated long-term contracts with an average tenor in excess of 20 years. Our strong financial results year-to-date highlight this sustainable business model. Please turn to the next slide.

Thanks, Jeff. As already discussed, we believe we've built a business model that can weather the current health and economic crisis and emerge stronger and more profitable. We've been consistent with our capital allocation approach by prioritizing our utility-centered capital plan, optimizing our balance sheet, and returning value to our shareholders. Despite our demonstrated capabilities and superior dividend growth, our stock has underperformed this year and trades at a relative discount compared to our peers. In light of this, and in an effort to continue returning value to our shareholders, we're announcing that we have completed a $500 million share repurchase program. This $500 million has exhausted the previous $2 billion authorization that we had outstanding since 2007 as part of a previous capital recycling program. Therefore, our board recently authorized an incremental $2 billion of share repurchases providing the flexibility to buy back shares on an opportunistic basis. Please turn to slide 10, where I'll discuss operational updates. SDG&E continues to be a leader in wildfire mitigation and has invested over $2 billion in this effort since 2007. The CPUC recently approved SDG&E wildfire mitigation plan and we've successfully procured wildfire insurance in excess of the $1 billion requirement in compliance with AB 1054. These insurance premiums are balanced as part of the 2019 GRC decision. We continue to innovate and advance our leadership position in this area through our fire safe 3.0 program combining technology and over 10 years of data. At SoCalGas, we received a proposed decision for approval to recover $806 million related to our pipeline safety enhancement plan. In addition to our continued focus on safely and reliably serving our customers, we're making significant headway on our sustainable clean energy goals. We remain on track to meet our goal to procure 5% renewable natural gas for our core customers by 2022. Separately, we continue to advance a regulatory program that will allow SoCalGas’ customers to buy renewable natural gas for their homes and businesses, along with working with legislators to advance a renewable gas portfolio standard. The company is also collaborating with several partners on a number of hydrogen demonstration and pilot projects. As the largest gas utility in the U.S., we believe our scale and commitment to innovation allows us to support renewable natural gas, hydrogen, and other technologies required to meet the state's clean energy goals in a way that promotes the resiliency of the system and affordability for our customers. Shifting to Texas. Oncor continues to execute on its capital plan. Oncor connected over 20,000 new premises in the second quarter and over 38,500 new premises year-to-date. On the transmission side, Oncor is on pace to set a record for interconnection requests in 2020 predominantly driven by an increase in solar generation activity. Through July, there were approximately 270 transmission interconnection requests which compares to 300 requests for all of 2019. Despite the impacts of COVID-19, Oncor believes it will continue to have steady increases in interconnection requests for the remainder of 2020. Overall, Texas continues to be one of the most resilient markets in the country and ERCOT predicts a new summer peak load later this year.

Please turn to slide 11 where I'll discuss developments at the Sempra LNG and Sempra Mexico business units. Beginning with Cameron LNG phase 1, as Jeff said, we're pleased that Train 3 has reached substantial completion with commercial operations expected in the coming days. The facility is expected to provide nearly $12 billion of after-debt service cash flows to Sempra during the 20-year tolling agreement with no commodity or volumetric exposure and is supported by its A-rated customers and partners. Moving to Mexico, despite the current market challenges, we strongly believe in the long-term fundamentals of delivering cleaner and more affordable energy to the people of Mexico. Tanya and her team are prudently managing IEnova's business while helping to ensure the continuity of safe and reliable operations. IEnova continues to be disciplined with regards to capital allocation by strategically deferring capital and executing on its share repurchase program. In fact, across North American infrastructure business, we've deferred about $0.5 billion of capital in 2020 as a result of the current market environment. Moving to our development projects, ECA LNG phase 1 has uptake in EPC contracts in place and is ready to move forward with a final investment decision subject to receiving the Mexican export permit. We continue to work closely with local authorities as well as the highest levels of the Mexican government on advancing the permit process. Separately, I'd like to address the recent commercial contract developments at the ECA regasification facility. Two customers are alleging that an update of the general terms and conditions for service of the facility resulted in a forced measure and breach of the existing contracts. We believe these allegations are meritless, and ECA has notified these customers that they are in breach of their obligations. We're examining all of our options in light of the timing and baselessness of the claims and plan to vigorously exercise our rights and remedies in all available forums. We don't believe that the initiation of arbitration by one of the customers will delay the ongoing steps to FID on the ECA phase 1 liquefaction project. At Cameron LNG phase 2, we've signed MOUs with Total, Mitsui, and Mitsubishi and are working on the preliminary front-end design studies. We're excited about this opportunity and believe that the incremental capacity at the existing Cameron facility should provide very competitive pricing for our customers. Given the current market environment, we continue to target FID on Port Arthur in 2021. We're working with our current and potential customers and remain disciplined in how we allocate capital to the project. Ultimately, demand from customers will drive the timing of Port Arthur. We continue to believe in the long-term fundamentals of the LNG market and Sempra's competitive position. We see long-term value in our projects and believe that our financial strength and the strategic locations of our development projects provide us with competitive advantages over others in the industry. Please turn to slide 12. Looking at our financial results, this was another strong quarter. Earlier this morning, we reported second quarter 2020 GAAP earnings of $2.239 billion or $7.61 per share. This compares to second quarter 2019 GAAP earnings of $354 million or $1.26 per share. On an adjusted basis, second quarter 2020 earnings were $485 million or $1.65 per share. This compares favorably to our second quarter 2019 adjusted earnings of $309 million or $1.10 per share.

Thanks, Trevor. Sempra continues to lead the sector in sustainability as highlighted by our strong ratings. In May, we published our 12th consecutive corporate sustainability report. We're extremely proud of the progress we're making on the environmental, social, and governance front, and this year's report provides a great snapshot of our most recent initiatives and our latest results. Our sustainability report also highlights how we champion diversity. In fact, across the Sempra family of companies that we control, 62% are persons of color, and in our parent company, the majority of all of our employees are women. We are also quite proud of our board of directors where 62% are women or persons of color. I'm very proud of our employees who continue to live out our company values. At Sempra, we do the right thing; champion people and shape the future. Please turn to the next slide. We're pleased to report a very successful quarter both operationally and financially benefiting from a more narrow strategic focus. We recently raised our full-year 2020 adjusted EPS guidance range and are also reaffirming our full-year 2021 EPS guidance range. We remain committed to creating long-term shareholder value, and I cannot be more pleased with our overall financial performance even in these challenging market conditions. And with that, this concludes our prepared remarks, and we will stop to take your questions.

[Operator Instructions] We will take our first question from Shahriar Pourreza with Guggenheim Partners.

Hi, good morning. It's actually Constantine here stepping in for Shahriar. Congrats on the great quarter.

Thanks, Constantine.

We have a couple of questions. One on kind of the capital allocation decisions that were announced here and the stock buybacks, a bit of a departure from prior language on capital allocation. We are curious about what sorts of time frames are you looking at for that $2 billion and can you give us a bit more sense on the rationale around the buyback versus deleveraging versus reinvestment specifically more from a strategic perspective? The option that you're announcing today indicates some lack of efficient redeployment in the near term and just thinking about M&A allocation, could you bring in any considerations on the Oncor stake and/or any other opportunities in the jurisdictions?

Thanks, Constantine. There are a few questions in there, so I'll try to address them in order. If I miss one, please circle back. I'll start with one of the comments we made in our prepared remarks, which is that we really feel like we're getting great traction with our strategy. We've set a course just over two years ago to become North America’s premier energy infrastructure company, and to do that, we elected to exit South America and sell some non-core assets that generated about $8.3 billion of pre-tax proceeds, which we've been able to effectively recycle back into our core businesses, particularly here in the United States. So what we've been focused on from a capital allocation standpoint is funding our $32 billion five-year capital program. The lion's share of that, as you know, is in our utilities. So our first obligation is to always make sure that we meet the resource requirements in Oncor, SDG&E, and SoCalGas, particularly in the areas of safety and reliability. We've made some definitive commitments around strengthening our balance sheet. We set forth our credit targets for the end of the year, namely around debt to cap and our FFO targets, which are reflected in the slides. We feel good about where we're at, but I will say that we feel quite strongly that the utility sector has underperformed the broader market by about 6% this year, and our stock is likewise underperformed within the sector. We think we have a very strong top-tier growth and income story, and that's why we've taken some steps in this market environment to defer some capital, which Trevor referenced in his prepared remarks, about $500 million out of this year into 2021, and that's created room for us to be thoughtful to support our stock. So we were very pleased to be able to use up the remaining authorization from 2007, and the commitment and authorization from our board really is to replenish that. We're not going to talk specifically about how we might put that authority to work, but I think our past practices of being opportunistic to support our stock at these levels should guide your thoughts in that area. Secondly, you raised the issue of M&A, and I think our practice has been that we don't normally talk about forward-looking acquisition activities, but I do think there's always benefit in discussing the lens by which we look at M&A activities. It typically starts with looking at assets that fit our strategy. Second, we look at assets where we think we can bring deep expertise to operate them more effectively, and then thirdly, obviously, price matters. We're always looking to pay a fair price and, if we can, obviously a dislocation price is helpful. But if you think about our approach to energy future holdings, remember this was an asset that was in bankruptcy, and we were able to extend our T&D strategy into Texas, which has been a core priority for us, and we did that at a very attractive price. We've talked about the larger management team with low interest rates and credit spreads; it's surprising to see utilities trade at a discount in the market, and if you look at and we've reviewed a lot of sell side research in this area, I've looked at Wolf, Baml, Goldman, UBS, and others, it's clear that there's a lot of value in our sector today, and I think it’s one of the reasons when we think about M&A, the one area that we feel like fits our strategy and also where we have deep expertise and there is a competitive price opportunity is with Sempra stock. So, I mean, we're pretty much pounding the table. We've got a top-tier growth and income story here, and that's one of the reasons that we were opportunistic this summer and pleased to go into the marketplace to purchase $500 million of our own stock. We have a $32 billion capital program underway that is 100% of our focus, but at the same time we're going to be aggressive to continue to look for opportunities to be opportunistic going forward.

Perfect. Yes. That's going in clarifies a bit and just a quick follow-up hydrogen has been kind of a topic of interest recently and California and [indiscernible] are kind of leading the way in the conversation with R&D. What's your outlook on kind of implementing this technology? Any potential CapEx allocation in the near term, I guess five-year plan as an upside? And are you seeing kind of the regulatory support in California for these type of projects or is it a little early?

Yes. Well, I appreciate you asking this question. This is something that's a high area of interest to us. I also appreciate your recognition of the great R&D work that's been taking place at SDG&E and SoCalGas. I'll provide a little bit of color, Constantine, and pass it to Kevin Sagara, who's the group president over California. But I think it starts with the fact that over the last three to five years this has been a priority in our company. We own the largest natural gas franchise in the western hemisphere, serving 22 million consumers right here in California their basic natural gas needs, and we made the decision in the last several years that we were leading this space. When you think of broad categories where we're spending time, either on R&D basis or projects, there are probably 8 to 10 different projects that we're looking at. They fall into the categories of transportation refueling, primarily focused on heavy-duty vehicles, blending opportunities into power generation, blending opportunity into compressor stations at SoCalGas and really the opportunity to co-locate some of these facilities and take advantage of cost efficiencies with our LNG facilities. But we're also trying to take a leadership position, Constantine, in some of the major trade associations like the hydrogen council and we're collaborating with the countries we think that are leading this field today, primarily Japan and Germany. So we're quite bullish from the role of hydrogen and renewable natural gas, particularly here in California. You think about the energy transition that's in front of our sector and the one that's in front of the world, particularly in the developing world; hydrogen is going to play an increasingly important role. It's still a little bit early, but I think you're raising a good point. The time now to create a leadership position is the work we're doing inside of our utilities currently and Kevin perhaps you could provide some additional color.

Thanks, Jeff. As you mentioned, it is a little early, but California has always led the way in this area of clean energy and this time I expect it will be no different. Having just come off of being the CEO of SDG&E, which is a leader in renewable energy, with top solar electric vehicles, and having led Sempra renewables, I'm all in on hydrogen. The gas company we're speaking to, all of the leading industry players that you would expect us to be speaking to. We've got several exciting projects in development. Today we're participating in projects that make biomethane from solar power and recaptured CO2 and others that make green hydrogen from solar power and water. As Jeff mentioned, we see opportunity in power generation and industrial processes. We're fueling needing and heavy-duty transportation. We see opportunities within our own system. We believe hydrogen will play a key role in the 21st-century energy system, and you can expect that our infrastructure at the California utilities will be right smack dab in the middle of it. Both utilities are working on several exciting hydrogen projects that we'll be announcing in the upcoming quarters, and so if you don't hear it in my voice, yes, I am really excited about hydrogen and I think there's a big opportunity here, and our utilities are going to be a big part of it and it's great our infrastructure is well-positioned to play a big role.

Perfect. I think that's very-very helpful. Thanks so much. I will jump back in the queue.

Thanks, Constantine.

Hey. Thanks for the question. I guess first of all, the $500 million of preferred CapEx, which part of the business did that come from?

I would start by saying we are obviously committed to our $32 billion capital program, but with this current market backdrop we've really pushed on the near-term into the capital program. This is really 100% coming from our non-utility businesses, primarily LNG, but we've moved capital related to ECA into next year, and we've also deferred some capital related to our storage businesses in Mexico. But it shouldn't have any meaningful impact on 2020 or 2021.

Okay, and is there any the $2 billion incremental authorization? That's just, it's not like a timeline or it's really [indiscernible] would you fair to say?

No. There's no timeline, but I think as I articulated to Constantine, I think our past practices would guide how we would look to use that.

Okay. And then a couple just issues that have popped up that I guess I get questions on recently has been this first San Diego franchise issue and then I guess this recent filing you guys made on clarifying lobbying and how that should be treated. Can you just maybe go through those two issues and your take on them?

Sure. I'll take your second question first and come back to the franchise agreement, but in California for a long period of time, various industrial utilities would be looking to promote one deal on regulation or another, and I think the goal always is to get to the best long-term energy policies in the state. Because there's sometimes a lack of clarity about what type of activities require use from ratepayer dollars versus shareholder dollars, we felt like that ambiguity is your enemy. So we felt like that for the benefit of the industry it was worth having a lot of clarity. So we filed an OIR to make sure there's a process around this with a lot of transparency and allow all five commissioners and their staff to weigh in on it. So we feel good about taking that step, and I think it will add some clarity for all the participants in the industry. On the San Diego franchise, I would probably offer you three different comments here, Steve. First, the city charter in San Diego always requires a competitive process to renew it. Mayor falls during the city council I think are doing all the things that you expect them to be doing. So running the competitive process. It's open and transparent. They've augmented their staff with some outside consultants, and all this is being done with the view towards getting the best outcome for the residents of the city. I think that leads to my second point, which is we have close to 300 franchises across the state of California. So we're always evaluating 10 or 12 of these at a time, and our approach we tend to focus on each of these as an opportunity for us to get better as a company. You have to remind yourself there is a strong alignment of interest that those same residents of the city are also our customers. So we're always trying to find new and better ways to serve them. Remember these are customers that date back their relationship with our company back in the 1800s, when we first started serving customers here in the region in 1881. But let me tell you what I'm confident about SDG&E is well positioned to be the best partner for the city. I think the three things that we've tried to talk about with the team at SDG&E is that's a company that leads our nation in clean energy with rooftop solar here locally at a 15% penetration rate; that's a remarkable number and a credit to the support from the utility. Historically, we've always been charging roughly 45% procurement for renewable generation, which is also an industry-leading position. In the last 14 years, we've been consistently named the number one utility in the West for reliability, and that goes back to your safety and safety metrics where we have a really outsized lead compared to other utilities. Finally, just two or three weeks ago, we were named the number one environmental utility in the United States at SDG&E for their commitment and demonstrated expertise in innovation technology. So if you think about some of our accomplishments, Steve, and you followed the company for a long period of time, I think the one thing that's kind of common about our success has been the broad partnership that San Diego gas electric has with the local labor. This is a century-old partnership here in San Diego that's always privileged safety and good improved utility practice and procedure. I think it's been central to our success, and I think as we approach this opportunity with the city, we're going to approach it from the standpoint that you're always good to have a little dose of humility and try to find the best way to put your foot forward. Our goal is to put the best value proposition from the city and we have a fair amount of confidence we can do that.

Okay. That's very helpful. I have been getting a lot of questions. So helpful to clarify those two things. Thank you, Jeff.

Thank you, Steve.

Hey, good morning, thank you for the time guys. If I can follow up...

Hey Julien.

Hey good morning Jeff. If I can follow up with the first round of questions here, Jeff just to follow up here on the M&A question. Speaking of questions that we've been getting inbound, there's been a lot of consternation in the market around M&A specifically and I'm hearing from you all on your call a very close focus on value in your own shares. Can you try to put the square those two a little bit more narrowly, maybe said differently we really hear about companies articulating frameworks around M&A from one of the premium names if I can put it that way? Can you perhaps frame the buyback in the context of M&A? Is the buyback really a placeholder in your mind relative, or what's your level of confidence in pursuing this buyback and seeing it through relative to alternative capital opportunities that pop up here?

Well, I would be pleased to answer that. I would say that in the past and currently, we have had no formal discussions regarding M&A activities. It is not in our field of view currently. I think what you should hear from my prior comments is that we have, what we think is a unique opportunity in our industry with really unparalleled visibility to our capital employment through 2024, and in part, Julian, that goes back to the quality of the rate case. We got at SoCalGas and SDG&E last year. Our goal is to fund that capital program, meet our credit commitments that we've been pretty clear about relative to credit rating agencies and protecting our balance sheet. If we have opportunities where we can move capital or defer capital within our program, you should expect us to be opportunistic with their own stock. But in general, when you think your stock is trading at such a deep discount as we think ours is, we should be trying to find every opportunity we can to repurchase that. So I'm not making commitments about how we will use the $2 billion of authority from our board, but I am telling you that our focus is on number one the organic growth program that we have, and right now it makes a lot more sense to buy something at a discount before you'd allocate capital something you'd be buying at a premium.

Thanks for the emphasis. If I can turn back to Steve's question very quickly, what is this process around the franchise arrangement look like? If you talk about a partnership, how would you frame the process going forward for investors from here?

I think the invitation to bid falls under the auspices of the mayor's office. I think there's a meeting in San Diego tomorrow where the level approach to the ITB or the invitation to bid is being presented to the council. Yet another opportunity for a lot of open transparent input from the council to that process, and probably over the next two to four weeks the invitation to bid would come out and then we would expect to participate in that process with the view that we would be submitting our bid sometime probably in the second half of October. But look, I can tell you that this has been a priority for our company for a long period of time. These are types of discussions that have been going on for years, not weeks or months, and there is a lot of commitment to make sure that we don't take these types of things for granted, and I think we're very, very proud of our company at SDG&E and its commitment to the community. And as I said in my prior comments, the best way you're successful and obviously we manage 300 of these up and down the state of California is you approach them, Julian, with a little bit of humility and always from the mindset that we have a chance to get better, and our job as a modern energy company is to find new and better ways to serve customers, and that's exactly the approach that SDG&E will be taking with the city.

Appreciate it.

Thank you, Julien.

Hi, good morning.

Good morning.

Hi. Morning. Just want to touch on a bit of the questions maybe it was picked up earlier here, but given some of the recent moves in the industry here how do you feel about the current regulated versus non-regulated business mix that you have? Do you see opportunities to kind of shift towards regulated more or are you kind of happy with where you're at?

That's a great strategic question. This is one that we review with our board on a periodic basis. We've even got discussions with our board on the same topic later this year. Look, we certainly privilege the utility side of our business. It represents roughly 80% of our earnings stack. What intrigues this is, and I mentioned this one of the earlier calls is as we think about our IEnova business, we certainly think there is going to be a lot of reshoring and onshoring. I had the good fortune of attending the Bilateral discussions and dinner with President Trump and President Lopez Obrador just a couple of weeks ago. There's a tremendous amount of collaboration taking place across all three nations under USMCA, and a lot of opportunity for new business and factories, and particularly in the pharmaceutical industry to relocate here. So I think it's intriguing for us to think about how we look at the IEnova business, which we also think is undervalued; we have been actively inside the IEnova business buying back those shares. So there's a share repurchase program that has been underway there as well, quite active this year, by the way. And as we think about our LNG business, there is more work to be done here, but I think one of the things that’s intriguing is probably less about whether the percentage is 80% of the mix or 90% of the mix. But Jeremy, what makes it more interesting is how you make sure that those businesses that are not utilities are not consuming the balance sheet of the parent company. So you see I've seen other companies in our sector do this, but the more we can think about having access to the unique growth profile that we have in our unregulated businesses and increasingly over time make sure it's not impacting our parent company and that debt is off balance sheet, I think that's a real opportunity for our company.

Got it. That's helpful there and then maybe just kind of pivoting over to the LNG business it looks like nice kind of pickup and flows the Cameron and then steadily moving up there and although the LNG market is a bit difficult right now just wondering if you could provide any more color as far as commercial conversations might be having there. If tone or the pace has changed at all granted you're talking more about a 2021 FID with Port Arthur but just want to touch base on that and see how things were progressing?

I'll be glad to provide some comments, and Justin, if you want to make some color, I'll pass it to you in a second. But what I would say, interesting if you start Jeremy at the macro level, what's unique is that the northern hemisphere had a very mild winter. Storage levels as we came into the late spring were relatively full, and you've seen an impact in natural gas demand globally related to the pandemic. I think the most recent IEA forecasts are expecting natural gas demand to decline for the year by about 4%, but what's interesting inside the LNG category is it's actually gone up. So global demand for LNG in the first half of the year is one of the few commodities that's actually up close to 2%. U.S. LNG exports for this six-month period compared to last year are up 70%, and that's a function a lot of the new capacity that has come online in the last 12 to 18 months, including Cameron. Interestingly, Europe's consumption of LNG is up 18% in the first six months. So there's clearly an opportunity where LNG is actually price competitive. So many countries' indigenous supply of natural gas, Thailand would be an example; they're landing LNG at a price that's cheaper in Thailand than they can actually produce it in their own economy. So I think there is continued green shoots and optimism about LNG, but what we've been trying to focus on, and I think our LNG team has been pretty redundant on this, is we've always had a long-held view that that second wave of LNG infrastructure, which is intended to allow for deliveries in the middle part of the decade, that is a very real opportunity. LNG is going to play a very-very big role in reformulating the energy stack globally. Roughly 80% of future energy demand will come from the developing world, and I think this market is going to be led by Asia, specifically China and the subcontinent of India. So there's a big opportunity there, and I think this pandemic, if anything, is causing some LNG buyers to delay their decision and it's also causing other infrastructure providers to get behind or fall by the wayside. So I think we've got a strong balance sheet. We have a very clear-eyed vision of what we want to accomplish in LNG, and it always comes back to what your competitive advantages are. I think our approach of having competitive low-cost brownfield sites that can dispatch directly into the Pacific and directly into the Atlantic is an advantage that no other LNG infrastructure provider has in North America. But let me stop there, and Justin, if you'd like to provide a little bit of color about where we're at with both ECA contracts, Cameron expansion contracts, and Port Arthur.

Thank you, Jeff, and thank you, Jeremy, for the question. I think, as Jeff said, on the supply side we've seen a period where there has been a significant, I think it's around 8% per year growth rate in LNG supply, and the consultants and we think as well that that will dramatically slow down as the market has changed. We think that supply growth will decrease as demand increases, and it's really an opportunity for world-class projects like ours to move forward. In terms of our conversations at Port Arthur, as we've said, we're targeting 2021. This is a customer demand-driven project. We are engaged with Saudi Aramco and many other customers. As Jeff mentioned, there has been a slowdown in the market as a result of COVID-19 and the economic slowdown. The LNG business is adjusting to teleconferences and virtual meetings which has really historically been a face-to-face business requiring a lot of international travel. With the slowdown, that definitely has slowed down the process, but again, we think over time that will pick back up, and we think, given the competitive advantage of our projects, those will move forward. In terms of Cameron expansion, we've announced that we have MOUs for the full volume there. We are working with the partners on conceptual work around the expansion and really trying to optimize that expansion from a cost basis and from a timing perspective. So we do continue to see long-term growth in the LNG business but again, we take a very disciplined capital allocation approach. We will build the projects when they have contracts and when the customer demand is there and when our partners want us to move forward.

Great. That's really helpful. Thank you.

Thank you.

Hi, good afternoon. Congrats on the quarter and thank you for the time.

Thanks, Sophie. Thank you.

Yes. A lot of my questions have been answered, but I just wanted to see if you could maybe give us a little more color on Mexico and what's happening there, just overall how you view that geography in your mix going forward. It's the last outside outside of the U.S. I guess geography in the mix and I'm just curious to hear a little bit more color on what you see on the ground there. Thank you.

So Sophie, just to make sure I understand your question. You would like a little bit more color on Mexico as a country and some of the macroeconomic developments?

Correct that and the political landscape there as well and how that affects energy development. So a little bit any update on your views there if there is? Could be helpful.

Sure. Look, I think Sempra has been an investor in Mexico for 22 years. We have roughly a $10 billion investment in Mexico in all aspects of the energy infrastructure business. It continues to be a country that we think has a great macro story. This is the number 15 economy in the world pre-COVID. Our internal forecast felt Sophie that this might be as a number 7 economy in the world by 2040. Remember it's 130 million consumers and it's one of the fastest-growing consumer markets in the western hemisphere. You raised some good points. There certainly has been some disruption in terms of how the Marina party has been administering the government and its approach to energy generally. Like I tell you I had the good fortune of going to dinner with President López Obrador and President Trump two weeks ago, there is true warmth and authenticity to that relationship. Obviously, the conversation two years ago or three years ago was more around the border and today there is broad recognition of the joint opportunity between both countries as they’ve set a priority to be able to bring back business and factories from Asia. So I think there's a real near-term opportunity for collaboration, and we think there's an opportunity for energy companies like ours. They're not really Canadian, or U.S., or Spanish or Italian company. This is a Mexican business that we own 67% of in Mexico. It's one of the top 10 or 12 companies on the Balsa. They have scale. They've got great relationships. They've got the expertise, and our goal is to make sure that we put forward a great value proposition every time we have the opportunity to work with the government. As you know, our business down there is increasingly one of a bilateral business with CNI customers and increasingly less reliant on the state-owned agency. So I think near-term there is a lack of clarity around some of the policies that can impact the marketplace. We think the long-term macro story is intact.

Perfect. Thank you.

Thank you.

Hey good morning. Thanks for taking my questions.

Good morning, Stephen.

I wanted to go back to green hydrogen, and Sempra certainly has been a thought leader there. While we're certainly excited about the growth in green hydrogen, I'm wondering just at a high level your thoughts on when green hydrogen would be economically viable for the utility sector? We can see applications in places like transportation, but the cost for green hydrogen continues to look even as they're dropping look relatively high compared to conventional gas, for example, and I'm just at a high level sort of the rough time frame over which you think green hydrogen may be viable for the utility business.

Well, it's a good question. I will start by telling you I don't have a perfect view of what the right answer is. I think the analogy that we've talked about on our senior team is photovoltaics. So photovoltaics have been pursued by our industry going back to the 1960s, and it was that Sempra that we launched the first large-scale central station project in 2008. Stephen, you may recall that was the Copper Mountain project. It was 10 megawatts. So that was 2008, and today, it's not uncommon to see a 500 megawatt project that's really, really price competitive and very much more price competitive than traditional fossil fire generation. So if we think about hydrogen, we see a similar opportunity. It clearly is early on the green hydrogen side. At best, it's the second half of this coming decade, but a lot will determine on the cost curve and how much advances are made on the R&D side. I think given that uncertainty, it's important that not just Sempra but a lot of other companies spend time and resources here because I think we have the chance to impact that cost curve and impact the commercial viability of green hydrogen. And particularly when you think about California, where we have periods of the year where we're long renewable resources and they cannot be used, and you're actually trying to export them or pay contiguous states like Arizona to take that power, we have a real inefficiency at certain times of the year and that production profile overlays very nicely with green hydrogen. So look, I think if there is going to be a breakthrough and there is going to be any development that moves it forward in time, California is the place where it will happen.

Well, that makes a lot of sense and then just thinking about natural gas usage in the state and obviously California is doing some thinking around moving away from conventional natural gas. Do you have a sense of sort of the regulatory or other timelines or sort of milestones or other sort of proceedings that we should be at least thinking about as we look at that or is there really nothing definitive, it's just sort of a longer-term aspiration within the state?

Yes. But there is a two-part process being read by the PUC today. There is a phase 1 review of the appropriate policies and impacts on natural gas that will lead to a phase 2 program; both SDG&E and SoCalGas are active in those proceedings. But I think when you speak with a lot of consultants in the space, a lot of political leadership, there’s a recognition that natural gas will play a long-term role in the United States energy policy and a long-term role in California's energy policy. Remember as a decoupled state, Stephen, it's probably more than reasonable that natural gas could decline in some areas, maybe in our core customers, but with electrification, it’s more likely than not that you're going to need to number one, produce two or three or four times the electricity that we currently produce, and that's going to require more natural gas for power production. So I think what you should expect to see is because we're decoupled, our interests are aligned with policymakers to make sure we're pursuing low-cost, low-carbon strategies, but electrification is a big deal both in the United States and in California and natural gas, particularly in power production will more than likely increase rather than decrease. I think it's important to your point to make sure we get the long-term policy right and that's why both of these proceedings at the PUC are very important and we'll be involved in it. Kevin would like to add some comments to that?

The only thing I may add is around R&G renewable natural gas. The gas companies set some pretty aggressive goals for itself 5% by 2022 and 20% by 2030 and they're really making good progress on those goals. In terms of getting projects online to capture that methane is really a real bad for the climate and so capturing it is an important part of the state's goals to mitigate GHG emissions and do something about climate change. So we're excited about R&G and what you spoke about a regulatory construct that could be helpful and that would be around an RPS for R&G. So if we could have some kind of RPS standard in the state around R&G, I'll be very supportive to more projects capturing them. So I'll start to run it back over to you Jeff.

I think those are all good points. I'll probably just conclude with the fact that just seven months ago, we got maybe one of the best general rate cases we've ever gotten at SoCalGas. So they're very much privileged in system reliability and safety. They've got a 9% plus CAGR of capital deployment inside their rate base. So it's a pretty aggressive program they have going on. In fact, across all three of our utilities when you think about our capital program we have average rate base growth forecasting for the next five years of 9%.

It's all really helpful color. Thank you very much.

I appreciate it.

Hey guys, thank you for taking my question and congrats on a good first half of the year. I really have two questions. One Jeff, you talked about the stock and talked about the valuation and how you trade relative to peers, but just curious do you think structurally California utilities and you still have significant presence there? Obviously it's a bigger business, structurally a lower multiple business relative to regulated companies in other states?

Let me just make sure I understand your question, Michael and by the way thank you for joining our call. I think your question is when we think about Sempra's valuation how much should it be impacted by structural issues in California is that what you are asking?

Yes. Do you believe that inherently the market views California utilities as a lower multiple business relative to utilities in other states?

Yes. My initial instinct is no but let me give you a little bit of color. Going back to the end of 2017, 80% of our earnings composition came from California. When we project out our earnings growth through 2022, roughly 50% of our earnings competition comes to California and I think what makes me feel good about the California story, Michael, is if you look at the remedial measures that we're taking to make sure that we're not exposed to wildfire risk financially particularly if you're prudent that's really important. I think I would govern my view of it Mike by the quality of the rate case we got. And you've heard us talk about this before but you got a remarkable rate case for SDG&E and SoCalGas. You also have a really high quality cost of capital. SDG&E's average cost of capital when you blend in the first cost of capital is about 10.4% and then you've got this kind of runway now for really a five-year deployment of your revenue requirement which we never have before. So as long as I've been around the business, I've never been able to have that clear of a runway for what our authorized spending level is. So I go back to the cost of capital, the rate case, the remedial measures to make sure that we've mitigated risk in the environment and overall one thing I think that people miss sometimes, Michael, and we've been kind of jealous about it here at our company is, the key for utilities is to make sure you're in markets that have a lot of economic expansion, population growth, and great regulation, and when you measure those three categories California still looks like a premium market as does Texas. So we're pleased to have kind of a tier 1 position here in a tier 1 position in Texas is that underlying economic growth, not just capital deployed for safety or reliability it gives you this long-term opportunity to deploy capital.

Got it. Thank you for that Jeff. Just curious on the LNG front, and I'm really thinking just about Cameron 1, 2, 3 can you remind us in the next five years or so or the next three to five years how much cash, I know you talk about how much you're going to get out of the life of the project but just next three to five years how much cash you think you get or how should we think about the annual run rate of cash coming out of Cameron 1, 2, 3?

Right. So what we've said publicly in the past now I'll review it with you is we've talked about having just from Cameron itself a $400 million to $450 million a year run rate; I think in our latest estimates Michael, I might revise that to be a little bit higher; we have some more work to be done on that. We think we have much more clear vision to the runway for it going forward. I think that over the next couple of years, 2021, it goes up quite significantly it's closer to $650 million and then it has a steady state around $450 to $475. So over the life of the project, it's going to be greater than $12 billion of cash after debt service. On a run rate basis it's going to be closer to the high end of that $400 to $450, and the next year just because of how some of the amortization schedules work you're going to have a little higher cash back to the company in 2021.

Got it. Thank you, Jeff. Much appreciate. I'll follow up with your team offline.

I appreciate it, Michael.

Hi, based on the current business outlook and recent 2020 guidance revision, is there any color you're able to share about the current outlook for 2021 guidance and drivers within the range?

Well, I think one of the things I go back to Ryan was you may recall we were all together virtually in our investor day. We talked about the A system we have to prioritize our activities really around trying to deliver our financial goals, and I think if you think about 2019, we set forward an EPS guidance range and during the year, we got into the high end of the range and we were very pleased, Ryan, that we were able to exceed that range on our February calls when we announced our Q4 results. This year, you'll call we set a guidance range for 2020 and we've been able to guide higher in that range on the May call, and then on June 30, we guided and actually adjusted our range actually raised in the low end of our range by $0.50. So as we think about 2021, I think we're pleased today, Ryan, to affirm our guidance for 2021. We have some more work to be done here, but we have an evergreen planning process that goes on constantly, and I think that what Alan characterize for 2021 is we're on our front foot. You're going to have positive uplift from Cameron moving to full run rate. You're going to have the earnings from South America will get backed out for 2021. We feel good about it we just have more work to be done, and if we get through that work it seems like we should adjust the 2021 number, we will I think our pattern in practice Ryan has been to under-promise and then work really, really hard to exceed expectations.

Thank you and then what was the average price that the $500 million buyback was purchased at and was this previewed with the rating agencies and then going forward what credit parameters or guideposts are you looking at when deciding on share buyback amounts and potential timing in future years?

Yes. I'll start with the credit metrics and I'll pass it to Trevor to talk about the weighted average share repurchase price but we've been pretty consistent our credit metrics during our slide presentation today. We remain on track to meet those by the end of the year and those have been commitments we've made over multiple years. So we don't see any change to the credit metrics but perhaps Trevor you could speak to the repurchase program.

Sure Jeff. So Ryan, what we did is we had an ASR, the accelerated stock repurchase program for the last 30 days, and the weighted average price of that was $122.

Great. Thank you. And just like it’s one mixed in terms of rating preview, rating key preview is that done in advance or not?

Yes. We have talked to the rating agencies about this recently as to what our overall plan is and where we're anticipating to get to by the end of the year.

And the best way I would comment on that Ryan, if you want to kind of a short form approach is that we've laid out a capital program in that capital program; we were able to move some capital out this year into future years that was a $500 million shift in our capital deployment and what we really did was redeploy that capital right into buying our shares at what we think is a very attractive price.

Good morning Jeff, hope all is well you and your family. Just a quick question if I go back to the potential for the $2 billion share repurchase authorization, can I think of that as a placeholder for LNG? I know you spoke about the strength of your LNG model but if that gets pushed out further maybe because of the total impact of COVID could you think about the $2 billion share repurchased as a placeholder for that?

Anthony, that's actually a very interesting question. I would probably frame it by saying that the last authorization that we are working on with our board was put in place in 2007. It really gave management the opportunity to look for points in time where we thought the stock was undervalued. I think we're certainly one of those points in time today. I mean we're very, very bullish on how attractively our stock is priced today. I don't know that I would associate it directly with LNG, but I think the way we've described our capital allocation process this year where we fund our first order priorities, particularly around our utilities, we make a commitment to pay down parent debt and deliver our credit metrics to the rating agencies. If there's opportunities either from a sale or divestiture of an asset or cash flow from other parts of our business or deferrals of CapEx, we will always be looking for opportunities periodically to be opportunistic to support our stock.

Hey guys this is [indiscernible] on for Eric. Thanks for taking my questions. I'll keep it quick over the other hour mark but on Mexico you guys highlighted some of the sort of near-term noise that might be impacting the public share price at this point. I just thought it would be good to get some commentary I know a lot of people on this call sit on the board for -- about how Sempra sort of represents interests and what kind of strategic levers are available to de-risk the mistake whether that be the interplay between payout ratio and credit metrics and things like that just generally sort of what the strategic direction for looks like?

Sure. I would say that we have 11 members on the board on IEnova; six come from Sempra plus Carlos, [indiscernible] and Tanya. We are very active in terms of how they build their capital program and how they manage their balance sheet. Certainly, when you think about that business, it's very rare in Mexico to see a business of this scale with U.S. dollar denominated revenues, and when you think about the tenor of that portfolio they've really been able to assemble a very, very attractive basket of assets, and remember our long-term goal is we don't want to invest outside of our utilities unless we think that we can risk-adjust those cash flows to match the expectations from a risk-reward standpoint of our U.S. based utility. So the one development that's taking place down there that kind of goes to the issue you're speaking about is over time we now have the majority of our revenues coming from non-government entities, and I think we see that trend continuing over time, and I think there will be periods in our investments in Mexico where we slow our capital spending. We preserve asset value and we leverage the value of our dividend for purposes of our shareholders, but the long-term story is intact. This is Jeff. I would just make a couple comments. Number one is it's a novel request. So traditionally state-owned enterprises had the domain and responsibility for the export of hydrocarbons. This would be the first permit that they've issued that authorizes the export of hydrocarbons by a private entity; number one. Number two, the government has largely been shut down because of the pandemic. I think Mexico today ranks number three in the world in terms of impacts from the virus in deaths. So they've been going through a really difficult situation economically, and that's impacted obviously the function of the government. But I would say this and I've mentioned it several times: I think that all the things that you expect us to be doing as a company both at Sempra and at IEnova in terms of relationships and value proposition and following up with folks, we're doing that. I wish we could have delivered the snare permit in Q4 of last year. This thing has gone on a little bit further than you would probably think reasonable, but look, there has been a lot of extenuating circumstances. The conversations remain quite positive, and I'm optimistic that we'll get to permit later in Q3.

Great. Thanks guys.

I appreciate it.

This concludes today's call. Thank you for your participation. You may now disconnect.