Sempra

Core operations · Facility damage and equipment failure

Additional risks associated with our facilities and systems, which may be beyond our control, include: failure to meet customer demand for electricity and/or natural gas, including electric or gas outages; gas surges into homes or other properties; release of hazardous or toxic substances, including gas leaks; public contact with energized equipment.

Project and contract management · Large contract concentration

SI Partners' ability to secure new or maintain or extend existing long-term sales or capacity agreements for its natural gas pipeline operations depends on, among other factors, demand for and supply of LNG and/or natural gas from its transportation customers, which may include our LNG facilities. A decrease in demand for or supply of LNG or natural gas from such customers could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Human capital and workforce · Talent acquisition and retention

The operation of our facilities depends on good labor relations with our employees and our ability to attract and retain qualified personnel. Our businesses depend on recruiting, developing and retaining qualified personnel. Several of our businesses have collective bargaining agreements with different labor unions, which are negotiated on a company-by-company basis.

Supply chain and procurement · Supplier operation and dependance

Our businesses depend on the performance of counterparties. Our businesses depend on the performance of business partners, customers, suppliers, contractors, and other counterparties under contractual and other arrangements to provide, among other things, services, supplies, equipment or commodities. If they fail to perform their obligations in accordance with these arrangements or elect to exercise early termination rights, we may be unable to meet our obligations and may be required to secure alternative arrangements.

Cybersecurity and data protection · Third party data security and vendors

We increasingly rely on third-party vendors to deploy new technologies and host, maintain and update our systems (including providing security updates), and these third parties may not have adequate risk management, technology resiliency and cybersecurity measures with respect to their systems or may fail to timely provide and install software updates. Certain of our key externally hosted systems depend on global cloud service providers as well as their respective vendors, some of which have experienced significant system failures and outages in the past.

Technology infrastructure · Technology systems and infrastructure failure

Our digitalization and grid modernization efforts, including the networking of operational technology assets such as substations, continue to increase the potential vulnerabilities and points of failure in our systems. We are also at risk of attacks on, vulnerabilities in or other failures of technologies and systems used by certain third-party vendors, regulators and/or ISOs.

Legal and litigation · Product liability and warranty claims

Juries have demonstrated a willingness to grant large awards, including punitive damages, in response to personal injury, product liability, property damage, nuisance, and other claims. Accordingly, actual costs incurred have and may continue to differ materially from insured or reserved amounts and may not be recoverable, in whole or in part, from insurance or in customer rates.

Industry regulation · Licensing and permits

Our businesses require numerous permits, licenses, rights-of-way, franchises, certificates and other approvals from federal, state, local and foreign governmental agencies. These approvals may not be granted in a timely manner (including due to potential staffing and funding issues at regulatory agencies) or at all or may be modified, rescinded or fail to be extended for a variety of reasons, including due to legal or regulatory changes or political considerations.

Tax and financial reporting · Financial reporting and accounting standards

We are subject to complex tax and accounting requirements that expose us to risks. These requirements may undergo changes at the federal, state, local and foreign levels, including in response to economic or political conditions. Compliance with these requirements and any changes to them or how they are implemented, interpreted or enforced could increase our operating costs and materially adversely affect how we conduct our business.

Legal and litigation · Litigation and legal proceedings

We may be negatively impacted by the outcome of litigation or other proceedings in which we are involved. Our businesses are involved in a number of lawsuits, appeals, binding arbitrations, regulatory investigations and other proceedings. We have spent, and continue to spend, substantial capital and employee resources on lawsuits and other proceedings.

Reputation and brand · Brand damage and negative publicity

Any actual or perceived noncompliance with applicable legal or regulatory requirements or any incidents impacting our or our vendors' systems, the integrity of our data or assets or the energy grid could result in disruptions to our business operations; legal or regulatory compliance failures; inability to produce accurate and timely financial statements; energy delivery failures; financial and reputational loss; litigation; and fines or penalties.

Economic and market conditions · Inflation and deflation pressures

Shortages of or delays in obtaining equipment, materials, supplies, commodities or labor, which have been and may continue to be exacerbated by supply chain and gas transportation capacity constraints, tight labor markets, and cost increases due to inflation, tariffs or otherwise, that may not be recoverable in a timely manner or at all.

Geopolitical and trade · Regulatory and policy uncertainty

Following these constitutional reforms, in March 2025, the Mexican government adopted the 2025 Energy Laws, which increase the government's control and participation in the energy sector and may create novel challenges for infrastructure development and operations. Like the LIE and LH, the 2025 Energy Laws give Mexican authorities broad discretion to revoke or suspend permits under certain circumstances.

Geopolitical and trade · Political instability and government changes

The Mexican government exercises significant and increasing influence over the Mexican energy sector and has adopted additional changes that could impact private investment in this sector. In 2024, the Mexican government adopted changes to the Mexican Constitution to reinforce state control over strategic sectors by granting a central role to government entities like the CFE and PEMEX.

Social and demographic · Stakeholder activism and pressure

The NEM program is an electric billing tariff mechanism designed to promote the installation of on-site renewable energy generation (primarily solar) for residential and business customers. As more and higher electric-use customers switch to NEM and self-generate energy, the burden on remaining non-NEM customers, who effectively subsidize the unpaid NEM costs, increases.

Social and demographic · Social and political movements

SDG&E and SoCalGas are also affected by numerous advocacy groups, including California Public Advocates Office, The Utility Reform Network, Utility Consumers' Action Network and the Sierra Club. Success by any of these groups in directly or indirectly influencing legislators and regulators could have a material adverse effect on Sempra's, SDG&E's and SoCalGas' results of operations, financial condition, cash flows and/or prospects.

Capital structure and performance · Debt management and refinancing

We have significant debt service obligations and an ongoing need for significant amounts of additional capital, which could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects by, among other things: making it more difficult and costly to service, pay or refinance debts as they come due, particularly when interest rates increase or economic or industry conditions are otherwise unfavorable.

Market and investment · Interest rate and yield curve risk

The forward price that we expect to receive upon physical settlement of a forward sale agreement will be subject to adjustment on a daily basis based on a floating interest rate factor. If the specified daily rate is less than the applicable spread on any day, this will result in a daily reduction of the forward price.

Innovation and product development · Product development and randd investment risks

We face risks related to activities and projects intended to advance new energy-related technologies. We participate in research, development and demonstration projects and other activities designed to develop and implement new technologies in the energy space, including those related to hydrogen, liquefaction, energy storage, microgrids, carbon sequestration, wildfire mitigation and grid modernization. These activities and projects involve significant employee time, as well as substantial capital resources, and we may be required to impair or write off amounts we have invested if any project is unsuccessful.

Strategic execution · Geographic expansion and market entry

The electric generation and wholesale power sales industries are highly competitive. As more plants are built, supplies of energy and related products may exceed demand, competitive pressures may increase and wholesale electricity prices may decline or become more volatile. Without long-term power sales agreements, our revenues may be subject to increased volatility.