On May 12, 2025, Southern California Gas Company, an indirect subsidiary of Sempra (NYSE: SRE), announced a significant capital raise by issuing \(1.1 billion aggregate principal amount of First Mortgage Bonds through an underwriting agreement with several top underwriters including BNP Paribas Securities and Mizuho Securities USA among others. The issuance comprises \)600 million 5.450% Series DDD Bonds due in 2035 and $500 million 6.000% Series EEE Bonds maturing in 2055 priced very close to par at 99.542% and 98.649%, respectively. This transaction underscores Sempra’s strategic approach to optimizing its capital structure, securing long-term funding at fixed interest rates conducive for infrastructure investments and operational expansions.
Financial Impact and Capital Structure Considerations:
As of its most recent fiscal year ended December 31, 2024, Sempra reported long-term debt totaling approximately \(31.56 billion and total shareholder equity of \)25.36 billion, with a total debt-to-capitalization ratio of 58.57% and a long-term debt-to-capitalization ratio of 55.45%. The new $1.1 billion bond issuance represents a material increase of about 3.49% in outstanding long-term debt, which will consequently impact the company’s leverage ratios. Such an increment should be analyzed in the context of Sempra’s strong capitalization and its ability to service debt through predictable cash flows from regulated gas infrastructure operations.
Strategic Implications and Market Outlook:
The issuance of these First Mortgage Bonds reflects Sempra’s confidence in its ongoing growth strategy amid a challenging macroeconomic environment characterized by potential tariff changes, regulatory oversight, and economic uncertainty. Stable fixed-rate financing supports infrastructure modernization which is critical to utility companies to comply with evolving environmental standards and to maintain reliable service delivery.
The fixed coupon rates of 5.450% for the 2035 bonds and 6.000% for the 2055 bonds are positioned competitively given recent market interest rate trends, providing investors with attractive yields relative to comparable utility credit profiles.
Previous earnings calls by Sempra highlighted the company’s focus on capital efficiency and investment in sustainable infrastructure growth. This debt issuance aligns well with those strategic priorities, potentially enabling the company to enhance capital allocation toward new projects and meet increasing energy demand in California and beyond.
In summary, the $1.1 billion bond issuance acts as a robust financial lever to support Sempra’s growth and operational resilience, reaffirming its commitment to maintaining liquidity and capital strength while navigating sector-specific challenges.
For the official filing and detailed underwriting agreement, visit the source document here: https://sec.gov/Archives/edgar/data/1032208/000119312525118842/d907961d8k.htm
Tags: SempraBondIssuance, UtilityCapitalStructure, LongTermDebt, FixedMortgageBonds, UtilityInfrastructureFinance