SEMPRA ENERGY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

You should read the following discussion in conjunction with the Condensed
Consolidated Financial Statements and the Notes thereto in this report, and the
Consolidated Financial Statements and the Notes thereto, "Part I - Item 1A. Risk
Factors" and "Part II - Item 7. MD&A" in the Annual Report.
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OVERVIEW

Sempra Energy is a California-based holding company with energy infrastructure
investments in North America. On July 2, 2021, Sempra Energy began doing
business as Sempra. Our businesses invest in, develop and operate energy
infrastructure, and provide electric and gas services to customers through
regulated public utilities. As we discuss in Note 12 of the Notes to Condensed
Consolidated Financial Statements in this report and in "Part I - Item 1.
Business" in the Annual Report, our business activities are organized under five
separately managed reportable segments.
Our former South American businesses and certain activities associated with
those businesses are presented as discontinued operations. Nominal activities
that are not classified as discontinued operations have been subsumed into
Parent and other. We completed the sales of these businesses in the second
quarter of 2020. Our discussions below exclude discontinued operations, unless
otherwise noted.
This report includes information for the following separate registrants:
?Sempra;
?SDG&E; and
?SoCalGas.
References in this report to "we," "our," "us," "our company" and "Sempra" are
to Sempra and its consolidated entities, collectively, unless otherwise stated
or indicated by the context. We refer to SDG&E and SoCalGas collectively as the
California Utilities, which do not include the utilities in our Sempra Texas
Utilities or Sempra Mexico segments or the utilities in our former South
American businesses included in discontinued operations. All references in this
report to our reportable segments are not intended to refer to any legal entity
with the same or similar name.
Throughout this report, we refer to the following as Condensed Consolidated
Financial Statements and Notes to Condensed Consolidated Financial Statements
when discussed together or collectively:
•the Condensed Consolidated Financial Statements and related Notes of Sempra;
•the Condensed Financial Statements and related Notes of SDG&E; and
•the Condensed Financial Statements and related Notes of SoCalGas.


RESULTS OF OPERATIONS
We discuss the following in Results of Operations:
?Overall results of operations of Sempra;
?Segment results;
?Significant changes in revenues, costs and earnings; and
?Impact of foreign currency and inflation rates on our results of operations.

OVERALL RESULTS OF OPERATIONS OF SEMPRA
In the three months ended September 30, 2021, we reported losses of $(648)
million and diluted EPS of $(2.03) compared to earnings of $351 million and
diluted EPS of $1.21 for the same period in 2020. In the nine months ended
September 30, 2021, we reported earnings of $650 million and diluted EPS of
$2.09 compared to earnings of $3,350 million and diluted EPS of $11.43 for the
same period in 2020. The change in diluted EPS in the three months ended
September 30, 2021 compared to the same period in 2020 included a reduction in
losses per share by $0.20 due to an increase in weighted-average common shares
outstanding. The change in diluted EPS in the nine months ended September 30,
2021 compared to the same period in 2020 included a reduction in earnings per
share by $0.13 due to an increase in weighted-average common shares outstanding.
Our (losses) earnings and diluted EPS were impacted by variances discussed in
"Segment Results" below.

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SEGMENT RESULTS
This section presents (losses) earnings by Sempra segment, as well as Parent and
other and discontinued operations, and a related discussion of the changes in
segment (losses) earnings. Throughout the MD&A, our reference to (losses)
earnings represents (losses) earnings attributable to common shares. Variance
amounts presented are the after-tax (losses) earnings impact (based on
applicable statutory tax rates), unless otherwise noted, and before NCI, where
applicable.
SEMPRA (LOSSES) EARNINGS BY SEGMENT
(Dollars in millions)
                                               Three months ended September 30,          Nine months ended September 30,
                                                    2021                2020                 2021                  2020
SDG&E                                          $       205          $     178          $          603          $     633
SoCalGas                                            (1,126)               (24)                   (625)               425
Sempra Texas Utilities                                 206                209                     479                458
Sempra Mexico                                          164                 50                     225                302
Sempra LNG                                               1                 71                     194                207
Parent and other(1)                                    (98)              (126)                   (226)              (515)
Discontinued operations                                  -                 (7)                      -              1,840
(Losses) earnings attributable to common
shares                                         $      (648)         $     

351 $ 650 $ 3,350

(1) Includes intercompany eliminations recorded in consolidation and certain corporate costs.

SDG&E

The increase in earnings of $27 million (15%) in the three months ended
September 30, 2021 compared to the same period in 2020 was primarily due to:
?$29 million charge in 2020 for amounts expected to be refunded to customers and
a fine related to the Energy Efficiency Program inquiry; and
?$27 million higher CPUC base operating margin, net of operating expenses;
offset by
?$18 million higher income tax expense primarily from flow-through items, net of
associated regulatory revenues; and
?$3 million lower AFUDC equity.
The decrease in earnings of $30 million (5%) in the nine months ended September
30, 2021 compared to the same period in 2020 was primarily due to:
?$62 million decrease due to the release of a regulatory liability in 2020
related to 2016-2018 forecasting differences that are not subject to tracking in
the income tax expense memorandum account;
?$20 million lower electric transmission margin, including the following
favorable impacts in 2020 from the March 2020 FERC-approved TO5 settlement
proceeding:
•$18 million to conclude a rate base matter, and
•$9 million impact from the retroactive application of the final TO5 settlement
for 2019; and
?$8 million higher income tax expense primarily from flow-through items, net of
associated regulatory revenues; offset by
?$44 million charge in 2020 for amounts expected to be refunded to customers and
a fine related to the Energy Efficiency Program inquiry; and
?$14 million higher CPUC base operating margin, net of operating expenses and
favorable resolution of regulatory matters in 2020.
SoCalGas
The increase in losses of $1,102 million in the three months ended September 30,
2021 compared to the same period in 2020 was primarily due to:
?$1,110 million increase in charges from impacts associated with the Aliso
Canyon natural gas storage facility litigation and regulatory matters comprised
of $1,132 million in 2021 compared to $22 million in 2020; offset by
?$8 million higher CPUC base operating margin, net of operating expenses, AFUDC
equity and other items.
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Losses of $625 million in the nine months ended September 30, 2021 compared to
earnings of $425 million for the same period in 2020 was primarily due to:
?$1,038 million increase in charges from impacts associated with the Aliso
Canyon natural gas storage facility litigation and regulatory matters comprised
of $1,132 million in 2021 compared to $94 million in 2020; and
?$64 million decrease due to the release of a regulatory liability in 2020
related to 2016-2018 forecasting differences that are not subject to tracking in
the income tax expense memorandum account; offset by
?$30 million higher CPUC base operating margin, net of operating expenses; and
?$12 million higher income tax benefits from forecasted flow-through items.
Sempra Texas Utilities
The decrease in earnings of $3 million (1%) in the three months ended September
30, 2021 compared to the same period in 2020 was primarily due to lower equity
earnings from Oncor Holdings driven by:
?increased operating costs and expenses attributable to invested capital; and
?lower revenues due to an annual energy efficiency program performance bonus
recognized in 2020, but pending PUCT approval in 2021; offset by
?increased revenues from rate updates to reflect increases in invested capital
and customer growth.
The increase in earnings of $21 million (5%) in the nine months ended September
30, 2021 compared to the same period in 2020 was primarily due to higher equity
earnings from Oncor Holdings driven by:
?increased revenues from rate updates to reflect increases in invested capital
and customer growth; offset by
?increased operating costs and expenses attributable to invested capital; and
?lower revenues due to an annual energy efficiency program performance bonus
recognized in 2020, but pending PUCT approval in 2021.
Sempra Mexico
Because Ecogas, our natural gas distribution utility in Mexico, uses the local
currency as its functional currency, its revenues and expenses are translated
into U.S. dollars at average exchange rates for the period for consolidation in
Sempra's results of operations. Prior year amounts used in the variances
discussed below are as adjusted for the difference in foreign currency
translation rates between years. We discuss these and other foreign currency
effects below in "Impact of Foreign Currency and Inflation Rates on Results of
Operations."
The increase in earnings of $114 million in the three months ended September 30,
2021 compared to the same period in 2020 was primarily due to:
?$62 million favorable impact from foreign currency and inflation effects net of
foreign currency derivative effects comprised of a $29 million favorable impact
in 2021 compared to a $33 million unfavorable impact in 2020;
?$6 million earnings attributable to NCI at IEnova in 2021 compared to $22
million earnings in 2020, including the effects of the increase in our ownership
of IEnova;
?$14 million primarily due to the start of commercial operations of the Veracruz
terminal in first quarter of 2021; and
?$11 million selling profit on a sales-type lease relating to the commencement
of a rail facility lease at the Veracruz terminal in the third quarter of 2021,
which we discuss in Note 11 of the Notes to Condensed Consolidated Financial
Statements; offset by
?$6 million higher net interest expense.
The decrease in earnings of $77 million (25%) in the nine months ended September
30, 2021 compared to the same period in 2020 was primarily due to:
?$227 million unfavorable impact from foreign currency and inflation effects net
of foreign currency derivative effects comprised of a $42 million unfavorable
impact in 2021 compared to a $185 million favorable impact in 2020;
?$29 million income tax expense in 2021 primarily from outside basis differences
in JV investments and the remeasurement of certain deferred income taxes; and
?$15 million higher net interest expense; offset by
?$50 million earnings attributable to NCI at IEnova in 2021 compared to $193
million earnings in 2020, including the effects of the increase in our ownership
of IEnova;
?$16 million primarily due to the start of commercial operations of the Veracruz
terminal in the first quarter of 2021; and
?$11 million selling profit on a sales-type lease relating to the commencement
of a rail facility lease at the Veracruz terminal in the third quarter of 2021.
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Sempra LNG
The decrease in earnings of $70 million in the three months ended September 30,
2021 compared to the same period in 2020 was primarily due to:
?$65 million lower earnings from marketing operations, primarily driven by
changes in natural gas prices; and
?$11 million lower net interest income from lower intercompany balances with
Parent and other; offset by
?$15 million higher equity earnings from Cameron LNG JV primarily due to the
three-train liquefaction project achieving full commercial operations in August
2020.
The decrease in earnings of $13 million (6%) in the nine months ended September
30, 2021 compared to the same period in 2020 was primarily due to:
?$122 million lower earnings from marketing operations due to losses in 2021
compared to gains in 2020, primarily driven by changes in natural gas prices;
?$8 million lower net interest income from lower intercompany balances with
Parent and other; and
?$8 million of certain non­capitalizable expenses at ECA LNG Phase 1 in 2021,
which reached a final investment decision in November 2020; offset by
?$115 million higher equity earnings from Cameron LNG JV primarily due to the
three-train liquefaction project achieving full commercial operations in August
2020; and
?$22 million income tax benefit in 2021 from the remeasurement of certain
deferred income taxes.
Parent and Other
The decrease in losses of $28 million (22%) in the three months ended September
30, 2021 compared to the same period in 2020 was primarily due to:
?$37 million lower preferred dividends primarily as a result of $36 million
lower dividends due to the mandatory conversion of all series A preferred stock
and series B preferred stock in January 2021 and July 2021, respectively; and
?$15 million lower net interest expense; offset by
?$18 million income tax expense in 2021 compared to a $2 million income tax
benefit in 2020 primarily due to a valuation allowance against certain tax
credit carryforwards; and
?$10 million lower net investment gains on dedicated assets in support of our
employee nonqualified benefit plan and deferred compensation obligations.
The decrease in losses of $289 million in the nine months ended September 30,
2021 compared to the same period in 2020 was primarily due to:
?$50 million equity earnings in 2021 compared to $100 million equity losses in
2020 related to our investment in RBS Sempra Commodities to settle pending VAT
matters and related legal costs, which we discuss in Note 11 of the Notes to
Condensed Consolidated Financial Statements;
?$69 million lower preferred dividends as a result of $88 million lower
dividends due to the mandatory conversion of all series A preferred stock and
series B preferred stock in January 2021 and July 2021, respectively, offset by
$19 million higher dividends due to the issuance of series C preferred stock in
June 2020;
?$48 million lower net interest expense;
?$22 million lower operating costs retained at Parent and other; and
?$9 million higher net investment gains on dedicated assets in support of our
employee nonqualified benefit plan and deferred compensation obligations; offset
by
?$25 million higher income tax expense primarily due to:
•$8 million higher income tax expense due to a valuation allowance against
certain tax credit carryforwards,
•$6 million higher consolidated California state income tax expense associated
with income from our investments in Sempra LNG entities, and
•$5 million lower income tax benefit related to share-based compensation.
Discontinued Operations
Discontinued operations that were previously in our Sempra South American
Utilities segment include our former 100% interest in Chilquinta Energía in
Chile, our former 83.6% interest in Luz del Sur in Peru and our former interests
in two energy-services companies, Tecnored and Tecsur, which provide electric
construction and infrastructure services to Chilquinta Energía and Luz del Sur,
respectively, as well as third parties. Discontinued operations also include
activities, mainly income taxes related to the
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South American businesses, that were previously included in the holding company
of the South American businesses at Parent and other.
As we discuss in Note 5 of the Notes to Condensed Consolidated Financial
Statements, we completed the sales of our South American businesses in the
second quarter of 2020. On April 24, 2020, we sold our equity interests in our
Peruvian businesses, including our 83.6% interest in Luz del Sur and its
interest in Tecsur, for cash proceeds of $3,549 million, net of transaction
costs and as adjusted for post-closing adjustments, and on June 24, 2020, we
sold our equity interests in our Chilean businesses, including our 100% interest
in Chilquinta Energía and Tecnored and our 50% interest in Eletrans, for cash
proceeds of $2,216 million, net of transaction costs and as adjusted for
post-closing adjustments.
Losses from discontinued operations of $7 million in the three months ended
September 30, 2020 was due to a reduction to the gain on sale of our Chilean
businesses as a result of post-closing adjustments.
Earnings from discontinued operations of $1,840 million in the nine months ended
September 30, 2020 included:
?$1,499 million gain on the sale of our Peruvian businesses;
?$248 million gain on the sale of our Chilean businesses;
?$98 million operational earnings prior to the sale of our Peruvian and Chilean
businesses; and
?$7 million income tax benefit related to changes in outside basis differences
from earnings and foreign currency effects.

SIGNIFICANT CHANGES IN REVENUES, COSTS AND EARNINGS
This section contains a discussion of the differences between periods in the
specific line items of the Condensed Consolidated Statements of Operations for
Sempra, SDG&E and SoCalGas.
Utilities Revenues and Cost of Sales
Our utilities revenues include natural gas revenues at our California Utilities
and Sempra Mexico's Ecogas and electric revenues at SDG&E. Intercompany revenues
included in the separate revenues of each utility are eliminated in Sempra's
Condensed Consolidated Statements of Operations.
SoCalGas and SDG&E currently operate under a regulatory framework that permits:
?The cost of natural gas purchased for core customers (primarily residential and
small commercial and industrial customers) to be passed through to customers in
rates substantially as incurred. SoCalGas' Gas Cost Incentive Mechanism provides
SoCalGas the opportunity to share in the savings and/or costs from buying
natural gas for its core customers at prices below or above monthly market-based
benchmarks. This mechanism permits full recovery of costs incurred when average
purchase costs are within a price range around the benchmark price. Any higher
costs incurred or savings realized outside this range are shared between the
core customers and SoCalGas. We provide further discussion in Note 3 of the
Notes to Consolidated Financial Statements in the Annual Report.
?SDG&E to recover the actual cost incurred to generate or procure electricity
based on annual estimates of the cost of electricity supplied to customers. The
differences in cost between estimates and actual are recovered or refunded in
subsequent periods through rates.
?The California Utilities to recover certain program expenditures and other
costs authorized by the CPUC, or "refundable programs."
Because changes in SoCalGas' and SDG&E's cost of natural gas and/or electricity
are recovered in rates, changes in these costs are offset in the changes in
revenues and therefore do not impact earnings. In addition to the changes in
cost or market prices, natural gas or electric revenues recorded during a period
are impacted by customer billing cycles causing a difference between customer
billings and recorded or authorized costs. These differences are required to be
balanced over time, resulting in over- and undercollected regulatory balancing
accounts. We discuss balancing accounts and their effects further in Note 4 of
the Notes to Condensed Consolidated Financial Statements in this report and in
Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
The California Utilities' revenues are decoupled from, or not tied to, actual
sales volumes. SoCalGas recognizes annual authorized revenue for core natural
gas customers using seasonal factors established in the Triennial Cost
Allocation Proceeding, resulting in a significant portion of SoCalGas' earnings
being recognized in the first and fourth quarters of each year. SDG&E's
authorized revenue recognition is also impacted by seasonal factors, resulting
in higher earnings in the third quarter when electric loads are typically higher
than in the other three quarters of the year. We discuss this decoupling
mechanism and its effects further in Note 3 of the Notes to Consolidated
Financial Statements in the Annual Report.
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The table below summarizes utilities revenues and cost of sales. UTILITIES REVENUES AND COST OF SALES (Dollars in millions)

                                               Three months ended September 

30, Nine months ended September 30,

                                                    2021                2020                2021                2020
Natural gas revenues:
SoCalGas                                       $     1,106          $     842          $     3,738          $   3,247
SDG&E                                                  157                134                  585                498
Sempra Mexico                                           17                 12                   61                 42
Eliminations and adjustments                           (25)               (23)                 (74)               (62)
Total                                                1,255                965                4,310              3,725
Electric revenues:
SDG&E                                                1,307              1,338                3,534              3,478
Eliminations and adjustments                            (2)                (2)                  (5)                (4)
Total                                                1,305              1,336                3,529              3,474
Total utilities revenues                       $     2,560          $   2,301          $     7,839          $   7,199
Cost of natural gas(1):
SoCalGas                                       $       240          $      92          $       736          $     476
SDG&E                                                   37                 27                  159                118
Sempra Mexico                                           13                  2                   25                  8
Eliminations and adjustments                            (8)                (7)                 (28)               (20)
Total                                          $       282          $     114          $       892          $     582
Cost of electric fuel and purchased
power(1):
SDG&E                                          $       324          $     430          $       869          $     921
Eliminations and adjustments                           (12)                (1)                 (41)                (3)
Total                                          $       312          $     429          $       828          $     918

(1) Excludes depreciation and amortization, which are presented separately on the Sempra, SDG&E and SoCalGas Condensed Consolidated Statements of Operations.

Natural Gas Revenues and Cost of Natural Gas
The table below summarizes the average cost of natural gas sold by the
California Utilities and included in cost of natural gas. The average cost of
natural gas sold at each utility is impacted by market prices, as well as
transportation, tariff and other charges.
CALIFORNIA UTILITIES AVERAGE COST OF NATURAL GAS
(Dollars per thousand cubic feet)
                                            Three months ended September 30,               Nine months ended September 30,
                                                2021                   2020                   2021                   2020
SoCalGas                                $            5.01          $     1.95          $           3.46          $     2.21
SDG&E                                                5.40                3.79                      4.62                3.56


In the three months ended September 30, 2021, our natural gas revenues increased
by $290 million (30%) to $1.3 billion compared to the same period in 2020
primarily due to:
?$264 million increase at SoCalGas, which included:
•$148 million increase in cost of natural gas sold, which we discuss below,
•$33 million higher non-service component of net periodic benefit cost in 2021,
which fully offsets in Other (Expense) Income, net,
•$31 million higher recovery of costs associated with refundable programs, which
revenues are offset in O&M,
•$26 million higher CPUC-authorized revenues, and
•$20 million higher revenues from incremental and balanced capital projects; and
?$23 million increase at SDG&E, which included:
•$10 million increase in cost of natural gas sold, which we discuss below,
•$6 million higher revenues primarily associated with PSEP, and
•$3 million higher CPUC-authorized revenues.
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In the three months ended September 30, 2021, our cost of natural gas increased
by $168 million to $282 million compared to the same period in 2020 primarily
due to:
?$148 million increase at SoCalGas primarily due to higher average natural gas
prices; and
?$10 million increase at SDG&E primarily due to higher average natural gas
prices.
In the nine months ended September 30, 2021, our natural gas revenues increased
by $585 million (16%) to $4.3 billion compared to the same period in 2020
primarily due to:
?$491 million increase at SoCalGas, which included:
•$260 million increase in cost of natural gas sold, which we discuss below,
•$116 million higher recovery of costs associated with refundable programs,
which revenues are offset in O&M,
•$94 million higher CPUC-authorized revenues,
•$62 million higher revenues from incremental and balanced capital projects, and
•$26 million higher non-service component of net periodic benefit cost in 2021,
which fully offsets in Other (Expense), Income, net, offset by
•$84 million decrease due to the release of a regulatory liability in 2020
related to 2016-2018 forecasting differences that are not subject to tracking in
the income tax expense memorandum account; and
?$87 million increase at SDG&E, which included:
•$41 million increase in cost of natural gas sold, which we discuss below,
•$17 million higher recovery of costs associated with refundable programs, which
revenues are offset in O&M,
•$17 million higher CPUC-authorized revenues, and
•$14 million higher revenues primarily associated with PSEP, offset by
•$6 million decrease due to the release of a regulatory liability in 2020
related to 2016-2018 forecasting differences that are not subject to tracking in
the income tax expense memorandum account.
In the nine months ended September 30, 2021, our cost of natural gas increased
by $310 million (53%) to $892 million compared to the same period in 2020
primarily due to:
?$260 million increase at SoCalGas primarily due to higher average natural gas
prices; and
?$41 million increase at SDG&E primarily due to higher average natural gas
prices.
Electric Revenues and Cost of Electric Fuel and Purchased Power
In the three months ended September 30, 2021, our electric revenues,
substantially all of which are at SDG&E, decreased by $31 million (2%),
remaining at $1.3 billion compared to the same period in 2020 primarily due to:
?$106 million lower cost of electric fuel and purchased power, which we discuss
below; and
?$12 million lower recovery of costs associated with refundable programs, which
revenues are offset in O&M; offset by
?$36 million charge in 2020 for amounts expected to be refunded to customers
related to the Energy Efficiency Program inquiry;
?$15 million higher revenues associated with SDG&E's wildfire mitigation plan;
?$13 million higher CPUC-authorized revenues;
?$9 million higher revenues associated with lower income tax benefits from
flow-through items;
?$5 million higher revenue from transmission operations; and
?$5 million higher revenues associated with a new customer information system.
Our utility cost of electric fuel and purchased power decreased by $117 million
(27%) to $312 million in the three months ended September 30, 2021 compared to
the same period in 2020 due to:
?$106 million at SDG&E primarily due to higher purchased power costs caused by
increased demand in 2020 and a decrease in residential demand in 2021 from an
increase in rooftop solar adoption; and
?$11 million higher intercompany eliminations associated with sales between
SDG&E and Sempra Mexico due to the acquisition of ESJ in March 2021.
In the nine months ended September 30, 2021, our electric revenues,
substantially all of which are at SDG&E, increased by $55 million (2%),
remaining at $3.5 billion compared to the same period in 2020 primarily due to:
?$78 million higher recovery of costs associated with refundable programs, which
revenues are offset in O&M;
?$51 million charge in 2020 for amounts expected to be refunded to customers
related to the Energy Efficiency Program inquiry;
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?$33 million higher CPUC-authorized revenues;
?$33 million higher revenues associated with SDG&E's wildfire mitigation plan;
?$15 million higher revenues associated with lower income tax benefits from
flow-through items; and
?$8 million higher revenues associated with a new customer information system;
offset by
?$77 million decrease due to the release of a regulatory liability in 2020
related to 2016-2018 forecasting differences that are not subject to tracking in
the income tax expense memorandum account;
?$52 million lower cost of electric fuel and purchased power, which we discuss
below;
?$22 million lower revenues due to favorable resolution of regulatory matters in
2020; and
?$13 million lower revenues from transmission operations, including the
following favorable impacts in 2020 related to the March 2020 FERC-approved TO5
settlement proceeding:
•$26 million to settle a rate base matter, and
•$12 million impact from the retroactive application of the final TO5 settlement
for 2019.
Our utility cost of electric fuel and purchased power decreased by $90 million
(10%) to $828 million in the nine months ended September 30, 2021 compared to
the same period in 2020 due to:
?$52 million at SDG&E primarily due to higher purchased power costs caused by
increased demand in 2020 and a decrease in residential demand in 2021 from an
increase in rooftop solar adoption; and
?$38 million higher intercompany eliminations associated with sales between
SDG&E and Sempra Mexico due to the acquisition of ESJ in March 2021.
Energy-Related Businesses: Revenues and Cost of Sales
The table below shows revenues and cost of sales for our energy-related
businesses.
ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES
(Dollars in millions)
                                            Three months ended September 30,               Nine months ended September 30,
                                                2021                   2020                    2021                   2020
REVENUES
Sempra Mexico                           $             580          $      339          $           1,307          $      893
Sempra LNG                                            119                  63                        367                 255
Parent and other(1)                                  (246)                (59)                      (500)               (148)
Total revenues                          $             453          $      343          $           1,174          $    1,000
COST OF SALES(2)
Sempra Mexico                           $             247          $       89          $             488          $      202
Sempra LNG                                            207                  62                        419                 145
Parent and other(1)                                  (234)                (61)                      (459)               (147)
Total cost of sales                     $             220          $       90          $             448          $      200

(1) Includes eliminations of intercompany activity. (2) Excludes depreciation and amortization, which are presented separately on Sempra's Condensed Consolidated Statements of Operations.

In the three months ended September 30, 2021, revenues from our energy-related
businesses increased by $110 million (32%) to $453 million compared to the same
period in 2020 primarily due to:
?$241 million increase at Sempra Mexico primarily due to:
•$154 million increase from the marketing business primarily due to higher
natural gas prices and volumes,
•$45 million higher revenues from the Veracruz and Mexico City terminals placed
in service in March and July of 2021, respectively, including a $16 million
selling profit on a sales-type lease relating to the commencement of a rail
facility lease at the Veracruz terminal in the third quarter of 2021,
•$20 million higher revenues from TdM primarily due to unrealized gains on
commodity derivatives in 2021 compared to unrealized losses in 2020 and higher
volumes and power prices, and
•$8 million increase from the renewables business primarily due to the
acquisition of ESJ in March 2021 and renewable assets placed in service in
December 2020 and March 2021; and
?$56 million increase at Sempra LNG primarily due to:
•$122 million increase from LNG marketing operations primarily from higher
natural gas and LNG cargo sales to Sempra Mexico mainly as a result of higher
natural gas prices and volumes, offset by
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•$68 million decrease from natural gas marketing operations primarily due to
higher losses in 2021 compared to 2020, mainly driven by changes in natural gas
prices, offset by
?$187 million decrease primarily from higher intercompany eliminations
associated with sales between Sempra LNG and Sempra Mexico.
In the three months ended September 30, 2021, the cost of sales for our
energy-related businesses increased by $130 million to $220 million compared to
the same period in 2020 primarily due to:
?$158 million increase at Sempra Mexico primarily due to higher natural gas
prices and volumes at the marketing business and at TdM; and
?$145 million increase at Sempra LNG mainly from natural gas marketing
activities due to higher natural gas purchases; offset by
?$173 million decrease primarily from higher intercompany eliminations
associated with sales between Sempra LNG and Sempra Mexico.
In the nine months ended September 30, 2021, revenues from our energy-related
businesses increased by $174 million (17%) to $1.2 billion compared to the same
period in 2020 primarily due to:
?$414 million increase at Sempra Mexico primarily due to:
•$277 million increase from the marketing business primarily due to higher
natural gas prices and volumes,
•$54 million higher revenues from the Veracruz and Mexico City terminals placed
in service in March and July of 2021, respectively, including a $16 million
selling profit on a sales-type lease relating to the commencement of a rail
facility lease at the Veracruz terminal in the third quarter of 2021,
•$31 million increase from the renewables business primarily due to the
acquisition of ESJ in March 2021 and renewable assets placed in service in
December 2020 and March 2021, and
•$29 million higher revenues from TdM mainly due to higher volumes and power
prices, offset by unrealized losses on commodity derivatives in 2021 compared to
unrealized gains in 2020; and
?$112 million increase at Sempra LNG primarily due to:
•$232 million increase from LNG marketing operations primarily from higher
natural gas and LNG cargo sales to Sempra Mexico mainly as a result of higher
natural gas prices and volumes, offset by
•$121 million decrease from natural gas marketing operations primarily due to
losses in 2021 compared to gains in 2020, mainly driven by changes in natural
gas prices; offset by
?$352 million decrease primarily from higher intercompany eliminations
associated with sales between Sempra LNG and Sempra Mexico.
In the nine months ended September 30, 2021, the cost of sales for our
energy-related businesses increased by $248 million to $448 million compared to
the same period in 2020 primarily due to:
?$286 million increase at Sempra Mexico primarily due to higher natural gas
prices and volumes at the marketing business and at TdM; and
?$274 million increase at Sempra LNG mainly from natural gas marketing
activities primarily due to higher natural gas purchases; offset by
?$312 million decrease primarily from higher intercompany eliminations
associated with sales between Sempra LNG and Sempra Mexico.
Operation and Maintenance
In the three months ended September 30, 2021, O&M increased by $55 million (5%)
to $1.1 billion compared to the same period in 2020 primarily due to:
?$52 million increase at SoCalGas primarily due to:
•$31 million higher expenses associated with refundable programs, which costs
incurred are recovered in revenue, and
•$21 million higher non-refundable operating costs;
?$16 million increase at Sempra Mexico primarily from the renewables business,
including the acquisition of ESJ in March 2021; and
?$15 million increase at Sempra LNG primarily due to the timing of employee
benefit expenses and certain non-capitalizable expenses at ECA LNG Phase 1 in
2021, which reached a final investment decision in November 2020; offset by
?$25 million decrease at SDG&E primarily due to:
•$14 million lower non-refundable operating costs, and
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•$11 million lower expenses associated with refundable programs, which costs
incurred are recovered in revenue.
In the nine months ended September 30, 2021, O&M increased by $331 million (12%)
to $3.1 billion compared to the same period in 2020 primarily due to:
?$175 million increase at SoCalGas primarily due to:
•$116 million higher expenses associated with refundable programs, which costs
incurred are recovered in revenue, and
•$59 million higher non-refundable operating costs;
?$102 million increase at SDG&E primarily due to:
•$95 million higher expenses associated with refundable programs, which costs
incurred are recovered in revenue, and
•$7 million higher non-refundable operating costs;
?$44 million increase at Sempra Mexico primarily from the renewables business,
including the acquisition of ESJ in March 2021, and expenses associated with the
growth in the business; and
?$24 million increase at Sempra LNG primarily due to certain non-capitalizable
expenses at ECA LNG Phase 1 in 2021, which reached a final investment decision
in November 2020, and expected credit losses associated with the guarantee
related to Cameron LNG JV's SDSRA; offset by
?$18 million decrease at Parent and other primarily from lower retained
operating costs offset by higher deferred compensation expense.
Aliso Canyon Litigation and Regulatory Matters
In the three months and nine months ended September 30, 2021, SoCalGas recorded
a charge of $1,571 million related to agreements associated with civil
litigation against SoCalGas and Sempra pertaining to the Leak, which we describe
in Note 11 of the Notes to Condensed Consolidated Financial Statements. In the
three months and nine months ended September 30, 2020, SoCalGas recorded charges
of $27 million and $127 million, respectively, related to civil litigation and
regulatory matters pertaining to the Leak.
Other (Expense) Income, Net
As part of our central risk management function, we may enter into foreign
currency derivatives to hedge Sempra Mexico parent's exposure to movements in
the Mexican peso from its controlling interest in IEnova. The gains/losses
associated with these derivatives are included in Other (Expense) Income, Net,
as described below, and partially mitigate the transactional effects of foreign
currency and inflation included in Income Tax Expense for Sempra Mexico's
consolidated entities and in Equity Earnings for Sempra Mexico's equity method
investments. We also utilized foreign currency derivatives in 2020 to hedge
exposure to fluctuations in the Peruvian sol and Chilean peso related to the
sales of our operations in Peru and Chile, respectively. We discuss policies
governing our risk management in "Part II - Item 7A. Quantitative and
Qualitative Disclosures About Market Risk" in the Annual Report.
Other expense, net, in the three months ended September 30, 2021 was $55 million
compared to other income, net, of $29 million in the same period in 2020. The
change was primarily due to:
?$20 million net losses in 2021 from impacts associated with interest rate and
foreign exchange instruments and foreign currency transactions compared to net
gains of $34 million for the same period in 2020 primarily due to:
•$18 million foreign currency losses in 2021 compared to $15 million foreign
currency gains in 2020 on a Mexican peso-denominated loan to IMG JV, which is
offset in Equity Earnings, and
•$3 million losses in 2021 on foreign currency derivatives and cross-currency
swaps compared to $19 million gains for the same period in 2020 as a result of
fluctuation of the Mexican peso;
?$18 million higher non-service component of net periodic benefit cost in 2021;
and
?$16 million lower investment gains in 2021 on dedicated assets in support of
our executive retirement and deferred compensation plans; offset by
?$6 million fine at SDG&E in 2020 related to the Energy Efficiency Program
inquiry.
Other income, net, in the nine months ended September 30, 2021 was $52 million
compared to other expense, net, of $163 million in the same period in 2020. The
change was primarily due to:
?$188 million lower net losses from impacts associated with interest rate and
foreign exchange instruments and foreign currency transactions primarily due to:
•$107 million lower foreign currency losses on a Mexican peso-denominated loan
to IMG JV, which is offset in Equity Earnings, and
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•$101 million lower losses on foreign currency derivatives and cross-currency
swaps as a result of fluctuation of the Mexican peso; offset by
•$22 million lower net gains in 2021 on other foreign currency transactional
effects;
?$19 million higher investment gains on dedicated assets in support of our
executive retirement and deferred compensation plans;
?$7 million higher AFUDC equity at SoCalGas; and
?$6 million fine at SDG&E in 2020 related to the Energy Efficiency Program
inquiry; offset by
?$8 million decrease in regulatory interest at the California Utilities due to
the release of a regulatory liability in 2020 related to 2016-2018 forecasting
differences that are not subject to tracking in the income tax expense
memorandum account; and
?$7 million higher non-service component of net periodic benefit cost in 2021.
Income Taxes
The table below shows the income tax (benefit) expense and ETRs for Sempra,
SDG&E and SoCalGas.
INCOME TAX (BENEFIT) EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
                                                    Three months ended September          Nine months ended September
                                                                 30,                                  30,
                                                        2021               2020              2021               2020
Sempra:
Income tax (benefit) expense from continuing
operations                                         $     (342)           $   99          $    (45)           $    60

(Loss) income from continuing operations before
income taxes
and equity earnings                                $   (1,365)           $  201          $   (316)           $ 1,061
Equity earnings, before income tax(1)                     137               117               457                158
Pretax (loss) income                               $   (1,228)           $  318          $    141            $ 1,219

Effective income tax rate                                  28    %           31  %            (32)   %             5  %
SDG&E:
Income tax expense                                 $       90            $   33          $    168            $   161
Income before income taxes                         $      295            $  211          $    771            $   794
Effective income tax rate                                  31    %           16  %             22    %            20  %
SoCalGas:
Income tax (benefit) expense                       $     (437)           $   (6)         $   (335)           $    95
(Loss) income before income taxes                  $   (1,563)           $  (30)         $   (959)           $   521
Effective income tax rate                                  28    %           20  %             35    %            18  %


(1)  We discuss how we recognize equity earnings in Note 6 of the Notes to
Consolidated Financial Statements in the Annual Report.
Sempra
Sempra's income tax benefit in the three months ended September 30, 2021
compared to an income tax expense in the same period in 2020 was primarily due
to:
?$439 million income tax benefit in 2021 compared to $5 million income tax
benefit in 2020 associated with the Aliso Canyon natural gas storage facility
litigation and regulatory matters; and
?$33 million income tax benefit in 2021 compared to $44 million income tax
expense in 2020 from foreign currency and inflation effects and associated
derivatives; offset by
?lower income tax benefits from flow-through items.
Sempra's income tax benefit in the nine months ended September 30, 2021 compared
to an income tax expense in the same period in 2020 was primarily due to:
?$439 million income tax benefit in 2021 compared to $33 million income tax
benefit in 2020 associated with the Aliso Canyon natural gas storage facility
litigation and regulatory matters;
?$22 million income tax benefit in 2021 from the remeasurement of certain
deferred income taxes; and
?higher income tax benefits from flow-through items; offset by
?$8 million income tax expense in 2021 compared to $263 million income tax
benefit in 2020 from foreign currency and inflation effects and associated
derivatives; and
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?$11 million lower income tax benefit related to share-based compensation.
We discuss the impact of foreign currency exchange rates and inflation on income
taxes below in "Impact of Foreign Currency and Inflation Rates on Results of
Operations." See Note 1 of the Notes to Condensed Consolidated Financial
Statements in this report and Notes 1 and 8 of the Notes to Consolidated
Financial Statements in the Annual Report for further details about our
accounting for income taxes and items subject to flow-through treatment.
SDG&E
SDG&E's income tax expense increased in the three months ended September 30,
2021 compared to the same period in 2020 primarily due to higher pretax income
and lower income tax benefits from flow-through items.
SDG&E's income tax expense increased in the nine months ended September 30, 2021
compared to the same period in 2020 primarily due to lower income tax benefits
from flow-through items.
SoCalGas
SoCalGas' income tax benefit increased in the three months ended September 30,
2021 compared to the same period in 2020 primarily due to $439 million income
tax benefit in 2021 compared to $5 million income tax benefit in 2020 associated
with the Aliso Canyon natural gas storage facility litigation and regulatory
matters.
SoCalGas' income tax benefit in the nine months ended September 30, 2021
compared to an income tax expense in the same period in 2020 was primarily due
to $439 million income tax benefit in 2021 compared to $33 million income tax
benefit in 2020 associated with the Aliso Canyon natural gas storage facility
litigation and regulatory matters.
Equity Earnings
In the three months ended September 30, 2021, equity earnings increased by $65
million (20%) to $391 million compared to the same period in 2020 primarily due
to:
?$40 million higher equity earnings at IMG JV, primarily due to foreign currency
effects, including $18 million foreign currency gains in 2021 compared to $15
million foreign currency losses in 2020 on IMG JV's Mexican peso-denominated
loans from its JV owners, which is fully offset in Other (Expense) Income, Net;
and
?$21 million higher equity earnings at Cameron LNG JV primarily due to the
three-train liquefaction project achieving full commercial operations in August
2020.
In the nine months ended September 30, 2021, equity earnings increased by $200
million (24%) to $1.0 billion compared to the same period in 2020 primarily due
to:
?$50 million equity earnings in 2021 compared to $100 million equity losses in
2020 related to our investment in RBS Sempra Commodities to settle pending VAT
matters and related legal costs;
?$147 million higher equity earnings at Cameron LNG JV primarily due to the
three-train liquefaction project achieving full commercial operations in August
2020; and
?$23 million higher equity earnings at Oncor Holdings primarily due to higher
revenues from rate updates to reflect increases in invested capital and customer
growth, offset by increased operating costs and expenses attributable to
invested capital, and lower revenues due to an annual energy efficiency program
performance bonus recognized in 2020, but pending PUCT approval in 2021; offset
by
?$122 million lower equity earnings at Sempra Mexico, which included:
•$103 million lower equity earnings at IMG JV, primarily due to foreign currency
effects, including $107 million lower foreign currency gains on IMG JV's Mexican
peso-denominated loans from its JV owners, which is fully offset in Other
(Expense) Income, Net, and
•$15 million lower equity earnings at TAG JV primarily due to income tax expense
in 2021 compared to a benefit in 2020.
Earnings Attributable to Noncontrolling Interests
In the three months ended September 30, 2021, earnings attributable to NCI
decreased by $17 million to $5 million compared to the same period in 2020
primarily due to the increase in our ownership interest in IEnova as a result of
the exchange offer and subsequent cash tender offer, which we discuss in Note 1
of the Notes to Condensed Consolidated Financial Statements, offset by an
increase mainly from foreign currency effects as a result of fluctuation of the
Mexican peso.
In the nine months ended September 30, 2021, earnings attributable to NCI
decreased by $153 million to $48 million compared to the same period in 2020
primarily due to lower earnings at Sempra Mexico and from the increase in our
ownership interest in IEnova as a result of the exchange offer and subsequent
cash tender offer.
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Preferred Dividends
In the three months ended September 30, 2021, preferred dividends decreased by
$37 million to $11 million compared to the same period in 2020 primarily due to
the mandatory conversion of all series A preferred stock and series B preferred
stock in January 2021 and July 2021, respectively.
In the nine months ended September 30, 2021, preferred dividends decreased by
$69 million to $52 million compared to the same period in 2020 primarily due to
the mandatory conversion of all series A preferred stock and series B preferred
stock in January 2021 and July 2021, respectively, offset by the issuance of
series C preferred stock in June 2020.

IMPACT OF FOREIGN CURRENCY AND INFLATION RATES ON RESULTS OF OPERATIONS
Because our natural gas distribution utility in Mexico, Ecogas, uses its local
currency as its functional currency, revenues and expenses are translated into
U.S. dollars at average exchange rates for the period for consolidation in
Sempra's results of operations. Prior to the sales of our South American
businesses in 2020, our operations in South America used their local currency as
their functional currency. We discuss further the impact of foreign currency and
inflation rates on results of operations, including impacts on income taxes and
related hedging activity, in "Part II - Item 7. MD&A - Impact of Foreign
Currency and Inflation Rates on Results of Operations" in the Annual Report.
Foreign Currency Translation
Any difference in average exchange rates used for the translation of income
statement activity from year to year can cause a variance in Sempra's
comparative results of operations. In the three months and nine months ended
September 30, 2021, the change in our earnings as a result of foreign currency
translation rates was not material compared to the same period in 2020.
Transactional Impacts
Income statement activities at our foreign operations and their JVs are also
impacted by transactional gains and losses, a summary of which is shown in the
table below:
TRANSACTIONAL (LOSSES) GAINS FROM FOREIGN CURRENCY AND INFLATION EFFECTS AND ASSOCIATED DERIVATIVES
(Dollars in millions)
                                                                                                  Transactional (losses) gains
                                                       Total reported amounts                     included in reported amounts
                                                                         

Three months ended September 30,

                                                       2021               2020                       2021                2020
Other (expense) income, net                        $      (55)         $     29                $         (20)         $     34
Income tax benefit (expense)                              342               (99)                          33               (44)
Equity earnings                                           391               326                           16               (23)
(Loss) income from continuing operations, net of
income tax                                               (632)              428                           29               (33)

(Loss) income from discontinued operations, net of income tax

                                                  -                (7)                           -                 -
Earnings attributable to noncontrolling interests          (5)              (22)                          (1)               15
(Losses) earnings attributable to common shares          (648)              351                           28               (18)

                                                                          

Nine months ended September 30,

                                                       2021               2020                       2021                2020
Other (expense) income, net                        $       52          $   (163)               $         (36)         $   (224)
Income tax benefit (expense)                               45               (60)                          (8)              263
Equity earnings                                         1,022               822                            -               141
(Loss) income from continuing operations, net of
income tax                                                751             1,823                          (44)              180

(Loss) income from discontinued operations, net of income tax

                                                  -             1,850                            -                15
Earnings attributable to noncontrolling interests         (48)             (201)                           3               (84)
(Losses) earnings attributable to common shares           650             3,350                          (41)              111

CAPITAL RESOURCES AND LIQUIDITY

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OVERVIEW

Sempra

Impact of the COVID-19 Pandemic
Our businesses that invest in, develop and operate energy infrastructure and
provide electric and gas services to customers have been identified as critical
or essential services in the U.S. and Mexico and have continued to operate
throughout the COVID-19 pandemic. As our businesses continue to operate, our
priority is the safety of our employees, customers, partners and the communities
we serve. We and other companies, including our partners, are taking steps to
try to protect the health and well-being of our employees and other
stakeholders. We continue to work closely with local, state and federal
authorities in an effort to provide essential services with minimum interruption
to customers and in accordance with applicable orders, including potential
vaccination mandates.
For a further discussion of risks and uncertainties related to the COVID-19
pandemic, see "Part I - Item 1A. Risk Factors" and "Part II - Item 7. MD&A -
Capital Resources and Liquidity" in the Annual Report.
Sempra Infrastructure Partners
As we discuss in Note 1 of the Notes to Condensed Consolidated Financial
Statements, on October 1, 2021, we completed the sale of a 20% equity interest
in Sempra Infrastructure Partners, which generally represents the combined
businesses of Sempra LNG and IEnova, to KKR for cash proceeds of $3.37 billion,
subject to post-closing adjustments. On October 1, 2021, Sempra Infrastructure
Partners paid $149 million to KKR for reimbursement of certain expenses that KKR
incurred in connection with closing the transaction. We intend to use the
proceeds from the sale to fund capital investments in support of additional
growth opportunities and strengthen our balance sheet by reducing debt, which we
discuss below in "Long-Term Debt Activities."
We have also entered into an accommodation and support agreement under which KKR
has the ability to borrow from Sempra up to $300 million plus reimbursement of
certain fees related to such borrowing, which we fully funded on November 1,
2021. This loan is due to be repaid in full no later than October 1, 2029 and
bears compound interest at 5% per annum.
The completion of the sale of NCI in Sempra Infrastructure Partners reduced our
ownership interest in Sempra Infrastructure Partners and requires us to share
control over certain business decisions with our minority partner, which
introduces a number of risks similar to those associated with sharing business
control. Moreover, the decrease in our ownership of Sempra Infrastructure
Partners will also decrease our share of the cash flows, profits and other
benefits these businesses currently or may in the future produce, which could
materially adversely affect our results of operations, cash flows, financial
condition and/or prospects. We discuss these risks and uncertainties further in
"Part I - Item 1A. Risk Factors" in the Annual Report.
Liquidity
We expect to meet our cash requirements through cash flows from operations,
unrestricted cash and cash equivalents, borrowings under our credit facilities,
distributions from our equity method investments, issuances of debt, project
financing and funding from minority interest owners. We believe that these cash
flow sources, combined with available funds, will be adequate to fund our
current operations, including to:
?finance capital expenditures
?meet liquidity requirements
?fund dividends
?fund new business or asset acquisitions or start-ups
?fund capital contribution requirements
?repay long-term debt
?fund expenditures related to the natural gas leak at SoCalGas' Aliso Canyon
natural gas storage facility
Sempra and the California Utilities currently have reasonable access to the
money markets and capital markets and are not currently constrained in their
ability to borrow money at reasonable rates from commercial banks, under
existing revolving credit facilities or through public offerings registered with
the SEC. However, our ability to access the money markets and capital markets or
obtain credit from commercial banks outside of our committed revolving credit
facilities could become materially constrained if changing economic conditions
and disruptions to the money markets and capital markets, due to the COVID-19
pandemic or otherwise, worsen. In addition, our financing activities and actions
by credit rating agencies, as well as many other factors, could negatively
affect the availability and cost of both short-term and long-term financing.
Also, cash flows from operations may be impacted by the timing of commencement
and completion, and potentially cost overruns, of large projects and
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other material events, such as significant outflows resulting from the
agreements expected to resolve certain material litigation related to the Leak.
If cash flows from operations were to be significantly reduced or we were unable
to borrow under acceptable terms, we would likely first reduce or postpone
discretionary capital expenditures (not related to safety) and investments in
new businesses. We monitor our ability to finance the needs of our operating,
investing and financing activities in a manner consistent with our intention to
maintain our investment-grade credit ratings and capital structure.
We have significant investments in several trusts to provide for future payments
of pensions and other postretirement benefits and nuclear decommissioning.
Changes in asset values, which are dependent on activity in the equity and fixed
income markets, have not materially and adversely affected the trust funds'
abilities to make required payments. However, changes in asset values or other
factors in future periods, such as changes to discount rates, assumed rates of
return, mortality tables and regulations, may impact funding requirements for
pension and other postretirement benefits plans. Funding requirements for
SDG&E's NDT could also be impacted by the timing and amount of SONGS
decommissioning costs. At the California Utilities, funding requirements are
generally recoverable in rates. We discuss our employee benefit plans and
SDG&E's NDT, including our investment allocation strategies for assets in these
trusts, in Notes 9 and 15, respectively, of the Notes to Consolidated Financial
Statements in the Annual Report.
Available Funds
Our committed lines of credit provide liquidity and support commercial paper. As
we discuss in Note 7 of the Notes to Condensed Consolidated Financial
Statements, Sempra, SDG&E and SoCalGas each have five-year credit agreements
expiring in 2024. In addition, Sempra Mexico has committed lines of credit that
expire in 2023 and 2024 and uncommitted revolving credit facilities that expire
in 2022 and 2023. Sempra Infrastructure Partners intends to enter into its own
revolving credit facility, although such a credit facility and its timing remain
uncertain.
The table below shows the amount of available funds at September 30, 2021,
including available unused credit on these primary U.S. and foreign lines of
credit.
AVAILABLE FUNDS AT SEPTEMBER 30, 2021
(Dollars in millions)
                                             Sempra      SDG&E       

SoCalGas

Unrestricted cash and cash equivalents(1) $ 873 $ 239 $ 226 Available unused credit(2)(3)

                6,312       1,500            750


(1)  Amounts at Sempra include $138 million held in non-U.S. jurisdictions. We
discuss repatriation in Note 8 of the Notes to Consolidated Financial Statements
in the Annual Report.
(2)  Available unused credit is the total available on Sempra's, SDG&E's,
SoCalGas', Sempra Mexico's and Sempra LNG's credit facilities that we discuss in
Note 7 of the Notes to Condensed Consolidated Financial Statements.
(3)  Because our commercial paper programs are supported by these lines, we
reflect the amount of commercial paper outstanding as a reduction to the
available unused credit.
Short-Term Borrowings
We use short-term debt primarily to meet liquidity requirements, fund
shareholder dividends, and temporarily finance capital expenditures,
acquisitions or start-ups. Our California Utilities use short-term debt
primarily to meet working capital needs. Revolving lines of credit, commercial
paper and a term loan were our primary sources of short-term debt funding in the
first nine months of 2021.
We discuss our short-term debt activities in Note 7 of the Notes to Condensed
Consolidated Financial Statements and below in "Sources and Uses of Cash."
Long-Term Debt Activities
Issuances of and payments on long-term debt in the first nine months of 2021
included the following:
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LONG-TERM DEBT ISSUANCES AND PAYMENTS
(Dollars in millions)
                                                                            Amount at
Issuances:                                                                   issuance              Maturity
SDG&E 2.95% green first mortgage bonds                                    $       750                      2051
Sempra LNG variable rate notes                                                    274                      2025

Payments:                                                                    Payments              Maturity
Sempra variable rate notes                                                $       850                      2021
SDG&E 3% first mortgage bonds                                                     350                      2021
SDG&E 1.914% amortizing first mortgage bonds                                       36                      2021
SDG&E variable rate 364-day term loan                                             200                      2021
Sempra Mexico amortizing variable rate notes                                       33                      2021
Sempra Mexico amortizing variable and fixed rate
loans                                                                              29                      2021


In October 2021, Sempra Mexico used proceeds from borrowings against its
committed and uncommitted lines of credit to fully repay $175 million of
outstanding principal plus accrued and unpaid interest on the ESJ fixed- and
variable-rate loan prior to its scheduled maturity in 2033, and $375 million of
outstanding principal plus accrued and unpaid interest on the Ventika fixed- and
variable-rate loans prior to scheduled maturity dates through 2032, and
recognized approximately $50 million ($30 million after tax and NCI) in charges
associated with hedge termination costs and a write-off of unamortized debt
issuance costs.
On November 1, 2021, Sempra issued notices to redeem, at respective make-whole
redemption prices, an aggregate principal amount of $2.35 billion of senior
unsecured notes prior to scheduled maturities in 2022 through 2025. Upon
redemption, which is scheduled to occur in December 2021, we expect to recognize
approximately $128 million ($93 million after tax) in charges associated with
the make-whole premiums from the early redemptions and write-off of unamortized
discount and debt issuance costs.
We discuss our long-term debt activities in Note 7 of the Notes to Condensed
Consolidated Financial Statements.
Credit Ratings
We provide additional information about the credit ratings of Sempra, SDG&E and
SoCalGas in "Part I - Item 1A. Risk Factors" and "Part II - Item 2. MD&A -
Capital Resources and Liquidity" in the Annual Report.
The credit ratings of Sempra, SDG&E and SoCalGas remained at investment grade
levels in the first nine months of 2021.
CREDIT RATINGS AT SEPTEMBER 30, 2021

                                           Sempra                              SDG&E                            SoCalGas
Moody's                          Baa2 with a stable outlook          A3 with a stable outlook           A2 with a stable outlook
S&P                             BBB+ with a negative outlook        BBB+ with a stable outlook         A with a negative outlook
Fitch                            BBB+ with a stable outlook         BBB+ with a stable outlook          A with a stable outlook


A downgrade of Sempra's or any of its subsidiaries' credit ratings or rating
outlooks may, depending on the severity, result in a requirement for collateral
to be posted in the case of certain financing arrangements and may materially
and adversely affect the market prices of their equity and debt securities, the
rates at which borrowings are made and commercial paper is issued, and the
various fees on their outstanding credit facilities. This could make it more
costly for Sempra, SDG&E, SoCalGas and Sempra's other subsidiaries to issue debt
securities, to borrow under credit facilities and to raise certain other types
of financing.
Sempra has agreed that, if the credit rating of Oncor's senior secured debt by
any of the three major rating agencies falls below BBB (or the equivalent),
Oncor will suspend dividends and other distributions (except for contractual tax
payments), unless otherwise allowed by the PUCT. Oncor's senior secured debt was
rated A2, A+ and A at Moody's, S&P and Fitch, respectively, at September 30,
2021.
Loans with Affiliates
At September 30, 2021, Sempra had $686 million in loans due from unconsolidated
affiliates and $328 million in loans due to unconsolidated affiliates.
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California Utilities
SDG&E's and SoCalGas' operations have historically provided relatively stable
earnings and liquidity. Their future performance and liquidity will depend
primarily on the ratemaking and regulatory process, environmental regulations,
economic conditions, actions by the California legislature, litigation and the
changing energy marketplace, as well as other matters described in this report.
SDG&E and SoCalGas expect that the available unused credit from their credit
facilities described above, cash flows from operations, and debt issuances will
continue to be adequate to fund their respective current operations and planned
capital expenditures. Additionally, Sempra has elected to make equity
contributions to SoCalGas, which began in September 2021, that are sufficient to
maintain SoCalGas' approved capital structure in connection with the accruals
related to the Leak. The California Utilities manage their capital structure and
pay dividends when appropriate and as approved by their respective boards of
directors.
As we discuss in Note 4 of the Notes to Condensed Consolidated Financial
Statements in this report and in Note 4 of the Notes to Consolidated Financial
Statements in the Annual Report, changes in balancing accounts for significant
costs at SDG&E and SoCalGas, particularly a change between over- and
undercollected status, may have a significant impact on cash flows. These
changes generally represent the difference between when costs are incurred and
when they are ultimately recovered in rates through billings to customers.
COVID-19 Pandemic Protections
The California Utilities are continuing to monitor the impacts of the COVID-19
pandemic on cash flows and results of operations. Some customers have
experienced and continue to experience a diminished ability to pay their
electric or gas bills, leading to slower payments and higher levels of
nonpayment than has been the case historically. These impacts could become
significant and could require modifications to our financing plans.
In connection with the COVID-19 pandemic, the California Utilities implemented
certain measures to assist customers, including suspending service
disconnections due to nonpayment for all customers (except for SoCalGas' noncore
customers), waiving late payment fees, and offering flexible payment plans. Such
measures ended on June 30, 2021, except for the suspension of service
disconnections that ended on September 30, 2021. At the CPUC's direction, the
California Utilities have started to automatically enroll residential and small
business customers with past-due balances in long-term repayment plans. The CPUC
is continuing to consider the impacts of any state or federal relief programs on
customer arrearages and if further debt relief is warranted.
The CPUC authorized each of the California Utilities to track and request
recovery of incremental costs associated with complying with residential
customer protection measures implemented by the CPUC related to the COVID-19
pandemic, including costs associated with suspending service disconnections and
uncollectible expenses that arise from customers' failure to pay. The California
Utilities expect to pursue recovery of small and medium-large commercial and
industrial customers' tracked costs in rates in a future CPUC proceeding, which
recovery is not assured. Uncollectible expenses related to residential customers
are recorded in a two-way balancing account as we discuss below.
The continuation of these circumstances could result in a further reduction in
payments received from the California Utilities' customers and a further
increase in uncollectible accounts, which could become material, and any
inability or delay in recovering all or a substantial portion of these costs
could have a material adverse effect on the cash flows, financial condition and
results of operations of Sempra, SDG&E and SoCalGas. We discuss regulatory
mechanisms in Note 4 of the Notes to Condensed Consolidated Financial
Statements.
Disconnection OIR
In June 2020, the CPUC issued a decision addressing residential service
disconnections that, among other things, allows each of the California Utilities
to establish a two-way balancing account to record the uncollectible expenses
associated with residential customers' inability to pay their electric or gas
bills. This decision also directs the California Utilities to establish an AMP
that provides successfully participating, income-qualified residential customers
with relief from outstanding utility bill amounts and became effective in
February 2021. The California Utilities have recorded increases in their
allowances for uncollectible accounts primarily related to expected forgiveness
of outstanding bill amounts for customers eligible under the AMP. The AMP could
result in a further reduction in payments received from the California
Utilities' customers and a further increase to uncollectible accounts, which
could become material, and any inability to recover these costs could have a
material adverse effect on the cash flows, financial condition and results of
operations of Sempra, SDG&E and SoCalGas.
CCM
A CPUC cost of capital proceeding determines a utility's authorized capital
structure and authorized return on rate base. In December 2019, the CPUC
approved the cost of capital and rate structures for SDG&E and SoCalGas that
became effective on
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January 1, 2020 and will remain in effect through December 31, 2022, subject to
the CCM. The CCM considers changes in interest rates based on the applicable
utility bond index published by Moody's (the CCM benchmark rate) for each
12-month period ending September 30 (the measurement period). The CCM benchmark
rate is the basis of comparison to determine if the CCM is triggered, which
occurs if the change in the applicable Moody's utility bond index relative to
the CCM benchmark rate is larger than plus or minus 1.000% at the end of the
measurement period. The index applicable to SDG&E and SoCalGas is based on each
utility's credit rating. SDG&E's CCM benchmark rate is 4.498% based on Moody's
Baa- utility bond index, and SoCalGas' CCM benchmark rate is 4.029% based on
Moody's A- utility bond index.
Alternatively, under the CCM, each of the California Utilities is permitted to
file a cost of capital application in an interim year in which an extraordinary
or catastrophic event materially impacts its cost of capital. In August 2021,
SDG&E filed an application with the CPUC to update its cost of capital effective
January 1, 2022 due to the ongoing effects of the COVID-19 pandemic. In this
application, SDG&E proposed to adjust its authorized capital structure by
increasing its common equity ratio from 52% to 54%. SDG&E also proposed to
increase its authorized ROE from 10.20% to 10.55% and decrease its authorized
cost of debt from 4.59% to 3.84%. As a result, SDG&E's proposed return on rate
base would decrease from 7.55% to 7.46% if such application is approved by the
CPUC as filed. SDG&E filed a joint motion with PG&E and Edison to consolidate
all three utilities' cost of capital applications given the overlapping issues
of law and fact, which joint motion was granted in October 2021.
For the measurement period ended September 30, 2021, the CCM would trigger for
SDG&E because the average Moody's Baa- utility bond index between October 1,
2020 and September 30, 2021 was 1.17% below SDG&E's CCM benchmark rate of
4.498%. However, SDG&E's application to update its cost of capital effective
January 1, 2022, if accepted by the CPUC, would supersede the CCM from applying.
If such application is not accepted, the CCM would be effective January 1, 2022
and would automatically adjust SDG&E's authorized ROE from 10.20% to 9.62% and
adjust its authorized cost of debt to reflect the then current embedded cost and
projected interest rate. SDG&E has requested that a final CPUC decision on its
interim cost of capital application be issued in the first half of 2022.
For the measurement period ended September 30, 2021, the CCM was not triggered
for SoCalGas. SoCalGas expects to file its next cost of capital application in
April 2022 for a January 1, 2023 effective date.
SDG&E
Wildfire Fund
The carrying value of SDG&E's Wildfire Fund asset totals $371 million at
September 30, 2021. We describe the Wildfire Legislation and related accounting
treatment in Note 1 of the Notes to Consolidated Financial Statements in the
Annual Report.
SDG&E is exposed to the risk that the participating California electric IOUs may
incur third-party wildfire costs for which they will seek recovery from the
Wildfire Fund, including with respect to wildfires that have occurred since
enactment of the Wildfire Legislation in July 2019. In such a situation, SDG&E
may recognize a reduction of its Wildfire Fund asset and record a charge against
earnings when there is a reduction of the available coverage due to recoverable
claims from any of the participating IOUs. At September 30, 2021, PG&E recorded
a receivable from the Wildfire Fund indicating that it may seek reimbursement in
the future from the Wildfire Fund for losses associated with the Dixie Fire. If
any California electric IOU's equipment is determined to be a cause of a fire,
it could have a material adverse effect on SDG&E's and Sempra's financial
condition and results of operations up to the carrying value of our Wildfire
Fund asset, with additional potential material exposure if SDG&E's equipment is
determined to be a cause of a fire. In addition, the Wildfire Fund could be
completely exhausted due to fires in the other California electric IOUs' service
territories, by fires in SDG&E's service territory or by a combination thereof.
In the event that the Wildfire Fund is materially diminished, exhausted or
terminated, SDG&E will lose the protection afforded by the Wildfire Fund, and as
a consequence, a fire in SDG&E's service territory could have a material adverse
effect on SDG&E's and Sempra's cash flows, results of operations and financial
condition.
Wildfire Cost Recovery Mechanism
In July 2021, SDG&E filed a request with the CPUC to establish an interim cost
recovery mechanism that would recover in rates 50% of its wildfire mitigation
plan regulatory account balance as of January 1 of each year. Such potential
recovery would be incremental to wildfire costs authorized in its GRC and would
be subject to reasonableness review. We expect the CPUC to issue a final
decision in the first half of 2022.
SoCalGas
SoCalGas' future performance and liquidity will be impacted by the resolution of
legal, regulatory and other matters concerning the Leak, which we discuss below
and in Note 11 of the Notes to Condensed Consolidated Financial Statements in
this report and in "Part I - Item 1A. Risk Factors" in the Annual Report.
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Aliso Canyon Natural Gas Storage Facility Gas Leak
From October 23, 2015 through February 11, 2016, SoCalGas experienced a natural
gas leak from one of the injection-and-withdrawal wells, SS25, at its Aliso
Canyon natural gas storage facility located in Los Angeles County.
Cost Estimate, Accounting Impact and Insurance. At September 30, 2021, SoCalGas
estimates certain costs related to the Leak are $3,199 million (the cost
estimate). This cost estimate may increase significantly as more information
becomes available. A portion of the cost estimate has been paid, and $1,976
million is accrued as Reserve for Aliso Canyon Costs at September 30, 2021 on
SoCalGas' and Sempra's Condensed Consolidated Balance Sheets. Sempra has elected
to make equity contributions to SoCalGas that are sufficient to maintain
SoCalGas' approved capital structure in connection with the accruals related to
these agreements, and Sempra does not expect to issue common equity in relation
to these agreements. In connection with this election, in September 2021, Sempra
made an initial equity contribution of $800 million to SoCalGas.
Except for the amounts paid or estimated to settle certain legal and regulatory
matters, the cost estimate does not include the matters that we describe in
"Civil Litigation - Unresolved Litigation" and "Regulatory Proceedings" in Note
11 of the Notes to Condensed Consolidated Financial Statements to the extent it
is not possible to predict at this time the outcome of these actions or
reasonably estimate the possible costs or a range of possible costs for damages,
restitution, civil or administrative fines or penalties, defense, settlement or
other costs or remedies that may be imposed or incurred. The cost estimate also
does not include certain other costs incurred by Sempra associated with
defending against shareholder derivative lawsuits and other potential costs that
we currently do not anticipate incurring or that we cannot reasonably estimate.
Further, we are not able to reasonably estimate the possible loss or a range of
possible losses in excess of the amounts accrued. These costs or losses not
included in the cost estimate could be significant and could have a material
adverse effect on SoCalGas' and Sempra's cash flows, financial condition and
results of operations.
We have received insurance payments for many of the categories of costs included
in the cost estimate, including temporary relocation and associated processing
costs, control-of-well expenses, costs of the government-ordered response to the
Leak, certain legal costs and lost gas. As of September 30, 2021, we recorded
the expected recovery of the cost estimate related to the Leak of $414 million
as Insurance Receivable for Aliso Canyon Costs on SoCalGas' and Sempra's
Condensed Consolidated Balance Sheets. This amount is exclusive of insurance
retentions and $865 million of insurance proceeds we received through
September 30, 2021. We intend to pursue the full extent of our insurance
coverage for the costs we have incurred. Other than insurance for certain future
defense costs we may incur as well as directors' and officers' liability, we
have exhausted all of our insurance in this matter. We continue to pursue other
sources of insurance coverage for costs related to this matter, but we may not
be successful in obtaining additional insurance recovery for any of these costs.
If we are not able to secure additional insurance recovery, if any costs we have
recorded as an insurance receivable are not collected, if there are delays in
receiving insurance recoveries, or if the insurance recoveries are subject to
income taxes while the associated costs are not tax deductible, such amounts,
which could be significant, could have a material adverse effect on SoCalGas'
and Sempra's cash flows, financial condition, results of operations and/or
prospects.
Natural Gas Storage Operations and Reliability. Natural gas withdrawn from
storage is important for service reliability during peak demand periods,
including peak electric generation needs in the summer and consumer heating
needs in the winter. The Aliso Canyon natural gas storage facility is the
largest SoCalGas storage facility and an important element of SoCalGas' delivery
system. As a result of the Leak, the CPUC has issued a series of directives to
SoCalGas specifying the range of working gas to be maintained in the Aliso
Canyon natural gas storage facility as well as protocols for the withdrawal of
gas, to support safe and reliable natural gas service. In February 2017, the
CPUC opened a proceeding pursuant to the SB 380 OII to determine the feasibility
of minimizing or eliminating the use of the Aliso Canyon natural gas storage
facility while still maintaining energy and electric reliability for the region,
including considering alternative means for meeting or avoiding the demand for
the facility's services if it were eliminated.
At September 30, 2021, the Aliso Canyon natural gas storage facility had a net
book value of $863 million. If the Aliso Canyon natural gas storage facility
were to be permanently closed or if future cash flows from its operation were
otherwise insufficient to recover its carrying value, we may record an
impairment of the facility, incur higher than expected operating costs and/or be
required to make additional capital expenditures (any or all of which may not be
recoverable in rates), and natural gas reliability and electric generation could
be jeopardized. Any such outcome could have a material adverse effect on
SoCalGas' and Sempra's results of operations, financial condition, cash flows
and/or prospects.
Labor Relations
Field, technical and most clerical employees at SoCalGas are represented by the
Utility Workers Union of America or the International Chemical Workers Union
Council. The collective bargaining agreement for these employees covering wages,
hours, working conditions, and medical and other benefit plans expired on
September 30, 2021. On October 1, 2021, SoCalGas and
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representatives of the unions reached a tentative agreement for a new collective
bargaining agreement to be in effect through 2024. To allow time for
ratification of the new collective bargaining agreement by the employees, it was
also agreed that the terms and conditions of the existing agreement would be
extended through the date the new collective bargaining agreement is ratified.
We expect the new collective bargaining agreement to be ratified in November
2021.
Franchise Agreement
SoCalGas' natural gas franchise agreement with the City of Los Angeles is due to
expire December 31, 2021. SoCalGas expects that it will participate in the
competitive bid process for a new franchise agreement, consistent with the terms
of the City Charter.
Sempra Texas Utilities
Oncor relies on external financing as a significant source of liquidity for its
capital requirements. In the event that Oncor fails to meet its capital
requirements or is unable to access sufficient capital to finance its ongoing
needs, we may elect to make additional capital contributions to Oncor (as our
commitments to the PUCT prohibit us from making loans to Oncor) which could be
substantial and which would reduce the cash available to us for other purposes,
could increase our indebtedness and could ultimately materially adversely affect
our results of operations, liquidity, financial condition and prospects. Oncor's
ability to pay dividends may be limited by factors such as its credit ratings,
regulatory capital requirements, debt-to-equity ratio approved by the PUCT and
other restrictions. In addition, Oncor will not pay dividends if a majority of
Oncor's independent directors or any minority member director determines it is
in the best interests of Oncor to retain such amounts to meet expected future
requirements.
Winter Weather Event
In February 2021, ERCOT required electric distribution companies, including
Oncor, to significantly reduce demand on the grid because electricity generation
was insufficient to meet demand due to extreme winter weather. As a result of
the load shedding events and state-wide power outages, the PUCT, other
governmental authorities or third parties, including Oncor's customers, have
taken or could take other measures to address financial challenges experienced
as a result of the event, which could adversely impact Oncor's collections and
cash flows and, in turn, could adversely impact Sempra. The Texas Legislature
has passed, and the Governor of Texas has signed, various legislation affecting
the ERCOT market, which addresses matters including certain weatherization
requirements and fines of up to $1 million per day for failures to comply with
such requirements, enabling ERCOT to finance certain amounts owed by ERCOT
market participants relating to the winter weather event, creation of the Texas
Energy Reliability Council, identification of gas facilities that are critical
to electric-generator fuel supplies, coordination between the gas and electric
industries, and changes in the composition of the PUCT and the ERCOT board of
directors. In addition, various regulatory and governmental entities have also
commenced investigations or indicated an intent to investigate the operation of
the ERCOT grid during this extreme winter weather event and potential future
actions to improve grid reliability. Any significant changes relating to the
ERCOT market that impact transmission and distribution utilities as a result of
such proceedings or otherwise could materially adversely impact Oncor. If Oncor
does not successfully respond to these changes and any other legislative,
regulatory, or market or industry developments applicable to it, Oncor could
suffer a deterioration in its results of operations, financial condition, cash
flows and/or prospects, which could materially adversely affect Sempra's results
of operations, financial condition, cash flows and/or prospects.
Sempra Mexico
Construction Projects
Sempra Mexico began commercial operations of its new terminals for the receipt,
storage and delivery of refined fuel products in the new port of Veracruz on
March 19, 2021 and in Mexico City on July 2, 2021. The two terminals have a
combined storage capacity of more than 2.6 million barrels. The storage capacity
for both terminals is contracted with Valero Energy Corporation. Sempra Mexico
also completed construction and began commercial operations of a new solar
facility (Border Solar) in Juárez, Chihuahua on March 25, 2021.
Sempra Mexico is currently constructing additional terminals for the receipt,
storage, and delivery of liquid fuels in the vicinity of Puebla and Topolobampo.
We expect the Puebla project to commence commercial operations in 2021 and the
Topolobampo project to commence commercial operations in the first half of 2022.
However, expected commencement dates could be delayed by worsening or extended
disruptions of project construction caused by the COVID-19 pandemic or other
factors outside our control. Sempra Mexico is continuing to monitor the impacts
of the COVID-19 pandemic on cash flows and results of operations. We expect to
fund these capital expenditures, investments and operations at IEnova with
available funds, including credit facilities, and funds internally generated by
the Sempra Mexico businesses, as well as funds from project financing, sales of
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securities, interim funding from the parent or affiliates, and partnering in
JVs. Sempra Mexico is also developing terminals for the receipt, storage, and
delivery of liquid fuels in the vicinity of Manzanillo, Guadalajara and
Ensenada.
As part of an industrywide audit and investigative process initiated by the CRE
to enforce fuel procurement laws, federal prosecutors conducted inspections at
several refined products terminals, including IEnova's refined products terminal
in Puebla to confirm that the gasoline and/or diesel in storage were legally
imported. During the inspection of the Puebla terminal in September 2021, a
federal prosecutor took samples from all the train and storage tanks in the
terminal and ordered that the facility be temporarily shut down during the
pendency of the analysis of the samples and investigation, while leaving the
terminal in IEnova's custody. Although IEnova filed an amparo lawsuit against
the closure and has submitted proof of the legal origin of the products to the
prosecutor's office, we are unable to predict when the investigation will be
completed and whether the facility will be able to resume normal operations. If
the terminal were to be shut down or commissioning operations significantly
curtailed for an extended period of time, Sempra's results of operations,
financial condition, cash flows and/or prospects could be materially adversely
affected.
The ability to successfully complete major construction projects is subject to a
number of risks and uncertainties. For a discussion of these risks and
uncertainties, see "Part I - Item 1A. Risk Factors" in the Annual Report.
Legal and Regulatory Matters
Energía Costa Azul. IEnova has been engaged in a long-running land dispute
relating to property adjacent to its ECA Regas Facility that allegedly overlaps
with land owned by the ECA Regas Facility (the facility, however, is not
situated on the land that is the subject of this dispute). In addition, four
cases involving two adjacent areas of real property on which part of the ECA
Regas Facility is situated, each brought by a single plaintiff or her
descendants, remain pending against the facility. Certain of these land disputes
involve land on which portions of the ECA LNG liquefaction facilities, including
ECA LNG Phase 1 currently under construction, are proposed to be situated or on
which portions of the ECA Regas Facility that would be necessary for the
operation of the proposed ECA LNG liquefaction facilities are situated.
Several administrative challenges are pending before Mexico's Secretariat of
Environment and Natural Resources (the Mexican environmental protection agency)
and Federal Tax and Administrative Courts, seeking revocation of the
environmental impact authorization issued to the ECA Regas Facility in 2003.
These cases generally allege that the conditions and mitigation measures in the
environmental impact authorization are inadequate and challenge findings that
the activities of the terminal are consistent with regional development
guidelines. In 2018 and 2021, three related claimants filed separate challenges
in the federal district court in Ensenada, Baja California in relation to the
environmental and social impact permits issued by each of ASEA and SENER to ECA
LNG authorizing natural gas liquefaction activities at the ECA Regas Facility.
In May 2020, the two third-party capacity customers at the ECA Regas Facility,
Shell Mexico and Gazprom, asserted that a 2019 update of the general terms and
conditions for service at the facility, as approved by the CRE, resulted in a
breach of contract by IEnova and a force majeure event. Citing these
circumstances, the customers subsequently stopped making payments of amounts due
under their respective LNG storage and regasification agreements. IEnova has
rejected the customers' assertions and has drawn on the customers' letters of
credit provided as payment security. The parties engaged in discussions under
the applicable contractual dispute resolution procedures without coming to a
mutually acceptable resolution. In July 2020, Shell Mexico submitted a request
for arbitration of the dispute and although Gazprom has joined the proceeding,
Gazprom has since replenished the amounts drawn on its letter of credit and has
resumed making regular monthly payments under its LNG storage and regasification
agreement. As a consequence, IEnova is not currently drawing on Gazprom's letter
of credit but expects to continue to draw on Shell Mexico's letter of credit.
IEnova intends to avail itself of its available claims, defenses, rights and
remedies in the arbitration proceeding, including seeking dismissal of the
customers' claims. In addition to the arbitration proceeding, Shell Mexico also
filed a constitutional challenge to the CRE's approval of the update to the
general terms and conditions and an additional constitutional claim against the
issuance of the liquefaction permit. Shell Mexico's request to stay the CRE's
approval of the general terms and conditions was denied in October 2020 and
upheld on appeal. A decision on the merits is pending. The claim regarding the
liquefaction permit issuance was denied in March 2021 and upheld on appeal. A
hearing on the merits of the arbitration case was held in October 2021.
We discuss these matters in further detail in Note 11 of the Notes to Condensed
Consolidated Financial Statements. One or more unfavorable final decisions on
these disputes or challenges could materially adversely affect our existing
natural gas regasification operations and proposed natural gas liquefaction
projects at the site of the ECA Regas Facility and have a material adverse
effect on Sempra's business, cash flows, financial condition, results of
operations and/or prospects.
Sonora Pipeline. As we discuss in Note 11 of the Notes to Condensed Consolidated
Financial Statements, the Guaymas-El Oro segment of the Sonora pipeline has been
inoperable since August 2017. Under an agreement between IEnova and the CFE, the
CFE will resume making payments only when the damaged section of the Guaymas-El
Oro segment of the Sonora pipeline is
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repaired. If the pipeline is not repaired by March 14, 2022, and the parties do
not agree on a new service start date, IEnova retains the right to terminate the
contract and seek to recover its reasonable and documented costs and lost
profits. At September 30, 2021, Sempra Mexico had $436 million in PP&E, net,
related to the Guaymas-El Oro segment of the Sonora pipeline, which could be
subject to impairment if IEnova is unable to make such repairs (which have not
commenced) or re-route the pipeline (which has not been agreed to by the
parties) and resume operations in the Guaymas-El Oro segment of the Sonora
pipeline or if IEnova terminates the contract and is unable to obtain recovery,
which in each case could have a material adverse effect on Sempra's business,
results of operations, financial condition, cash flows and/or prospects.
In June 2014, IEnova and a landowner agreed to enter into a voluntary
right-of-way easement agreement for the construction and operation of a
seven-mile section of the 314-mile Sasabe-Puerto Libertad-Guaymas segment of the
Sonora natural gas pipeline on the landowner's property. However, in 2015, the
landowner filed a complaint demanding the easement agreement be nullified. In
September 2021, a definitive and non-appealable judgment was issued declaring
the easement agreement nullified and ordering the removal of the pipeline from
the landowner's property. IEnova intends to file a special judicial action
whereby it will ask a civil court to acknowledge the existence of the easement
and to determine the consideration the landowner should receive in exchange for
the easement. The failure to stay this judgment pending the resolution of
IEnova's planned special judicial action or prevail in preserving the easement
in the special judicial action could require us to modify the route of the
pipeline and could require a temporary shutdown of this portion of the pipeline,
which could have a material adverse effect on Sempra's business, results of
operations, financial condition, cash flows and/or prospects.
Regulatory and Other Actions by the Mexican Government. As we discuss in Note 11
of the Notes to Condensed Consolidated Financial Statements, the Mexican
government and certain Mexican governmental agencies have amended existing laws
and rules, updated transmission rates, and issued orders, decrees and
regulations that could materially impact IEnova's participation in the country's
energy market. Those actions would, among other things, create barriers for
renewable energy facilities to enter the wholesale electricity market, threaten
the prospects for private-party renewable energy generation in the country,
limit the ability to dispatch renewable energy and to receive or maintain
operation permits and increase costs of electricity for legacy renewables and
cogeneration energy contract holders. In addition, those actions (i) require
that only state-owned companies may import and export hydrocarbons, refined
products, petrochemicals, and biofuels through channels other than those
authorized, which could adversely affect new projects that have not obtained
such authorizations and projects under construction, in development or in
operation, and (ii) grant SENER and the CRE additional powers to suspend and
revoke permits related to the midstream and downstream sectors. Some of these
newly enacted amendments, orders, rules, decrees and regulations have been
challenged or temporarily suspended through litigation and judicial rulings
obtained by businesses operating in the power sector, including by IEnova.
As we discuss in Note 11 of the Notes to Condensed Consolidated Financial
Statements, in September 2021, the President of Mexico presented a
constitutional reform initiative that introduces significant changes to the
legal and economic principles underlying the country's energy reform of 2013,
generating imminent risks for private investments in this sector. Electricity
generation permits and contracts for the sale of electricity to the CFE,
including permits at all of IEnova's operational power generation facilities,
would be canceled. The public electricity supply service would be provided
exclusively by the CFE, which may acquire up to 46% of required energy from the
private sector. Only certain private power plants would be permitted to continue
generating electricity and compete to offer the CFE the lowest production costs.
If the ongoing litigation to enjoin enforcement or suspend or overturn these
newly enacted laws and regulations fails, if the proposed constitutional reform
is passed in its current form, or if other amendments to existing laws or
regulations are adopted or enacted that curb private-party involvement in the
energy sector in Mexico, this could impact our ability to operate our facilities
at existing levels or at all, result in increased costs for IEnova and its
customers, adversely affect our ability to develop new projects, and negatively
impact our ability to recover the carrying values of our investments in Mexico,
any of which may have a material adverse effect on our business, financial
condition, results of operations, cash flows and/or prospects.
Acquisition of ESJ
As we discuss in Note 5 of the Notes to Condensed Consolidated Financial
Statements, in March 2021, IEnova increased its ownership interest in ESJ from
50% to 100% by acquiring Saavi Energía's 50% equity interest in ESJ. ESJ owns a
fully operating wind power generation facility with a nameplate capacity of 155
MW that is fully contracted by SDG&E under a long-term PPA. ESJ is constructing
a second wind power generation facility with a nameplate capacity of 108 MW that
we expect will be completed in the first quarter of 2022.
IEnova Exchange Offer and Cash Tender Offer
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
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in IEnova from 70.2% to 96.4%. In September 2021, we completed a cash tender
offer and acquired 51,014,545 publicly owned shares of IEnova for 4.0 billion
Mexican pesos (approximately $202 million in U.S. dollars) in cash, which
increased our ownership interest in IEnova from 96.4% to 99.9%. We describe
these transactions in Note 1 of the Notes to Condensed Consolidated Financial
Statements.
In addition to being traded on the New York Stock Exchange, Sempra's common
stock is also listed on the Mexican Stock Exchange under the ticker symbol
SRE.MX. 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 remaining publicly owned IEnova
shares for 78.97 Mexican pesos per share, the same price per share that was
offered in our cash tender offer. The trust will be in place through the earlier
of April 14, 2022 or the date on which we acquire all remaining publicly owned
IEnova shares.
Sempra LNG
Sempra LNG is pursuing development of additional LNG export facilities on the
Gulf Coast and Pacific Coast of North America through its proposed Cameron LNG
JV Phase 2 liquefaction expansion project in Louisiana, ECA LNG liquefaction
export projects in Mexico, and Port Arthur LNG liquefaction export project in
Texas. Sempra LNG will require funding for the development and expansion of its
portfolio of projects, which may be financed through a combination of operating
cash flows, funding from the parent and minority interest owners, bank
financing, project financing, accessing the capital markets and participating in
JVs.
Cameron LNG JV Liquefaction Expansion Project (Phase 2)
Cameron LNG JV has received the major permits and FTA and non-FTA approvals
necessary to expand the current configuration of the Cameron LNG JV liquefaction
project beyond Phase 1. The permits for the Phase 2 project currently include up
to two additional liquefaction trains and up to two additional full containment
LNG storage tanks. However, Cameron LNG JV plans to file an amendment, subject
to approval by the FERC, to modify the permits to allow the use of electric
drives, instead of gas turbine drives, which would reduce overall emissions. We
expect the proposed expansion project will initially have one train with offtake
capacity of over 6 Mtpa, with the ability to increase capacity with
debottlenecking, and the site can accommodate additional trains beyond Phase 2.
Sempra has entered into MOUs with TOTAL SE, Mitsui & Co., Ltd. and Mitsubishi
Corporation that provide a framework for cooperation for the development of and
100% of the offtake from the potential Cameron LNG JV Phase 2 project. The
ultimate participation of and offtake by TOTAL SE, Mitsui & Co., Ltd. and
Mitsubishi Corporation remains subject to negotiation and finalization of
definitive agreements, among other factors, and TOTAL SE, Mitsui & Co., Ltd. and
Mitsubishi Corporation have no commitment to participate in or enter into
offtake agreements with the Phase 2 project until such definitive agreements are
established.
Expansion of the Cameron LNG JV liquefaction facility beyond the first three
trains is subject to certain restrictions and conditions under the JV project
financing agreements, including among others, timing restrictions on expansion
of the project unless appropriate prior consent is obtained from the Phase 1
project lenders. Under the Cameron LNG JV equity agreements, the expansion of
the project requires the unanimous consent of all the partners, including with
respect to the equity investment obligation of each partner. Discussions among
all the Cameron LNG JV partners have been taking place regarding how an
expansion may be structured, including a facility design utilizing electric
drives, and we expect that discussions will continue. Although we are working
towards making a final investment decision around the end of 2022, the timing of
when or if Cameron LNG JV will receive approval to amend the permits is
uncertain, and there is no assurance that the Cameron LNG JV members will
unanimously agree in a timely manner or at all on an expansion structure, which,
if not accomplished, would materially and adversely impact the development of
the Phase 2 project.
The development of the potential Cameron LNG JV Phase 2 project is subject to
numerous other risks and uncertainties, including securing binding customer
commitments; reaching unanimous agreement with our partners to proceed;
obtaining and maintaining a number of permits and regulatory approvals; securing
financing; negotiating and completing suitable commercial agreements, including
a definitive EPC contract, equity acquisition and governance agreements;
reaching a positive final investment decision; and other factors associated with
this potential investment. For a discussion of these risks, see "Part I - Item
1A. Risk Factors" in the Annual Report.
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ECA LNG Liquefaction Export Projects
Sempra LNG and IEnova are developing two natural gas liquefaction export
projects at IEnova's existing ECA Regas Facility. The liquefaction export
projects, which are planned for development in two phases (a mid-scale project
by ECA LNG Phase 1 that is under construction and a proposed large-scale project
by ECA LNG Phase 2), are being developed to provide buyers with direct access to
North American west coast LNG supplies. We do not expect the construction or
operation of the ECA LNG Phase 1 project to disrupt operations at the ECA Regas
Facility. However, construction of the proposed ECA LNG Phase 2 project would
conflict with the current operations at the ECA Regas Facility, which currently
has long-term regasification contracts for 100% of the regasification facility's
capacity through 2028, making the decisions on whether and how to pursue the ECA
LNG Phase 2 project dependent in part on whether the investment in a large-scale
liquefaction facility would, over the long term, be more beneficial financially
than continuing to supply regasification services under our existing contracts.
We have planned measures to limit disruption of operations at the ECA Regas
Facility with the construction of the ECA LNG Phase 1 project.
In March 2019, ECA LNG received two authorizations from the DOE to export
U.S.-produced natural gas to Mexico and to re-export LNG to non-FTA countries
from its ECA LNG Phase 1 project, which is a one-train natural gas liquefaction
facility with a nameplate capacity of 3.25 Mtpa and initial offtake capacity of
approximately 2.5 Mtpa that is under construction, and its proposed ECA LNG
Phase 2 project that is in development.
In April 2020, ECA LNG Phase 1 executed definitive 20-year LNG sale and purchase
agreements with Mitsui & Co., Ltd. for approximately 0.8 Mtpa of LNG and with an
affiliate of TOTAL SE for approximately 1.7 Mtpa of LNG. In December 2020, an
affiliate of TOTAL SE acquired a 16.6% ownership interest in ECA LNG Phase 1,
with Sempra LNG and IEnova each retaining a 41.7% ownership interest. Our MOU
with Mitsui & Co., Ltd. provides a framework for Mitsui & Co., Ltd.'s potential
offtake of LNG from, and potential acquisition of an equity interest in, ECA LNG
Phase 2.
In February 2020, we entered into an EPC contract with Technip Energies for the
engineering, procurement and construction of the ECA LNG Phase 1 project. Since
reaching a positive final investment decision with respect to the project in
November 2020, we released Technip Energies to commence work to construct the
ECA LNG Phase 1 project. The total price of the EPC contract is estimated at
approximately $1.5 billion. We estimate that capital expenditures will
approximate $2.0 billion, including capitalized interest and project
contingency. The actual cost of the EPC contract and the actual amount of these
capital expenditures may differ, perhaps substantially, from our estimates. We
expect ECA LNG Phase 1 to begin producing LNG by the end of 2024.
In December 2020, ECA LNG Phase 1 entered into a five-year loan agreement for an
aggregate principal amount of up to $1.6 billion, of which $291 million was
outstanding at September 30, 2021. Proceeds from the loan are being used to
finance the cost of construction of the ECA LNG Phase 1 project. We discuss the
details of this loan in Note 7 of the Notes to Condensed Consolidated Financial
Statements in this report and in Note 7 of the Notes to Consolidated Financial
Statements in the Annual Report.
The construction of the ECA LNG Phase 1 project and the development of the
potential ECA LNG Phase 2 project are subject to numerous risks and
uncertainties. For Phase 1, these include maintaining permits and regulatory
approvals; construction delays; securing and maintaining commercial
arrangements, such as gas supply and transportation agreements; the impact of
recent and proposed changes to the law in Mexico; and other factors associated
with the project and its construction. For Phase 2, these include obtaining
binding customer commitments; the receipt of a number of permits and regulatory
approvals; obtaining financing; negotiating and completing suitable commercial
agreements, including a definitive EPC contract, equity acquisition and
governance agreements, LNG sales agreements and gas supply and transportation
agreements; reaching a positive final investment decision; the impact of recent
and proposed changes to the law in Mexico; and other factors associated with
this potential investment. In addition, as we discuss in Note 11 of the Notes to
Condensed Consolidated Financial Statements, an unfavorable decision on certain
property disputes or permit challenges, an unfavorable judgment that does not
allow IEnova to secure new or renew existing LDA authorizations, or an extended
dispute with existing customers at the ECA Regas Facility, could materially
adversely affect the development and construction of these projects and Sempra's
financial condition, results of operations, cash flows and prospects, including
the impairment of all or a substantial portion of the capital costs invested in
the projects to date. For a discussion of these risks, see "Part I - Item 1A.
Risk Factors" in the Annual Report.
Port Arthur LNG Liquefaction Export Project
Sempra LNG is developing a proposed natural gas liquefaction export project on a
greenfield site that it owns in the vicinity of Port Arthur, Texas, located
along the Sabine-Neches waterway. Sempra LNG received authorizations from the
DOE in August 2015 and May 2019 that collectively permit the LNG to be produced
from the proposed Port Arthur LNG project to be exported to all current and
future FTA and non-FTA countries.
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In April 2019, the FERC approved the siting, construction and operation of the
proposed Port Arthur LNG liquefaction facility, along with certain natural gas
pipelines, including the Louisiana Connector and Texas Connector Pipelines, that
could be used to supply feed gas to the liquefaction facility, assuming the
project is completed. In February 2020, Sempra LNG filed a FERC application for
the siting, construction and operation of a second phase at the proposed Port
Arthur LNG facility, including the potential addition of two liquefaction
trains.
In February 2020, we entered into an EPC contract with Bechtel for the proposed
Port Arthur LNG liquefaction project. The EPC contract contemplates the
construction of two liquefaction trains with a nameplate capacity of
approximately 13.5 Mtpa, two LNG storage tanks, a marine berth and associated
loading facilities and related infrastructure necessary to provide liquefaction
services. We have no obligation to move forward on the EPC contract, and we may
release Bechtel to perform portions of the work pursuant to limited notices to
proceed. We have the option to fully release Bechtel to perform all of the work
to construct the Port Arthur LNG liquefaction export project only after we reach
a positive final investment decision with respect to the project and after
certain other conditions are met, including obtaining project financing. In
December 2020, we amended and restated the EPC contract to reflect an estimated
price of approximately $8.7 billion. Since we did not issue a full notice to
proceed by July 15, 2021, agreement by both parties on an amendment to the EPC
contract is necessary. Such amendment may adjust the EPC contract price and the
EPC schedule and could potentially include other changes to the work and terms
and conditions of the EPC contract prior to Port Arthur LNG having the right to
issue a full notice to proceed thereunder. Any agreement on such an amendment by
both parties or on favorable terms to Sempra cannot be assured.
In December 2018, Polish Oil & Gas Company (PGNiG) and Port Arthur LNG entered
into a definitive 20-year agreement for the sale and purchase of 2 Mtpa of LNG
per year from the Port Arthur LNG liquefaction export project. In July 2021, the
agreement was terminated and PGNiG and Sempra LNG entered into an MOU to
collaborate to transition the 2 Mtpa to Sempra LNG's portfolio of projects.
In May 2019, Aramco Services Company and Sempra LNG signed a Heads of Agreement
for the negotiation of a definitive 20-year LNG sale and purchase agreement for
5 Mtpa of LNG offtake from the Port Arthur LNG liquefaction export project. The
Heads of Agreement also included the negotiation of a potential 25% equity
investment in the project. In January 2020, Aramco Services Company and Sempra
LNG signed an Interim Project Participation Agreement related to the proposed
project. In June 2021, Aramco Services Company and Sempra LNG agreed to allow
the Heads of Agreement and Interim Project Participation Agreement to expire.
In November 2019, Port Arthur LNG commenced the relocation and upgrade of
approximately three miles of highway where the Port Arthur LNG liquefaction
export project would be located.
We continue work to progress development of the proposed Port Arthur LNG
liquefaction export project and are evaluating design changes that could reduce
overall emissions, including electric drives, renewable power sourcing and other
technological solutions. Given uncertainties in the energy markets, including
real-time developments of new technologies that could impact the design, scale
and structure of the project, we continue to evaluate the timing of a final
investment decision; however, we will not make a final investment decision in
2021.
Development of the Port Arthur LNG liquefaction export project is subject to a
number of risks and uncertainties, including obtaining customer commitments;
completing the required commercial agreements, such as equity acquisitions and
governance agreements, LNG sales agreements and gas supply and transportation
agreements; completing construction contracts; securing and maintaining all
necessary permits and approvals; obtaining financing and incentives; reaching a
positive final investment decision; and other factors associated with the
potential investment. An unfavorable outcome with respect to any of these
factors could have a material adverse effect on Sempra's financial condition,
results of operations and prospects, including the impairment of all or a
substantial portion of the capital costs invested in the project to date. For a
discussion of these risks, see "Part I - Item 1A. Risk Factors" in the Annual
Report.

SOURCES AND USES OF CASH
The following tables include only significant changes in cash flow activities
for each of our registrants.
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CASH FLOWS FROM OPERATING ACTIVITIES
(Dollars in millions)
Nine months ended September 30,                                       Sempra             SDG&E            SoCalGas
2021                                                                $  2,981          $  1,024          $   1,037
2020                                                                   1,629               983              1,388
Change                                                              $  1,352          $     41          $    (351)

Net increase in Reserve for Aliso Canyon Costs primarily due to $1,248 higher accruals and $18 lower payments

$  1,266                            $   1,266
Higher dividends received from Cameron LNG JV                            

287

Net decrease in Insurance Receivable for Aliso Canyon primarily due to $193 lower accruals and $3 higher insurance proceeds received

                                                        196                                  196

Release of a regulatory liability related to 2016-2018 income tax expense forecasting differences in 2020

                              175          $     86                 89
Change in income taxes receivable/payable, net                           166              (134)              (170)
Decrease in prepaid insurance                                             42                39                  3
Change in accounts payable                                                86               (32)                24
Increase in greenhouse gas allowance purchases                          (123)                                (133)
Change in accounts receivable                                           (183)               29                (96)

Change in net undercollected regulatory balancing accounts (including long-term amounts in regulatory assets)

                      (189)              (80)              (109)

Change in net margin posted at Sempra LNG's marketing operations

(364)

(Lower) higher net income (loss), adjusted for noncash items included in earnings

                                                  (1,103)              114             (1,427)
Other                                                                     45                19                  6
Cash used in discontinued operations in 2020 primarily due to
$1,161 income taxes paid related to the sale of our South
American businesses                                                    1,051
                                                                    $  1,352          $     41          $    (351)



CASH FLOWS FROM INVESTING ACTIVITIES
(Dollars in millions)
Nine months ended September 30,                                 Sempra             SDG&E           SoCalGas
2021                                                          $ (3,456)         $ (1,553)         $ (1,417)
2020                                                             2,415            (1,315)           (1,345)
Change                                                        $ (5,871)         $   (238)         $    (72)

Distribution from Cameron LNG JV in 2020                      $   (753)
Increase in capital expenditures                                  (293)     

$ (237) $ (72) Acquisition of 50% interest in ESJ in March 2021 for $79, net of $14 cash and cash equivalents acquired

                 (65)
Lower contributions to Oncor Holdings                               58
Distribution from Oncor Holdings in 2021                           361
Other                                                                7      

(1)

Cash provided by discontinued operations in 2020 primarily due to $5,781 proceeds, net of transaction costs paid, offset by $502 cash sold from the sale of our South American businesses

                                   (5,186)
                                                              $ (5,871)         $   (238)         $    (72)


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CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
Nine months ended September 30,                                  Sempra             SDG&E            SoCalGas
2021                                                           $    397          $    506          $     602
2020                                                               (710)            1,055                251
Change                                                         $  1,107          $   (549)         $     351

Change in borrowings and repayments of short-term debt, net

$  3,870

$ 80 $ 517 Lower payments for commercial paper and other short-term debt with maturities greater than 90 days

                         2,277
Repurchase of common stock under ASR program in 2020                500
Lower repurchases of common stock                                    26
Lower advances from unconsolidated affiliates                       (24)
Higher purchases of NCI                                             (43)
(Higher) lower common dividends paid                               (109)              200                (25)
Higher payments on long-term debt and finance leases               (205)    

(354)

Net proceeds from issuance of series C preferred stock in 2020

                                                            (890)
(Lower) higher issuances of short-term debt with
maturities greater than 90 days                                  (1,296)    

375

Lower issuances of long-term debt                                (2,646)             (853)              (949)
Equity contribution from Sempra                                                                          800
Other                                                                48                 3                  8
Cash provided by discontinued operations in 2020
primarily from a $250 intercompany loan and $165 net
increase in short term debt                                        (401)
                                                               $  1,107          $   (549)         $     351


Capital Expenditures, Investments and Acquisitions
EXPENDITURES FOR PP&E, INVESTMENTS AND ACQUISITIONS
(Dollars in millions)
                                                 Nine months ended September 30,
                                                        2021                      2020
SDG&E                                   $           1,560                       $ 1,323
SoCalGas                                            1,417                         1,345
Sempra Texas Utilities                                151                           225
Sempra Mexico                                         325                           443
Sempra LNG                                            362                           200
Parent and other                                        7                             6
Total                                   $           3,822                       $ 3,542


The amounts and timing of capital expenditures and certain investments are
generally subject to approvals by various regulatory and other governmental and
environmental bodies, including the CPUC, the FERC and the PUCT, and various
other factors described in this MD&A and in "Part I - Item 1A. Risk Factors" in
the Annual Report. In 2021, we expect to make capital expenditures and
investments of approximately $6.1 billion, an increase from the $5.8 billion
projected in "Part II - Item 7. MD&A - Capital Resources and Liquidity" in the
Annual Report. The increase is primarily attributable to an increase in expected
contributions to our investment in Oncor Holdings and pipeline expansion
projects at Sempra Mexico, offset by a delay of capital expenditures related to
ECA LNG Phase 1 at Sempra LNG.
COMMITMENTS
We discuss significant changes to contractual commitments in the first nine
months of 2021, none of which were outside the ordinary course of our business,
in Notes 7 and 11 of the Notes to Condensed Consolidated Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
In June 2021, Sempra provided a promissory note, which constitutes a guarantee,
for the benefit of Cameron LNG JV with a maximum exposure to loss of $165
million. The guarantee will terminate upon full repayment of Cameron LNG JV's
debt,
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scheduled to occur in 2039, or replenishment of the amount withdrawn by Sempra
LNG from the SDSRA. We discuss this guarantee in Note 6 of the Notes to
Condensed Consolidated Financial Statements.
In March 2021, Cameron LNG JV reached financial completion of the three-train
liquefaction project and Sempra's guarantees for a maximum aggregate amount of
$4.0 billion were terminated.
In July 2020, Sempra entered into a Support Agreement, which contains a
guarantee and represents a variable interest, for the benefit of CFIN with a
maximum exposure to loss of $979 million. The guarantee will terminate upon full
repayment of the guaranteed debt by 2039, including repayment following an event
in which the guaranteed debt is put to Sempra. We discuss this guarantee in
Notes 1, 6 and 9 of the Notes to Condensed Consolidated Financial Statements.
Our investments in Oncor Holdings and Cameron LNG JV and our Support Agreement
for the benefit of CFIN are variable interests. Sempra's other businesses may
also enter into arrangements that could include variable interests. We discuss
variable interests in Note 1 of the Notes to Condensed Consolidated Financial
Statements.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We view certain accounting policies as critical because their application is the
most relevant, judgmental, and/or material to our financial position and results
of operations, and/or because they require the use of material judgments and
estimates. We discuss these accounting policies in "Part II - Item 7. MD&A" in
the Annual Report.
We describe our significant accounting policies in Note 1 of the Notes to
Consolidated Financial Statements in the Annual Report. We follow the same
accounting policies for interim reporting purposes.


NEW ACCOUNTING STANDARDS
We discuss the relevant pronouncements that have recently been issued or become
effective and have had or may have an impact on our financial statements and/or
disclosures in Note 2 of the Notes to Condensed Consolidated Financial
Statements.

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