SOUTHERN CALIFORNIA GAS CO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

This combined MD&A for Sempra, SDG&E and SoCalGas should be read 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.

OVERVIEW

Sempra is a California-based holding company with energy infrastructure
investments in North America. Our businesses invest in, develop and operate
energy infrastructure, and provide electric and gas services to customers
through regulated public utilities. In the fourth quarter of 2021, we formed
Sempra Infrastructure, which resulted in a change to our reportable segments.
Historical segment disclosures have been restated to conform with the current
presentation of our four reportable segments, which 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.

                                       79

--------------------------------------------------------------------------------

Table of Contents

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 results of operations.

OVERALL RESULTS OF OPERATIONS OF SEMPRA

OVERALL RESULTS OF OPERATIONS OF SEMPRA
(Dollars and shares in millions, except per share amounts)

[[Image Removed: sre-20220331_g4.jpg]][[Image Removed: sre-20220331_g5.jpg]][[Image Removed: sre-20220331_g6.jpg]]

Our earnings and diluted EPS were impacted by variances discussed below in "Segment Results."

SEGMENT RESULTS

This section presents earnings (losses) by Sempra segment, as well as Parent and
other, and a related discussion of the changes in segment earnings (losses).
Throughout the MD&A, our reference to earnings represents earnings attributable
to common shares. Variance amounts presented are the after-tax earnings impact
(based on applicable statutory tax rates), unless otherwise noted, and before
NCI, where applicable.

SEMPRA EARNINGS (LOSSES) BY SEGMENT
(Dollars in millions)
                                                    Three months ended March 31,
                                                                              2022       2021
SDG&E                                                                        $ 234      $ 212
SoCalGas                                                                       334        407
Sempra Texas Utilities                                                         162        135
Sempra Infrastructure                                                           95        202
Parent and other(1)                                                           (213)       (82)
Earnings attributable to common shares                                      

$ 612 $ 874

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

SDG&E

The increase in earnings of $22 million (10%) in the three months ended March
31, 2022 compared to the same period in 2021 was primarily due to higher CPUC
base operating margin, net of operating expenses.

                                       80

--------------------------------------------------------------------------------

Table of Contents

SoCalGas

The decrease in earnings of $73 million (18%) in the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to:

?$66 million charge relating to civil litigation pertaining to the Leak; and

?$10 million in penalties related to the energy efficiency and advocacy OSCs, which we discuss in Note 4 of the Notes to Condensed Consolidated Financial Statements.

Sempra Texas Utilities

The increase in earnings of $27 million (20%) in the three months ended March
31, 2022 compared to the same period in 2021 was primarily due to higher equity
earnings from Oncor Holdings driven by increased revenues from rate updates to
reflect increases in invested capital, higher customer consumption and customer
growth, offset by increased operating costs and expenses attributable to
invested capital.

Sempra Infrastructure

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 decrease in earnings of $107 million in the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to:

?$107 million unfavorable impact from foreign currency and inflation effects,
net of foreign currency derivative effects, comprised of a $95 million
unfavorable impact in 2022 compared to a $12 million favorable impact in 2021;
and

?$84 million lower earnings from asset and supply optimization primarily driven by changes in natural gas prices and lower volumes; offset by

?$34 million income tax benefit in 2022 primarily from remeasurement of certain deferred income taxes;

?$13 million higher earnings primarily due to the start of commercial operations of the Veracruz and Mexico City terminals in March and July of 2021, respectively;

?$13 million higher earnings due to higher transportation revenues primarily driven by higher rates; and

?$5 million favorable U.S. tax impact from converting SI Partners from a corporation to a partnership in October 2021.

Parent and Other

The increase in losses of $131 million in the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to:

?$120 million deferred income tax expense associated with the change in our
indefinite reinvestment assertion related to our foreign subsidiaries, which we
discuss in Note 1 of the Notes to Condensed Consolidated Financial Statements;
and

?$17 million net investment losses in 2022 compared to $2 million net investment gains in 2021 on dedicated assets in support of our employee nonqualified benefit plan and deferred compensation obligations; offset by

?$10 million lower net interest expense; and

?$10 million lower preferred dividends due to the mandatory conversion of all series B preferred stock in July 2021.

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 SoCalGas and SDG&E and
Sempra Infrastructure'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 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

                                       81

--------------------------------------------------------------------------------

Table of Contents

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.

?SoCalGas and SDG&E 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 the difference between customer billings and recorded or
CPUC-authorized amounts. 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.

SoCalGas' and SDG&E's 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.

The table below summarizes utilities revenues and cost of sales.

UTILITIES REVENUES AND COST OF SALES
(Dollars in millions)
                                                                         Three months ended
                                                                              March 31,
                                                                                   2022                2021
Natural gas revenues:
SoCalGas                                                                       $    1,993          $    1,508
SDG&E                                                                                 325                 268
Sempra Infrastructure                                                                  28                  27
Eliminations and adjustments                                                          (26)                (26)
Total                                                                               2,320               1,777
Electric revenues:
SDG&E                                                                               1,120               1,069
Eliminations and adjustments                                                           (3)                 (1)
Total                                                                               1,117               1,068
Total utilities revenues                                                       $    3,437          $    2,845
Cost of natural gas(1):
SoCalGas                                                                       $      677          $      273
SDG&E                                                                                 126                  82
Sempra Infrastructure                                                                   9                   6
Eliminations and adjustments                                                          (10)                (12)
Total                                                                                 802                 349
Cost of electric fuel and purchased power(1):
SDG&E                                                                                 221                 241
Eliminations and adjustments                                                          (16)                 (9)
Total                                                                                 205                 232
Total utilities cost of sales                                               

$ 1,007 $ 581

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

                                       82

--------------------------------------------------------------------------------

Table of Contents

Natural Gas Revenues and Cost of Natural Gas

The table below summarizes the average cost of natural gas sold by Sempra
California 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.

SEMPRA CALIFORNIA AVERAGE COST OF NATURAL GAS
(Dollars per thousand cubic feet)
                                                          Three months ended March 31,
                                                                                    2022        2021
SoCalGas                                                                          $ 6.80      $ 2.60
SDG&E                                                                               7.81        4.44


In the three months ended March 31, 2022, our natural gas revenues increased by
$543 million (31%) to $2.3 billion compared to the same period in 2021 primarily
due to:

?$485 million increase at SoCalGas, which included:

•$404 million increase in cost of natural gas sold, which we discuss below,

•$29 million higher CPUC-authorized revenues,

•$21 million higher revenues from incremental and balanced capital projects,

•$17 million higher revenues associated with impacts resulting from changes in tax laws tracked in the income tax expense memorandum account, and

•$17 million higher recovery of costs associated with refundable programs, which revenues are offset in O&M; and

?$57 million increase at SDG&E, which included:

•$44 million increase in cost of natural gas sold, which we discuss below, and

•$4 million higher CPUC-authorized revenues.

In the three months ended March 31, 2022, our cost of natural gas increased by
$453 million to $802 million compared to the same period in 2021 primarily due
to:

?$404 million increase at SoCalGas primarily due to higher average natural gas prices; and

?$44 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 March 31, 2022, our electric revenues, substantially all of which are at SDG&E, increased by $49 million (5%) remaining at $1.1 billion compared to the same period in 2021 primarily due to:

?$17 million higher CPUC-authorized revenues;

?$16 million higher revenues associated with SDG&E's wildfire mitigation plan;

?$10 million higher revenues from transmission operations;

?$10 million higher revenues associated with impacts resulting from changes in tax laws tracked in the income tax expense memorandum account; and

?$6 million higher revenues associated with lower income tax benefits from flow-through items; offset by

?$20 million lower cost of electric fuel and purchased power, which we discuss below.

Our utility cost of electric fuel and purchased power includes utility-owned
generation, power purchased from third parties, and net power purchases and
sales to the California ISO. In the three months ended March 31, 2022, the cost
of electric fuel and purchased power decreased by $27 million (12%) to $205
million compared to the same period in 2021 primarily due to:

•$20 million at SDG&E primarily from higher sales to the California ISO due to higher market prices and lower customer demand; and

•$7 million higher intercompany eliminations associated with sales between SDG&E and Sempra Infrastructure due to the acquisition of ESJ in March 2021.

                                       83

--------------------------------------------------------------------------------

Table of Contents

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
                                                                                                         March 31,
                                                                                                               2022                2021
REVENUES
Sempra Infrastructure                                                                                      $      396          $      422
Parent and other(1)                                                                                               (13)                 (8)
Total revenues                                                                                             $      383          $      414
COST OF SALES(2)
Sempra Infrastructure                                                                                      $      135          $      108
Parent and other(1)                                                                                                 -                   1
Total cost of sales                                                                                        $      135          $      109


(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 March 31, 2022, revenues from our energy-related businesses decreased by $31 million (8%) to $383 million compared to the same period in 2021 primarily due to:

?$69 million decrease in revenues from asset and supply optimization primarily
from higher unrealized losses on commodity derivatives offset by higher natural
gas sales primarily from higher volumes and natural gas prices; and

?$10 million lower revenues from TdM mainly due to lower volumes from scheduled
major maintenance completed in February 2022, which resulted in increased plant
reliability, offset by higher power prices; offset by

?$21 million higher transportation revenues primarily driven by higher rates;

?$17 million higher revenues primarily from the Veracruz and Mexico City terminals placed in service in March and July of 2021, respectively; and

?$16 million higher revenues from the renewables business primarily due to the
acquisition of ESJ in March 2021 and renewable assets placed in service in March
2021 and January 2022.

In the three months ended March 31, 2022, the cost of sales for our energy-related businesses increased by $26 million (24%) to $135 million compared to the same period in 2021 primarily due to higher natural gas purchases related to asset and supply optimization.

Operation and Maintenance

In the three months ended March 31, 2022, O&M increased by $85 million (8%) to $1.1 billion compared to the same period in 2021 primarily due to:

?$48 million increase at SoCalGas, primarily due to:

•$31 million higher non-refundable operating costs, and

•$17 million higher expenses associated with refundable programs, which costs incurred are recovered in revenue;

?$28 million increase at Sempra Infrastructure, primarily due to:

•$9 million higher purchased materials and services at TdM due to scheduled major maintenance completed in February 2022,

•$7 million from the renewables business primarily due to construction repairs at Ventika, and

•$5 million higher development costs; and

?$7 million increase at SDG&E, primarily due to higher non-refundable operating costs.

Aliso Canyon Litigation and Regulatory Matters

In the three months ended March 31, 2022, SoCalGas recorded a charge of $92 million relating to civil litigation pertaining to the Leak. We describe these charges in Note 11 of the Notes to Condensed Consolidated Financial Statements.

                                       84

--------------------------------------------------------------------------------

Table of Contents

Other Income, Net

As part of our central risk management function, we may enter into foreign
currency derivatives to hedge SI Partners' exposure to movements in the Mexican
peso from its controlling interest in IEnova. The gains/losses associated with
these derivatives are included in Other Income, Net, as described below, and
partially mitigate the transactional effects of foreign currency and inflation
included in Income Tax Expense for SI Partners' consolidated entities and in
Equity Earnings for SI Partners' equity method investments. We discuss policies
governing our risk management in "Part II - Item 7A. Quantitative and
Qualitative Disclosures About Market Risk" in the Annual Report.

In the three months ended March 31, 2022, other income, net increased by $3 million (9%) to $38 million compared to the same period in 2021 primarily due to:

?$36 million lower net losses from impacts associated with interest rate and foreign exchange instruments and foreign currency transactions primarily due to:

•$6 million gains in 2022 on cross-currency swaps compared to $30 million losses
in 2021 on foreign currency derivatives and cross-currency swaps as a result of
fluctuation of the Mexican peso, and

•$12 million lower foreign currency losses on a Mexican peso-denominated loan to IMG, which is offset in Equity Earnings, offset by

•$8 million losses in 2022 compared to $4 million gains in 2021 on other foreign currency transactional effects; and

?$12 million higher non-service component of net periodic benefit credit; offset by

?$13 million investment losses in 2022 compared to $9 million investment gains
in 2021 on dedicated assets in support of our executive retirement and deferred
compensation plans; and

?$10 million in penalties at SoCalGas related to the energy efficiency and advocacy OSCs.

Income Taxes

The table below shows the income tax expense and ETRs for Sempra, SDG&E and SoCalGas.

INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
(Dollars in millions)
                                                                       Three months ended
                                                                           March 31,
                                                                                 2022               2021
Sempra:
Income tax expense                                                           $     334          $     158

Income before income taxes and equity earnings                               $     665          $     768
Equity earnings, before income tax(1)                                              143                135
Pretax income                                                               

$ 808 $ 903

Effective income tax rate                                                           41  %              18  %

SDG&E:

Income tax expense                                                           $      64          $      45
Income before income taxes                                                   $     298          $     257
Effective income tax rate                                                           21  %              18  %

SoCalGas:

Income tax expense                                                           $      84          $      94
Income before income taxes                                                   $     418          $     501
Effective income tax rate                                                           20  %              19  %

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

Sempra

In the three months ended March 31, 2022, Sempra's income tax expense increased by $176 million compared to the same period in 2021 primarily due to:

?$120 million deferred income tax expense associated with the change in our indefinite reinvestment assertion related to our foreign subsidiaries, which we discuss in Note 1 to Condensed Consolidated Financial Statements;

?$70 million income tax expense in 2022 compared to $42 million income tax benefit in 2021 from foreign currency and inflation effects and associated derivatives; and

?lower income tax benefits from flow-through items; offset by

                                       85

--------------------------------------------------------------------------------

Table of Contents

?$34 million income tax benefit in 2022 from the remeasurement of certain deferred income taxes; and

?$5 million favorable U.S. income tax impact from converting SI Partners from a corporation to a partnership in October 2021.

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

In the three months ended March 31, 2022, SDG&E's income tax expense increased
by $19 million (42%) compared to the same period in 2021 primarily due to higher
pretax income.

SoCalGas

In the three months ended March 31, 2022, SoCalGas' income tax expense decreased
by $10 million (11%) compared to the same period in 2021 primarily due to lower
pretax income partially offset by lower income tax benefits from flow-through
items.

Equity Earnings

In the three months ended March 31, 2022, equity earnings increased by $8 million (3%) to $326 million compared to the same period in 2021 primarily due to:

?$26 million higher equity earnings at Oncor Holdings primarily due to increased
revenues from rate updates to reflect increases in invested capital, higher
customer consumption and customer growth, offset by increased operating costs
and expenses attributable to invested capital; offset by

?$21 million lower equity earnings at IMG, primarily due to foreign currency
effects, including $12 million lower foreign currency gains on IMG's Mexican
peso-denominated loans from its JV owners, which is fully offset in Other
Income, Net, and higher income tax expense.

Earnings Attributable to Noncontrolling Interests

In the three months ended March 31, 2022, earnings attributable to NCI increased
by $1 million (3%) to $34 million compared to the same period in 2021 primarily
due to:

?$17 million increase as a result of a decrease in our ownership interest in SI Partners net of an increase in our ownership interest in IEnova; offset by

?$16 million primarily due to a decrease in SI Partners subsidiaries net income.

Preferred Dividends

In the three months ended March 31, 2022, preferred dividends decreased by $10
million to $11 million compared to the same period in 2021 primarily due to the
conversion of all series B preferred stock in July 2021.

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. 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.

                                       86

--------------------------------------------------------------------------------

Table of Contents

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 ended March 31, 2022, the
change in our earnings as a result of foreign currency translation rates was
negligible compared to the same period in 2021.

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 March 31,

                                                        2022                 2021                       2022                2021
Other income, net                                  $         38          $      35                $         (13)         $    (49)
Income tax expense                                         (334)              (158)                         (70)               42
Equity earnings                                             326                318                          (12)               19
Net income                                                  657                928                          (95)               12
Earnings attributable to noncontrolling interests           (34)               (33)                          20                (9)
Earnings attributable to common shares                      612                874                          (75)                3

CAPITAL RESOURCES AND LIQUIDITY

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" in the Annual Report.

Liquidity

We expect to meet our cash requirements through cash flows from operations,
unrestricted cash and cash equivalents, borrowings under or supported by our
credit facilities, issuances of debt, distributions from our equity method
investments, 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 operations in both the short-term and long-term, including
to:

?finance capital expenditures

?repay long-term debt

?fund dividends

?meet liquidity requirements

?fund capital contribution requirements

?fund expenditures related to the natural gas leak at SoCalGas' Aliso Canyon natural gas storage facility

                                       87

--------------------------------------------------------------------------------

Table of Contents

?repurchase shares of our common stock

?fund new business or asset acquisitions or start-ups

Sempra, SDG&E and SoCalGas 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, through public offerings registered with the SEC, or through private
placements of debt supported by our revolving credit facilities in the case of
commercial paper. 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
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 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 goal to maintain our
investment-grade credit ratings.

Available Funds

Our committed lines of credit provide liquidity and support commercial paper.
Sempra, SDG&E and SoCalGas each have five-year credit agreements expiring in
2024, SI Partners has a three-year credit agreement expiring in 2024 and IEnova
has committed lines of credit that expire in 2023 and 2024. In addition, IEnova
and ECA LNG Phase 1 have uncommitted revolving credit facilities that expire in
2022 and 2023.

AVAILABLE FUNDS AT MARCH 31, 2022
(Dollars in millions)
                                             Sempra       SDG&E       

SoCalGas

Unrestricted cash and cash equivalents(1) $ 2,519 $ 528 $ 613 Available unused credit(2)

                    7,922       1,500            750

(1) Amounts at Sempra include $106 held in non-U.S. jurisdictions. We discuss repatriation in Note 1 of the Notes to Condensed Consolidated Financial Statements in this report and Note 8 of the Notes to Consolidated Financial Statements in the Annual Report.

(2)  Available unused credit is the total available on committed and uncommitted
lines of credit that we discuss in Note 7 of the Notes to Condensed Consolidated
Financial Statements. 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. SDG&E and SoCalGas use short-term debt primarily to meet working capital needs. Commercial paper and lines of credit were our primary source of short-term debt funding in the first three months of 2022.

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

Significant issuances of and payments on long-term debt in the first three months of 2022 included the following:

                                       88

--------------------------------------------------------------------------------

Table of Contents

LONG-TERM DEBT ISSUANCES AND PAYMENTS
(Dollars in millions)
                                                                                Amount at
Issuances:                                                                       issuance              Maturity

Sempra 3.30% fixed rate notes                                                 $       750                      2025
Sempra 3.70% fixed rate notes                                                         500                      2029
SDG&E variable rate term loan                                                         200                      2024
SDG&E 3.00% first mortgage bonds                                                      500                      2032
SDG&E 3.70% first mortgage bonds                                                      500                      2052
SoCalGas 2.95% fixed rate notes                                                       700                      2027
Sempra Infrastructure variable rate notes                                              51                      2025
Sempra Infrastructure 3.25% fixed rate notes                                          400                      2032

Payments:                                                                        Payments              Maturity
SDG&E 1.914% amortizing first mortgage bonds                                           17                      2022
Sempra Infrastructure amortizing variable rate notes                                   11                      2022

We discuss our long-term debt activities, including the use of proceeds on long-term debt issuances, 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 three months of 2022.

CREDIT RATINGS AT MARCH 31, 2022

                                           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 the imposition of financial
and/or other burdensome covenants and 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 March 31, 2022.

Loans with Affiliates

At March 31, 2022, Sempra had $626 million in loans due from unconsolidated affiliates and $309 million in loans due to unconsolidated affiliates.

Sempra California

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, which also supports their commercial paper programs,
cash flows from operations, and debt issuances will continue to be adequate to
fund their respective current operations and planned capital expenditures.
Additionally, as we discuss below, Sempra elected to make an equity contribution
to SoCalGas in 2021 and may elect to make additional equity contributions in the
future that are intended to maintain SoCalGas' approved capital structure in
connection with settlement activity associated with the Leak. SDG&E and

                                       89

--------------------------------------------------------------------------------

Table of Contents

SoCalGas manage their capital structures 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 or refunded in rates through billings to
customers.

COVID-19 Pandemic Protections

SDG&E and SoCalGas 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 and at the direction of the CPUC, SDG&E
and SoCalGas implemented a number of measures to assist customers, including
automatically enrolling residential and small business customers with past-due
balances in long-term repayment plans.

In 2021, SDG&E and SoCalGas applied, on behalf of their customers, for financial
assistance from the California Department of Community Services and Development
under the California Arrearage Payment Program, which provided funds of
$63 million and $79 million for SDG&E and SoCalGas, respectively. In the first
quarter of 2022, SDG&E and SoCalGas received and applied the amounts directly to
eligible customer accounts to reduce past due balances.

SDG&E

Authorized Cost of Capital, Subject to the CCM

As we discuss in Note 4 of the Notes to Condensed Consolidated Financial
Statements, in December 2019, the CPUC approved the cost of capital for SDG&E
and SoCalGas that became effective on January 1, 2020 and will remain in effect
through December 31, 2022, subject to the CCM.

For the measurement period that ended September 30, 2021, the CCM would trigger
for SDG&E, if the CPUC determines that the CCM should be implemented, 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%. In
August 2021, SDG&E filed an application with the CPUC to update its cost of
capital effective January 1, 2022 through December 31, 2022 due to the ongoing
effects of the COVID-19 pandemic rather than have the CCM apply. In December
2021, the CPUC established a proceeding to determine if SDG&E's cost of capital
was impacted by an extraordinary event such that the CCM should not apply. If
the CPUC finds that there was not an extraordinary event, the CCM would be
effective retroactive to 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. If the CPUC
finds that there was an extraordinary event, it will then determine whether to
suspend the CCM for 2022 and preserve SDG&E's current authorized cost of capital
or hold a second phase of the proceeding to set a new cost of capital for 2022.
SDG&E expects to receive a final decision in the second half of 2022. In
December 2021, the CPUC granted SDG&E the establishment of memorandum accounts
effective January 1, 2022 to track any differences in revenue requirement
resulting from the interim cost of capital decision expected in 2022.

We further discuss the CCM in "Part I - Item 1A. Risk Factors" in the Annual Report.

Wildfire Fund

The carrying value of SDG&E's Wildfire Fund asset totals $353 million at March 31, 2022. We describe the Wildfire Legislation and related accounting treatment and SDG&E's commitment to make annual shareholder contributions to the Wildfire Fund through 2028 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 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 an impairment charge against
earnings when there is a reduction of the available coverage due to recoverable
claims from any of the participating IOUs. PG&E has indicated that it will seek
reimbursement from the Wildfire Fund for losses associated with the Dixie Fire,
which burned from July 2021 through October 2021 and was reported to be the
largest single wildfire (measured by acres burned) in California history. If any
California electric IOU's equipment is determined to be a cause of a fire, it
could have a material

                                       90

--------------------------------------------------------------------------------

Table of Contents

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 results of operations, financial condition, cash flows and/or
prospects.

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 costs. The proposed recovery would be incremental to wildfire costs
currently authorized in its GRC and would be subject to reasonableness review.
In May 2022, the CPUC issued a final decision denying SDG&E's request and
directing SDG&E to file for the review and recovery of its wildfire mitigation
plan costs through its next GRC or a separate application.

Off-Balance Sheet Arrangements

SDG&E has entered into PPAs and tolling agreements that are variable interests
in unconsolidated entities. We discuss variable interests in Note 1 of the Notes
to Condensed Consolidated Financial Statements.

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.

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 March 31, 2022, SoCalGas
estimates certain costs related to the Leak are $3,314 million (the cost
estimate). This cost estimate may increase significantly as more information
becomes available. At March 31, 2022, $2,052 million of the cost estimate is
accrued in Reserve for Aliso Canyon Costs and $4 million of the cost estimate is
accrued in Deferred Credits and Other on SoCalGas' and Sempra's Condensed
Consolidated Balance Sheets. Sempra elected to make an $800 million equity
contribution to SoCalGas in September 2021 and may elect to make additional
equity contributions in the future that are intended to maintain SoCalGas'
approved capital structure in connection with settlement activity associated
with the Leak. Sempra does not expect to issue common equity to fund any such
equity contributions.

Except for the amounts paid or estimated to settle certain legal and regulatory
matters, the cost estimate does not include (i) any amounts necessary to resolve
claims of Individual Plaintiffs who do not agree to participate in the
settlement of the Individual Actions or members of the Property Class Action who
opt out of that settlement or (ii) 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. The costs or losses not
included in the cost estimate could be significant and could have a material
adverse effect on SoCalGas' and Sempra's results of operations, financial
condition, cash flows and/or prospects.

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 March 31, 2022, we recorded the
expected recovery of the cost estimate related to the Leak of $360 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 $919 million of insurance proceeds we received through March 31, 2022. 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

                                       91

--------------------------------------------------------------------------------

Table of Contents

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
could have a material adverse effect on SoCalGas' and Sempra's results of
operations, financial condition, cash flows 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 component 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 March 31, 2022, the Aliso Canyon natural gas storage facility had a net book
value of $894 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.

Franchise Agreement

In December 2021, the Los Angeles City Council awarded SoCalGas a new, 21-year
natural gas franchise following an invitation for bids, which was approved and
signed by the City of Los Angeles mayor in January 2022. The 21-year term
consists of an initial 13-year term from the effective date, followed by an
8-year term that the City of Los Angeles has the option to terminate. Among
other conditions, the new franchise agreement was subject to CPUC approval of
the rates and surcharges therein for it to become effective, which SoCalGas
received in March 2022. Consistent with its terms, the new agreement went into
effect on May 1, 2022, until which time SoCalGas continued to serve customers
located in the City of Los Angeles in accordance with the agreement that expired
on December 31, 2021, by operation of law.

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 reduce the cash available to us for other purposes, increase our
indebtedness and ultimately materially adversely affect our results of
operations, financial condition, cash flows and/or prospects. Oncor's ability to
make distributions may be limited by factors such as its credit ratings,
regulatory capital requirements, increases in its capital plan, debt-to-equity
ratio approved by the PUCT and other restrictions and considerations. In
addition, Oncor will not make distributions 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.

Off-Balance Sheet Arrangement

Our investment in Oncor Holdings is a variable interest in an unconsolidated entity. We discuss variable interests in Note 1 of the Notes to Condensed Consolidated Financial Statements.

Sempra Infrastructure

Sempra Infrastructure expects to fund capital expenditures, investments and
operations in part with available funds, including credit facilities, and cash
flows from operations of the Sempra Infrastructure businesses. We expect Sempra
Infrastructure will require additional funding for the development and expansion
of its portfolio of projects, which may be financed through a combination of
funding from the parent and minority interest owners, bank financing, issuances
of debt, project financing and partnering in JVs.

In December 2021, we entered into an agreement to sell a 10% NCI in SI Partners
to ADIA for cash proceeds of $1.8 billion, subject to adjustments. We expect the
transaction will close in the second quarter of 2022. We intend to use the
expected proceeds from the sale to ADIA to help fund incremental capital
expenditures at Sempra California and Sempra Texas Utilities, to repay

                                       92

--------------------------------------------------------------------------------

Table of Contents

commercial paper borrowings used to repurchase $750 million in shares of our
common stock ($300 million of which was completed in the fourth quarter of 2021,
$200 million of which was completed in the first quarter of 2022 and $250
million of which was completed in the second quarter of 2022), and further
strengthen our balance sheet. Our ability to complete the ADIA transaction is
subject to a number of risks, including, among others, the ability to obtain
regulatory and third-party approvals and satisfy other customary closing
conditions. If we are not able to obtain these approvals and satisfy all other
closing conditions in a timely manner or on satisfactory terms, then the
proposed transaction may be abandoned and/or our prospects for Sempra
Infrastructure and, in turn, Sempra's results of operations, financial
condition, cash flows and/or prospects could be materially adversely affected.

Following the closing of the ADIA transaction, Sempra, KKR and ADIA would
directly or indirectly own a 70%, 20%, and 10% interest, respectively, in SI
Partners. The agreed sale of NCI in SI Partners to ADIA would reduce our
ownership interest in SI Partners and require us to involve a new minority
partner in making certain business decisions. Moreover, the decrease in our
ownership of SI Partners also decreases our share of the cash flows, profits and
other benefits these businesses currently or may in the future produce.

LNG and Net-Zero Solutions

Cameron LNG JV Liquefaction Expansion Project (Phase 2). Cameron LNG JV is
developing a proposed expansion project that would add one liquefaction train
with an expected maximum production capacity of approximately 6.75 Mtpa and
would increase the production capacity of the existing three trains through
debottlenecking activities. The Cameron LNG JV site can accommodate additional
trains beyond the proposed Phase 2 project.

Cameron LNG JV previously received major permits and FTA and non-FTA approvals
associated with a potential expansion which included up to two additional
liquefaction trains and up to two additional full containment LNG storage tanks.
In January 2022, Cameron LNG JV filed 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. The amendment, if
approved, would also change the design from a two-train gas turbine expansion to
a one-train electric drive expansion along with other design enhancements that,
together, are expected to result in a more cost-effective and efficient
facility, while also reducing overall greenhouse gas emissions.

Sempra Infrastructure and the other Cameron LNG JV partners, namely affiliates
of TotalEnergies SE, Mitsui & Co., Ltd. and Japan LNG Investment, LLC, a company
jointly owned by Mitsubishi Corporation and Nippon Yusen Kabushiki Kaisha, have
entered into an HOA for the potential development of the Phase 2 project. The
HOA provides a commercial framework for the proposed project, including the
contemplated allocation to Sempra Infrastructure of 50.2% of the projected
fourth train production capacity and 25% of the projected debottlenecking
capacity from the project under tolling agreements. The HOA contemplates the
remaining capacity to be allocated equally to the existing Cameron LNG JV Phase
1 customers. Sempra Infrastructure plans to sell the LNG corresponding to its
allocated capacity from the proposed Phase 2 project under long-term sale and
purchase agreements prior to making a final investment decision. The HOA is a
preliminary, non-binding arrangement. The ultimate participation of and offtake
by Sempra Infrastructure, TotalEnergies SE, Mitsui & Co., Ltd. and Japan LNG
Investment, LLC remain subject to negotiation and finalization of definitive
agreements, among other factors, and the HOA does not commit any party to
participate in, or enter into definitive agreements with respect to, the Phase 2
project.

Sempra Infrastructure, the other Cameron LNG JV partners, and Cameron LNG JV
have entered into a Project Development Agreement under which Sempra
Infrastructure, subject to certain conditions and ongoing approvals by the
Cameron LNG JV board, will manage and lead the Phase 2 development work up to a
final investment decision by Cameron LNG JV.

Cameron LNG JV, upon the unanimous approval of the Cameron LNG JV board, awarded
two Front-End Engineering Design (FEED) contracts, one to Bechtel Energy Inc.
and the other to a joint venture between JGC America Inc. and Zachry Industrial
Inc. At the conclusion of the resulting competitive FEED process, one contractor
is expected to be selected to be the EPC contractor for the proposed Phase 2
project.

In connection with the execution of the Phase 2 Project Development Agreement
and the award of the FEED contracts, the Cameron LNG JV board unanimously
approved an expansion development budget to fund, subject to the terms of the
Project Development Agreement, development work necessary to prepare for a
potential final investment decision.

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, scope restrictions on expansion of
the project unless appropriate prior consent is obtained from the existing
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. Sempra
Infrastructure is working under the framework established in the Phase 2 Project
Development

                                       93

--------------------------------------------------------------------------------

Table of Contents

Agreement and targeting completing the FEED work in the summer of 2023 and
expects to be in a position to make a final investment decision shortly
thereafter. The timing of when or if Cameron LNG JV will receive approval from
the FERC to amend its permits and from the existing project lenders to conduct
the expansion under its financing agreements is uncertain, and there is no
assurance that Sempra Infrastructure will complete the necessary development
work or that the Cameron LNG JV members will unanimously agree in a timely
manner or at all on making a final investment decision, 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,
including approval from the FERC for amendments to existing permits; securing
certain consents under the existing financing agreements and securing sufficient
new financing; negotiating and completing suitable commercial agreements,
including a definitive EPC contract and definitive Cameron LNG JV tolling 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.

ECA LNG Liquefaction Export Projects. Sempra Infrastructure is developing two
separate natural gas liquefaction export projects at its 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, but have planned measures to limit
disruption of operations should any arise. 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, when 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.

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 TotalEnergies SE for approximately 1.7 Mtpa of LNG. In December
2020, an affiliate of TotalEnergies SE acquired a 16.6% ownership interest in
ECA LNG Phase 1, with Sempra Infrastructure retaining an 83.4% 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, Technip Energies has been working 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 $392 million was
outstanding at March 31, 2022. 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 Sempra

                                       94

--------------------------------------------------------------------------------

Table of Contents

Infrastructure 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 results of operations, financial condition, cash flows and/or
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 Infrastructure 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 Infrastructure 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. In February 2020, Sempra Infrastructure filed an
application with the DOE to permit LNG produced from a second phase of the
proposed Port Arthur LNG facility to be exported to all current and future FTA
and non-FTA countries.

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 if and when the
project is completed. In February 2020, Sempra Infrastructure filed a FERC
application for the siting, construction and operation of a second phase of 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. 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 to proceed. On April 8, 2022, we entered into an
agreement with Bechtel to provide a revised proposal for the EPC contract price
and the EPC schedule for the proposed Port Arthur LNG liquefaction project.
Bechtel is scheduled to issue this revised proposal in August 2022 for Sempra
Infrastructure's consideration. Any agreement on such an amendment to the EPC
contract by both parties or on favorable terms to Sempra Infrastructure cannot
be assured.

We are progressing the development of the proposed Port Arthur LNG liquefaction
export project and we are evaluating the optimal project design and structure as
well as the potential timing for a final investment decision taking into account
market demands given the current geopolitical environment and our ongoing
discussions with prospective LNG buyers and equity investors. We also continue
to evaluate overall opportunities to develop the entirety of the Port Arthur
site as well as potential design changes for the proposed LNG project that could
reduce overall emissions, including a facility design utilizing electric drives,
renewable power sourcing and other technological solutions, which may apply to
future expansions.

Development of the Port Arthur LNG liquefaction export project is subject to a
number of risks and uncertainties, including obtaining customer commitments;
identifying suitable project partners; completing the required commercial
agreements, such as equity acquisition and governance agreements, LNG sales
agreements and gas supply and transportation agreements; completing construction
contracts, including an amendment to the EPC contract with Bechtel; securing and
maintaining all necessary permits and approvals; obtaining financing and
incentives, such as obtaining property tax abatement; 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 results of operations, financial condition,
cash flows and/or 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.

Vista Pacifico LNG Liquefaction Export Project. Sempra Infrastructure is
developing Vista Pacifico LNG, a potential natural gas liquefaction, storage,
and mid-scale export facility proposed to be located in the vicinity of
Topolobampo in Sinaloa, Mexico, under an MOU with the CFE that contemplates the
negotiation of definitive agreements that would cover development of Vista
Pacifico LNG, as well as a separate natural gas regasification project in La Paz
Baja California Sur, and the potential re-routing of a portion of the Guaymas-El
Oro segment of the Sonora pipeline and resumption of its operations through
mutual agreements between the CFE and the Yaqui tribe. The MOU is a preliminary,
non-binding arrangement. The proposed LNG export terminal would be supplied with
U.S. natural gas and would use excess natural gas and pipeline capacity on
existing pipelines in Mexico with the intent of helping to meet growing demand
for natural gas and LNG in the Mexican and Pacific markets. In November 2020,
Sempra Infrastructure filed an application with the DOE to permit the export of
natural gas to Mexico and for LNG produced from the proposed Vista Pacifico LNG
facility to be re-exported to all current and future FTA and non-FTA countries.
In April 2021, the DOE granted Vista Pacifico's LNG export authorization
application for FTA countries.

In March 2022, TotalEnergies SE and Sempra Infrastructure entered into an MOU
that contemplates TotalEnergies SE potentially contracting approximately
one-third of the long-term export production of the proposed Vista Pacifico LNG
project and potentially participating as a minority partner in the project. The
MOU is a preliminary, non-binding arrangement. The ultimate

                                       95

--------------------------------------------------------------------------------

Table of Contents

participation of and offtake by TotalEnergies SE remain subject to negotiation
and finalization of definitive agreements, among other factors, and
TotalEnergies SE has no commitment to participate in, or enter into an offtake
agreement with respect to, the Vista Pacifico LNG project unless such definitive
agreements are established.

The development of the potential Vista Pacifico LNG project (as well as the
other projects subject to the MOU with the CFE discussed above) is subject to
numerous risks and uncertainties, including securing binding customer
commitments; obtaining and maintaining a number of permits and regulatory
approvals; securing financing; identifying suitable project partners;
negotiating and completing suitable commercial agreements, including definitive
EPC contracts, 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. For a
discussion of these risks, see "Part I - Item 1A. Risk Factors" in the Annual
Report.

Hackberry Carbon Sequestration Project. Sempra Infrastructure is developing the
potential Hackberry carbon sequestration project near Hackberry, Louisiana. This
proposed project in development is designed to permanently sequester carbon
dioxide from Cameron LNG JV. In the third quarter of 2021, Sempra Infrastructure
filed an application with the U.S. Environmental Protection Agency for a Class
VI carbon injection well to advance this project.

The development of the potential Hackberry carbon sequestration project is
subject to numerous risks and uncertainties, including obtaining required
consents from the Cameron LNG JV partners, securing binding customer
commitments; identifying suitable project partners; obtaining and maintaining a
number of permits and regulatory approvals; securing financing; negotiating and
completing suitable commercial agreements, including a definitive EPC contract,
and 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.

Off-Balance Sheet Arrangements. Our investment in Cameron LNG JV is a variable
interest in an unconsolidated entity. We discuss variable interests in Note 1 of
the Notes to Condensed Consolidated Financial Statements.

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, scheduled to occur in 2039, or replenishment of the amount withdrawn by
Sempra Infrastructure from the SDSRA. We discuss this guarantee in Note 6 of the
Notes to Condensed Consolidated Financial Statements.

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 Consolidated Financial Statements in the Annual
Report.

Energy Networks

Construction Projects. Sempra Infrastructure is currently constructing
additional terminals for the receipt, storage, and delivery of liquid fuels in
the vicinity of Puebla and Topolobampo. 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 Sempra Infrastructure'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 Sempra
Infrastructure's custody. In addition, in November 2021, the CRE notified Sempra
Infrastructure of the commencement of an administrative proceeding for revoking
the storage permit at the Puebla terminal due to alleged breach of its terms and
conditions. Although Sempra Infrastructure 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, the outcome of the administrative proceeding or whether the facility
will be able to commence commercial operations. If the terminal were to be shut
down, storage permits were to be revoked 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. We expect to finalize construction and start commissioning
activities of the Topolobampo project in the second quarter of 2022 and to
commence commercial operations in the second half of 2022, subject to the
receipt of certain pending permits. 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.

Sempra Infrastructure is also developing terminals for the receipt, storage, and delivery of liquid fuels in the vicinity of Manzanillo and Ensenada.

                                       96

--------------------------------------------------------------------------------

Table of Contents

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 Infrastructure is continuing to monitor the
impacts of the COVID-19 pandemic on cash flows and results of operations.

Clean Power

Construction Projects. ESJ completed construction and began commercial
operations of a second, 108-MW wind power generation facility on January 15,
2022. This second wind power generation facility is fully contracted by SDG&E
under a long-term PPA expiring in 2042.

In March 2022, TotalEnergies SE and Sempra Infrastructure entered into an MOU
that provides a framework for cooperation in the development of North American
renewable energy projects. The MOU includes the potential acquisition by Sempra
Infrastructure of a target of 30% of TotalEnergies SE's 80% equity interest in a
proposed offshore wind project in California that is under development, which
would result in an acquisition of 24% of the total equity interest in the
project, and the potential acquisition by TotalEnergies SE of a targeted 30%
equity interest in certain renewable and energy storage development projects
that are under development by Sempra Infrastructure in Northern Mexico. The MOU
is a preliminary, non-binding arrangement. The ultimate participation of
TotalEnergies SE and/or Sempra Infrastructure remain subject to negotiation and
finalization of definitive agreements, among other factors, and TotalEnergies SE
and Sempra Infrastructure have no commitment to participate in any or all these
projects unless such definitive agreements are established.

Acquisition of ESJ. As we discuss in Note 5 of the Notes to Condensed Consolidated Financial Statements, in March 2021, Sempra Infrastructure increased its ownership interest in ESJ from 50% to 100% by acquiring Saavi Energía's 50% equity interest in ESJ.

Legal and Regulatory Matters

See Note 11 of the Notes to Condensed Consolidated Financial Statements for discussions of the following legal and regulatory matters affecting our operations in Mexico:

Energía Costa Azul

?  Land Disputes

? Environmental and Social Imp act Permits

One or more unfavorable final decisions on these land disputes or environmental
and social impact permit 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, results of operations, financial condition,
cash flows and/or prospects.

Sonora Pipeline

?  Guaymas-El Oro Segment

? Sasabe-Puerto Libertad-Guaymas Segment

Our investment in the Guaymas-El Oro segment of the Sonora pipeline could be
subject to impairment if Sempra Infrastructure is unable to make certain repairs
(which have not commenced) or re-route a portion of the pipeline (which has not
been agreed to by the parties, but is subject to negotiation pursuant to a
non-binding MOU, as described above) and resume operations in the Guaymas-El Oro
segment of the Sonora pipeline or if Sempra Infrastructure terminates the
contract and is unable to obtain recovery. In addition, the failure to stay the
court judgment nullifying Sempra Infrastructure's right-of-way easement for a
portion of the Sasabe-Puerto Libertad-Guaymas segment of the Sonora pipeline
pending the resolution of Sempra Infrastructure'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. Any such occurrence 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

?  Transmission Rates for Legacy Generation Facilities

?  Offtakers of Legacy Generation Permits

?  Amendments to Mexico's Electricity Industry Law

?  Amendments to Mexico's Hydrocarbons Law

                                       97

--------------------------------------------------------------------------------

Table of Contents

Sempra Infrastructure and other parties affected by these resolutions, orders,
decrees, regulations and proposed amendments to Mexican law have challenged them
by filing amparo and other claims, some of which have been granted injunctive
relief. The court-ordered injunctions or suspensions provide temporary relief
until Mexico's federal district court or Supreme Court ultimately resolves the
amparo and other claims. An unfavorable decision on one or more of these amparo
or other challenges, the potential for extended disputes, or the possibility of
future reforms to the energy industry through further amendments to Mexican
laws, rules or the constitution may impact our ability to operate our facilities
at existing levels or at all, may result in increased costs for Sempra
Infrastructure and its customers, may adversely affect our ability to develop
new projects, may result in decreased revenues and cash flows, and may
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,
results of operations, financial condition, cash flows and/or prospects.

SOURCES AND USES OF CASH

The following tables include only significant changes in cash flow activities for each of our registrants.

CASH FLOWS FROM OPERATING ACTIVITIES
(Dollars in millions)
Three months ended March 31,                                      Sempra             SDG&E            SoCalGas
2022                                                            $  1,607          $    670          $     741
2021                                                               1,502               396                799
Change                                                          $    105          $    274          $     (58)

Change in accounts receivable                                   $    266

$ (34) $ 252 Net increase in Reserve for Aliso Canyon Costs, current and noncurrent, due to $93 higher accruals offset by $5 higher payments

                                                       88                                   88
Change in regulatory liabilities                                      43                42
Change in customer deposits                                           38                11                 28
Change in net margin posted at Sempra Infrastructure                  29

Increase in seasonal liability related to temporary last-in, first-out liquidation in 2022 primarily due to changes in natural gas inventory value

                                28                                   28
Change in inventory                                                   13                18                (50)

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

                    (9)              174               (183)

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

                                                 (12)               35                 36

Proceeds received in 2021 from Insurance Receivable for Aliso Canyon

                                                         (31)                                 (31)
Change in income taxes receivable/payable, net                      (148)               35               (108)
Change in accounts payable                                          (184)               (8)              (137)
Other                                                                (16)                1                 19
                                                                $    105          $    274          $     (58)



CASH FLOWS FROM INVESTING ACTIVITIES
(Dollars in millions)
Three months ended March 31,                                    Sempra             SDG&E            SoCalGas
2022                                                          $ (1,290)         $   (552)         $    (468)
2021                                                            (1,301)             (555)              (459)
Change                                                        $     11          $      3          $      (9)

Acquisition of 50% interest in ESJ in March 2021 for $79, net of $14 of cash and cash equivalents acquired $ 65 (Increase) decrease in capital expenditures

                        (23)         $      3          $      (9)
Higher contributions to Oncor Holdings                             (35)
Other                                                                4
                                                              $     11          $      3          $      (9)


                                       98

--------------------------------------------------------------------------------

Table of Contents

CASH FLOWS FROM FINANCING ACTIVITIES
(Dollars in millions)
Three months ended March 31,                                    Sempra             SDG&E            SoCalGas
2022                                                          $  1,638          $    385          $     303
2021                                                              (407)              (94)              (141)
Change                                                        $  2,045          $    479          $     444

Higher issuances of long-term debt                            $  3,483          $  1,195          $     697
Lower payments on long-term debt and finance leases              1,054      

199

Higher issuances of short-term debt with maturities greater than 90 days

                                               438
(Higher) lower common dividends paid                               (48)                                  25
Distributions to KKR in 2022                                       (53)
Higher repurchases of common stock                                (189)
Higher payments for commercial paper and other
short-term debt with maturities greater than 90 days            (1,009)     

(375)

Change in borrowings and repayments of short-term debt,
net                                                             (1,652)             (531)              (272)
Other                                                               21                (9)                (6)
                                                              $  2,045          $    479          $     444

Capital Expenditures, Investments and Acquisitions

EXPENDITURES FOR PP&E, INVESTMENTS AND ACQUISITIONS
(Dollars in millions)
                                               Three months ended March 31,
                                                     2022                   2021
SDG&E                                   $          552                    $   555
SoCalGas                                           468                        459
Sempra Texas Utilities                              85                         50
Sempra Infrastructure                              182                        231
Parent and other                                     2                          1
Total                                   $        1,289                    $ 1,296


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 2022, we expect to make capital expenditures and
investments of approximately $6.2 billion (which excludes capital expenditures
that will be funded by unconsolidated entities), as we discuss in "Part II -
Item 7. MD&A - Capital Resources and Liquidity" in the Annual Report.

CRITICAL ACCOUNTING ESTIMATES

Management views certain accounting estimates 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 critical accounting estimates in
"Part II - Item 7. MD&A" in the Annual Report.

NEW ACCOUNTING STANDARDS

We discuss the recent accounting pronouncements that have had or may have a significant effect on our financial statements and/or disclosures in Note 2 of the Notes to Condensed Consolidated Financial Statements.

                                       99

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses