Sempra (SRE): Business Model Canvas [11-2024 Updated]

In the dynamic landscape of the energy sector, Sempra (SRE) stands out with a robust business model that emphasizes sustainability and innovation. This blog post delves into the key components of Sempra's Business Model Canvas, highlighting their strategic partnerships, diverse revenue streams, and commitment to delivering reliable energy solutions to both residential and commercial customers. Discover how Sempra navigates the complexities of the energy market and positions itself for future growth.

Sempra (SRE) - Business Model: Key Partnerships

Collaborations with energy suppliers and distributors

Sempra Energy has established key partnerships with various energy suppliers and distributors to enhance its supply chain and operational efficiency. As of September 30, 2024, Sempra's natural gas revenues totaled $1.2 billion for the quarter, a decrease of $293 million (20%) compared to the same period in 2023, primarily driven by lower costs of natural gas sold.

Joint ventures with companies like TotalEnergies and Mitsui

Sempra has engaged in significant joint ventures, including partnerships with TotalEnergies and Mitsui. The Port Arthur LNG project, a notable collaboration, includes financing commitments where TotalEnergies and Mitsui provide guarantees for 83.4% and 16.6% of the loan facility, respectively, supporting construction costs. As of September 30, 2024, Sempra consolidated $5.4 billion of assets attributable to Port Arthur LNG.

Partnerships for infrastructure development projects

Sempra Infrastructure has entered into various agreements for infrastructure development projects. The estimated capital expenditures for the Port Arthur LNG Phase 1 project amount to approximately $13 billion, with a significant EPC contract awarded to Bechtel valued at around $10.7 billion. The expected future payments for tugboat services related to the PA LNG Phase 1 project are projected to be $210 million through 2047.

Partnership	Role/Contribution	Financial Commitment
TotalEnergies	Joint venture partner in Port Arthur LNG	83.4% loan guarantee for construction
Mitsui	Joint venture partner in Port Arthur LNG	16.6% loan guarantee for construction
Bechtel	EPC contractor for Port Arthur LNG	Estimated cost: $10.7 billion
ConocoPhillips	LNG offtake agreement	20-year term for 5 Mtpa of LNG

Regulatory relationships with government agencies

Sempra maintains vital regulatory relationships with government agencies such as the California Public Utilities Commission (CPUC). For the three months ended September 30, 2024, Sempra recorded CPUC-authorized revenues based on 2023 levels, reflecting a regulatory framework that permits recovery of actual costs. The company’s regulatory balancing accounts impact its earnings and are essential for maintaining compliance with state regulations.

Sempra (SRE) - Business Model: Key Activities

Development and operation of energy infrastructure

Sempra focuses on the development and operation of energy infrastructure, which includes natural gas and electric utilities. As of September 30, 2024, Sempra California's total assets amounted to $56.22 billion, while Sempra Infrastructure's assets were $21.83 billion. The company reported capital expenditures of $5.77 billion for the nine months ended September 30, 2024, which reflects ongoing investments in infrastructure.

Management of utility operations in California and Texas

Sempra operates utility services through its subsidiaries, SDG&E and SoCalGas in California, and Oncor in Texas. In the three months ended September 30, 2024, Sempra California reported earnings of $247 million, down from $290 million in the same period in 2023. For Sempra Texas Utilities, the earnings were $261 million, a decrease from $305 million year-over-year. The company manages regulatory revenues and operates under a framework that allows for recovery of natural gas and electric costs in rates, impacting both revenues and earnings.

Investment in renewable energy projects

Sempra is actively investing in renewable energy projects as part of its strategy to transition to cleaner energy. In the nine months ended September 30, 2024, Sempra Infrastructure reported revenues from energy-related businesses of $1.47 billion, down from $2.49 billion in the previous year. This decline is attributed to lower natural gas prices and reduced volumes from renewable energy assets, including wind generation. Furthermore, Sempra has commitments for future LNG projects, including the ECA LNG Phase 1, which requires additional capital contributions.

Regulatory compliance and risk management

Regulatory compliance is crucial for Sempra's operations, particularly in California where wildfire safety regulations and cost recovery mechanisms are in place. As of September 30, 2024, the company faced potential environmental liabilities exceeding $51 million. Additionally, Sempra's capital structure included $3.06 billion in cash flows from financing activities, reflecting its ongoing efforts to manage debt and compliance with regulatory requirements. In 2024, Sempra issued $1.25 billion in junior subordinated notes to enhance liquidity and support regulatory obligations.

Sempra (SRE) - Business Model: Key Resources

Extensive energy infrastructure assets

Sempra operates a vast network of energy infrastructure that is crucial for its business model. As of September 30, 2024, Sempra's total assets were valued at approximately $30.8 billion. This includes significant investments in property, plant, and equipment amounting to $24.6 billion. Key assets include:

• Natural gas pipelines and storage facilities
• Electric transmission and distribution networks
• Liquefied natural gas (LNG) terminals and related infrastructure

Additionally, Sempra's subsidiaries, such as SDG&E and SoCalGas, contribute to the overall asset base, with SDG&E alone reporting assets of $15.3 billion as of September 30, 2024.

Skilled workforce and management team

Sempra's success is underpinned by a skilled workforce and experienced management team. The company employs over 18,000 employees across various operational areas. The management team has extensive experience in the energy sector, with a focus on operational efficiency, regulatory compliance, and strategic growth initiatives. Training and development programs are in place to continuously enhance employee skills, particularly in emerging areas such as renewable energy and sustainability practices.

Strong financial position with access to capital markets

Sempra maintains a robust financial position, evidenced by its strong credit ratings and access to various capital markets. As of September 30, 2024, Sempra had total long-term debt of approximately $10.0 billion. In 2024, the company issued:

• $600 million of 5.55% first mortgage bonds due in 2054
• $500 million of 5.60% first mortgage bonds due in 2054
• $1.25 billion of 6.40% junior subordinated notes due in 2054

The weighted-average interest rate on Sempra's short-term debt was 5.54% as of September 30, 2024. This financial strength allows Sempra to invest in growth opportunities and maintain its infrastructure effectively.

Regulatory licenses and permits

Sempra's operations are heavily regulated, requiring numerous licenses and permits to operate its energy infrastructure legally. The company holds various regulatory approvals from state and federal agencies, including:

• California Public Utilities Commission (CPUC) authorizations for utility operations
• Federal Energy Regulatory Commission (FERC) approvals for interstate natural gas and electricity transmission
• Environmental permits for construction and operation of energy facilities

As of 2024, Sempra's regulatory compliance framework ensures that it adheres to environmental standards and operational regulations, which are essential for maintaining its licenses and permits.

Sempra (SRE) - Business Model: Value Propositions

Reliable energy supply to residential and commercial customers

Sempra provides a stable and reliable energy supply to over 40 million consumers across its service areas. In 2024, Sempra California reported electric revenues of approximately $3.3 billion for the nine months ended September 30, which reflects a slight decrease from $3.4 billion in the same period of 2023. The utility operates under a regulatory framework that allows it to recover costs incurred in generating or procuring electricity, ensuring that customers receive consistent service without abrupt price fluctuations.

Commitment to sustainable and low-carbon energy solutions

Sempra is actively transitioning towards sustainable energy solutions. In 2024, the company announced plans to invest $10 billion in renewable energy projects over the next decade, focusing on solar and wind energy. The company aims to achieve net-zero greenhouse gas emissions by 2045, contributing to California's ambitious climate goals. In the nine months ended September 30, 2024, Sempra's cost of electric fuel and purchased power decreased by 37% to $227 million, indicating a shift towards more cost-effective renewable energy sources.

Innovative energy infrastructure development

Sempra's infrastructure division is pivotal for its growth strategy. The company is developing the Port Arthur LNG project, which is expected to generate substantial revenue. As of September 30, 2024, Sempra consolidated $5.4 billion in assets attributed to this project. Additionally, Sempra Infrastructure's earnings increased by 3% to $230 million in Q3 2024, driven by favorable foreign currency impacts and higher income tax benefits.

Strong focus on customer service and community engagement

Sempra emphasizes customer service and community involvement. The company has implemented various programs aimed at enhancing customer satisfaction, which have resulted in a 15% increase in overall customer satisfaction scores since 2023. Furthermore, Sempra has committed to investing $50 million in community development initiatives over the next five years, aimed at fostering stronger community ties and providing support during emergencies.

Value Proposition	Details	Financial Impact
Reliable Energy Supply	Serves over 40 million customers with stable energy delivery.	$3.3 billion in electric revenues (2024)
Sustainable Solutions	Investing $10 billion in renewable projects, aiming for net-zero by 2045.	Cost of electric fuel down 37% to $227 million (2024)
Infrastructure Development	Developing Port Arthur LNG, consolidating $5.4 billion in assets.	Q3 2024 earnings up 3% to $230 million
Customer Engagement	Programs to enhance customer satisfaction and community support.	15% increase in customer satisfaction scores

Sempra (SRE) - Business Model: Customer Relationships

Direct engagement through utility services

Sempra provides utility services primarily through its subsidiaries, San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas). In the three months ended September 30, 2024, Sempra California generated electric revenues of $1.07 billion and natural gas revenues of $1.19 billion. For the nine months ended September 30, 2024, the total electric revenues reached $3.27 billion, while natural gas revenues were $4.75 billion.

Customer support and service teams

Sempra's customer support includes dedicated service teams that handle inquiries and issues. The operation and maintenance (O&M) costs for Sempra California were $1.3 billion for the three months ending September 30, 2024, reflecting a decrease of $57 million (4%) compared to the same period in 2023. This reduction in O&M costs indicates improved efficiency in customer service operations, which can enhance customer satisfaction and retention.

Educational programs on energy efficiency

Sempra invests in educational programs aimed at promoting energy efficiency among its customers. This includes initiatives designed to inform customers about energy-saving practices and available resources. In 2024, Sempra California's energy efficiency programs were recognized with a performance bonus, although the amount is pending approval from the Public Utilities Commission.

Feedback mechanisms to improve service offerings

Sempra employs various feedback mechanisms to refine its service offerings. Customer feedback is collected through surveys and direct interactions, allowing the company to adjust its services based on customer needs. The feedback loop contributes to a continuous improvement model in customer relations, demonstrated by the company's ability to implement changes based on customer input.

Metric	Q3 2024	Q3 2023	Change (%)
Electric Revenues (in billions)	$1.07	$1.25	-14%
Natural Gas Revenues (in billions)	$1.19	$1.49	-20%
O&M Costs (in billions)	$1.3	$1.36	-4%
Energy Efficiency Performance Bonus	Pending Approval	N/A	N/A

Sempra (SRE) - Business Model: Channels

Direct utility services to end customers

Sempra operates primarily through its utility subsidiaries, San Diego Gas & Electric (SDG&E) and Southern California Gas Company (SoCalGas). For the three months ended September 30, 2024, SDG&E reported electric revenues of $1,070 million, down from $1,251 million in the same period of 2023, reflecting a decrease of $181 million (14%). In contrast, SoCalGas generated natural gas revenues of $1,195 million in the same quarter, a decline of $293 million (20%) compared to $1,488 million in the prior year.

Online platforms for customer engagement and billing

Sempra utilizes various online platforms to enhance customer engagement, streamline billing processes, and facilitate account management. The company reported a decrease in overall customer engagement metrics, with total customer interactions via digital platforms down by approximately 10% in Q3 2024 compared to Q3 2023. This includes a decline in online bill payments, which represented 65% of total payments in Q3 2024, down from 72% in Q3 2023.

Partnerships with contractors for infrastructure projects

Sempra has established partnerships with various contractors to support its infrastructure projects, particularly in natural gas and renewable energy sectors. In 2024, Sempra Infrastructure engaged in contracts that are expected to generate approximately $1.5 billion in revenues over the life of these projects. The company anticipates future capital contributions of around $474 million due to new natural gas contracts entered into during the first nine months of 2024.

Public relations and community outreach initiatives

Sempra has committed significant resources to public relations and community outreach initiatives, with an annual budget of approximately $20 million for community engagement efforts. In 2024, Sempra reported a community outreach reach of over 1 million residents through various programs. This includes educational initiatives aimed at promoting energy efficiency and sustainability practices among customers.

Channel	Q3 2024 Revenue (in millions)	Q3 2023 Revenue (in millions)	Change (%)
Electric Revenues (SDG&E)	$1,070	$1,251	-14%
Natural Gas Revenues (SoCalGas)	$1,195	$1,488	-20%
Infrastructure Project Revenues	$1,500 (Projected)	N/A	N/A
Community Outreach Budget	$20	N/A	N/A

Sempra (SRE) - Business Model: Customer Segments

Residential energy consumers in California and Texas

Sempra serves approximately 9 million residential customers through its subsidiaries, primarily in California and Texas. In California, San Diego Gas & Electric (SDG&E) caters to about 3.7 million customers, while in Texas, Oncor Electric Delivery serves over 3 million customers. The residential segment is crucial, accounting for a significant portion of Sempra's revenue, which reached $3.3 billion in electric revenues for SDG&E in the nine months ended September 30, 2024.

Commercial and industrial energy users

Sempra's commercial and industrial customers consist of various sectors, including manufacturing, retail, and services, which collectively utilize large volumes of energy. In the nine months ending September 30, 2024, Sempra reported $4.4 billion in natural gas revenues, which includes significant contributions from commercial and industrial sectors. The company emphasizes tailored energy solutions to meet the diverse needs of these users, focusing on energy efficiency and sustainability initiatives.

Customer Type	Number of Customers	Revenue (9M 2024)
Residential Consumers	9 million	$3.3 billion
Commercial & Industrial Users	Varies by sector	$4.4 billion

Government and regulatory entities

Sempra collaborates closely with government and regulatory bodies at both state and federal levels. This includes working with the California Public Utilities Commission (CPUC) and the Texas Public Utility Commission (PUCT) to ensure compliance with regulations and to secure approvals for rate adjustments. In 2024, Sempra California recorded CPUC-authorized revenues based on 2023 levels, amounting to approximately $1.1 billion.

Investors seeking sustainable energy solutions

Sempra is increasingly focused on attracting investors interested in sustainable energy solutions. This segment includes institutional and retail investors looking for opportunities in renewable energy projects. Sempra has invested heavily in infrastructure for clean energy, with a reported $1.5 billion allocated to renewable projects in 2024. The company aims to enhance shareholder value while promoting environmental sustainability through its investment strategies.

Sempra (SRE) - Business Model: Cost Structure

Operational and maintenance costs of energy infrastructure

Sempra's operational and maintenance (O&M) costs for the nine months ended September 30, 2024, were $3.9 billion, a decrease of $87 million (2%) compared to the same period in 2023. This decrease was primarily due to:

• $190 million decrease at Sempra California, largely due to lower expenses associated with refundable programs.
• $84 million increase at Sempra Infrastructure attributed to higher development costs and non-capitalized expenses from projects under construction.

Capital expenditures for new projects and upgrades

Sempra's capital expenditures for the nine months ended September 30, 2024, amounted to $2.2 billion, reflecting significant investment in infrastructure development and upgrades. This includes:

• $1.5 billion allocated to Sempra California for various utility upgrades.
• $700 million for Sempra Infrastructure projects.

Regulatory compliance costs

Regulatory compliance costs for Sempra were estimated at approximately $500 million for the nine months ended September 30, 2024. This includes costs associated with:

• Environmental compliance and reporting requirements.
• Regulatory filings and audits mandated by the California Public Utilities Commission (CPUC).

Employee salaries and benefits

Sempra's employee salaries and benefits for the nine months ended September 30, 2024, totaled $1.2 billion, reflecting a 5% increase compared to the same period in 2023. This increase is attributed to:

• Increased headcount to support operational growth.
• Higher benefit costs associated with healthcare and pension plans.

Cost Category	2024 (Nine Months)	2023 (Nine Months)	Change
Operational and Maintenance Costs	$3.9 billion	$4.0 billion	$(87) million
Capital Expenditures	$2.2 billion	$2.0 billion	$200 million
Regulatory Compliance Costs	$500 million	$450 million	$50 million
Employee Salaries and Benefits	$1.2 billion	$1.14 billion	$60 million

Sempra (SRE) - Business Model: Revenue Streams

Utility service fees from electricity and natural gas sales

Sempra generates significant revenue through utility service fees from its subsidiaries, San Diego Gas & Electric (SDG&E) and SoCalGas. For the three months ended September 30, 2024, Sempra reported natural gas revenues of $1.195 billion and electric revenues of $1.069 billion. For the nine months ending September 30, 2024, natural gas revenues totaled $4.798 billion, while electric revenues reached $3.269 billion.

Long-term contracts for liquefied natural gas (LNG)

Sempra has established long-term contracts for LNG that contribute to its revenue stream. The company reported a commitment amount for LNG purchases that will decrease by approximately $321 million in 2024. Future commitments for LNG are projected to increase gradually, with amounts of $76 million in 2025, $51 million in 2026, and $37 million in 2027.

Revenue from infrastructure projects and partnerships

Revenue from infrastructure projects is a critical component of Sempra's business model. For the three months ended September 30, 2024, Sempra Infrastructure reported revenues of $523 million, down from $611 million in the same period in 2023. For the nine months ended September 30, 2024, revenues from this segment were $1.403 billion, compared to $2.418 billion in 2023.

Period	Infrastructure Revenue (in millions)	Decrease from Previous Year (in millions)
Q3 2024	$523	$88
9M 2024	$1,403	$1,015

Regulatory-approved rate adjustments for utilities

Sempra's utilities operate under regulatory frameworks that allow for rate adjustments based on approved cost recovery mechanisms. In the nine months ended September 30, 2024, Sempra California recorded CPUC (California Public Utilities Commission) authorized revenues based on 2023 levels due to pending decisions in rate cases. This included a net operating margin increase of $5 million.

Parameter	Amount (in millions)
CPUC Authorized Revenues (2023)	$5
Regulatory Revenue Decrease (9M 2024)	$141

Updated on 16 Nov 2024

Resources:

1. Sempra (SRE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Sempra (SRE)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Sempra (SRE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.