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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day and welcome to the Sempra Second Quarter Earnings Call. Today's conference is being recorded. And at this time, I'd like to turn the conference over to Nelly Molina. Please go ahead.
Good morning, everyone. And welcome to our Second Quarter 2021 Earnings call for Sempra. A live webcast of this teleconference and this live presentation is available on our website under the Investors section.
On the line with us today, we have several members of our management team, including Jeff Martin, Chairman, and Chief Executive Officer, Trevor Mihalik, Executive Vice President, and Chief Financial Officer, Justin Bird, Chief Executive Officer of Sempra LNG, Allen Nye, Chief Executive Officer of Oncor, Kevin Sagara, Group President, and Peter Wall, Senior Vice President, Controller and Chief Accounting Officer.
Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statement we make today.
The factors that could cause our actual results to differ materially are discussed in the Company's most recent 10-K and 10-Q filed with the SEC. All of the earnings per share amounts in our presentation are shown on a diluted basis, and we'll be discussing certain non-GAAP financial measures.
Please refer to the presentation of slides that accompany this call for a recompilation to GAAP measures. I'd also like to mention that forward-looking statements contained in this presentation speak only as of today over the 5th 2021, and the Company does not assume any obligation to update or revise any of these forward-looking statements in the future.
With that, please, turn to Slide 4, and let me hand the call over to Jeff.
Thank you, Nelly. I want to start today by thanking those that attended our virtual Investor Day this past June, and also mention that the team and I really enjoyed getting back on the road this past month and seeing many of you in person.
As we discussed at our Investor Day, we've simplified our business model, narrowed our investment strategy to attractive markets and improved Capital discipline. All with the goal of offering a competitive value proposition, including consistent and attractive returns, strong Earnings visibility in EPS growth, and a sustainable and growing dividend.
Additionally, at the Investor Day, Allen Nye highlighted the robust growth that Oncor continues to see all across its service territory. And as a result, Oncor is increasing its Capital plan, which Trevor describes in further detail later in today's presentation. Shifting now to the quarter, I'm pleased with our financial results.
And I think it's a testament to the affirmative steps we've taken to simplify our business model and focus our capital investments on top-tier infrastructure growth platforms. We're reporting strong earnings and affirming both our increased 2021 adjusted EPS guidance range and our 2022 EPS guidance range.
I'm excited about the progress we've made so far this year, and I'm proud of the broad support we're seeing all across our operating businesses. Now, please turn to the next slide, where I'll turn the call over to Trevor to provide both business and financial updates.
Thanks, Jeff. To begin, we have had several positive developments at our operating companies this past quarter. At SDG&E in July, we received CPUC approval for our 2021 Wildfire Mitigation Plan Update, building on the Utilities' long-standing commitment to advance fire hardening and public safety. SoCalGas began flowing renewable natural gas at two additional biomethane projects in support of their goal to provide 20% RNG to core customers by 2030 to help the state reach its de-carbonization goals.
In Texas, Oncor has provided visibility to their 2022 to 2026 projected Capital plan, which has increased to approximately $14 billion over the five-year period. Additionally, Oncor did receive PUCT approval to extend its rate case filing deadline to June 1, 2022.
At Sempra Infrastructure, we completed the exchange offer for IEnova's shares, resulting in a 96.4% ownership interest. And we plan to launch a cash tender offer for the remaining 3.6% interest. We're also advancing the sale of the non-controlling interest and Sempra Infrastructure Partners to KKR.
And while I may have been a bit optimistic at Investor Day, we now expect to close the transaction around the end of the Third Quarter, subject to the Mexican Competition Commission completing its economic and market analysis and issuing the regulatory approval.
With that, please turn to the next slide for more details around Oncor's capital plan update. Oncor continues to operate in one of the fastest-growing states with strong macro fundamentals.
As a result, Oncor is announcing its 2022 to 2026 projected capital plan of approximately $14 billion dollars, nearly a $2 billion dollar increase over the 2021 to 2025 capital plan. Furthermore, Oncor is increasing its 2021 to 2022 Capital plan by approximately $425 million, consistent with what Allen outlined at the Investor Day and is largely incorporated in the new $14 billion five-year capital plan.
Oncor's robust Capital plan supports the economic development seen throughout its service territory, increases in generation interconnection requests, strong premise growth, and investments in grid resiliency.
A good example of this robust growth can be seen in new relocations, expansions, and electric service to Oncor system, which are on pace to exceed 2020 values by 70% and to exceed 2019 values by 170%. Please turn to the next slide where I will review the financial results.
Earlier this morning, we reported Second Quarter 2021 GAAP earnings of $424 million or $1.37 per share. This compares to Second Quarter 2020 GAAP earnings of $2 billion, $239 million, or $7.61 per share.
On an adjusted basis, Second Quarter 2021 earnings were $504 million, or $1.63 per share. This compares to our Second Quarter of 2020 adjusted earnings of $501 million, or $1.71 per share.
On a year-to-date basis, 2021 GAAP earnings were one billion, two hundred and ninety-eight million dollars or $4.24 per share. This compares to year-to-date 2020 GAAP earnings of two billion, nine hundred ninety-nine million dollars or $9.91 per share.
Adjusted year-to-date 2021 Earnings were one billion, four hundred and four million dollars or $4.58 per share. This compares to our year-to-date 2020 adjusted Earnings of one billion, two hundred and forty-two million dollars or $4.20 per share. Please turn to the next slide.
The variance in the Second Quarter 2021 adjusted earnings compared to the same period last year, was affected by the following key items: a $126 million from a CPUC decision that resulted in the release of a regulatory liability at the California utilities in 2020 related to prior years forecasting differences that are not subject to tracking in the income tax expense memorandum account, and $22 million of lower earnings due to the sale of our Peruvian and Chilean businesses in April and June of 2020 respectively.
This was more than offset by $38 million higher equity earnings from the Cameron LNG JV, primarily due to Phase 1 achieving full commercial operations in August of 2020. $35 million of lower losses at Parents and Other, primarily due to lower preferred dividends and lower net interest expense, $34 million of higher income tax benefits from forecasted flow-through items at SDG&E and SoCalGas, and $22 million income tax benefit in 2021 from the re-measurement of certain deferred income taxes at Sempra LNG.
Please turn to the next slide. We are pleased with our strong operational and financial performance this quarter and are focused on continuing to execute throughout the remainder of the year. And with that, this concludes our prepared remarks. Now, I will stop, and we can take your questions.
Thank you. [Operator instructions]. We'll pause for just a moment to allow everyone to signal they have a question. Thank you. We'll now take the first question from Shar Pourreza of Guggenheim Partners. Please go ahead.
Hi, everyone.
Good morning, Shar.
Jeff, could you maybe just talk a little bit about the visibility into '22? I mean, you obviously -- you and Trevor reiterated guidance. There is more Capex coming into Texas, which includes some contemporaneous recovery.
Can you maybe talk about the other moving pieces or changes in assumptions for '22, i.e. maybe cost of Capital, anything else that could move you in the range or actually incremental to the range?
Right I would start Shar by indicating that we're very pleased with our first half results to be able to produce $4.58 of adjusted EPS from the first half, I think is an extraordinary outcome. And that does cause us to be fairly bullish against our increased guidance for 2021 that we certainly think there will be some pull-through of that strength into 2022.
And I think it's a function of the growth that we're seeing in front of all three platforms. I think there's a portfolio of opportunities here in California and in Texas and Sempra Infrastructure, which really highlights why we need to perform and execute well.
I could not be more pleased. We obviously did this transaction back in March of 2018 with Oncor. We forecasted internally with our board that there would be increased capital opportunities. We were pleased that the time that they had a $7.4 billion commitment to their regulator, about their capital program.
In November of 2017, they launched a great CIS program. What we were not prepared for was the quality of that management team. Allen Nye is on the call with us today, Don Clevenger, who is the CFO, Matt Henry, the General Counsel, and Jim Greer, the COO.
They are knocking the socks off of it. Now, prioritizing what we think is most important at Sempra, which is strength of operations and safety. More to your point on what we can expect next year, you did raise cost of Capital. We talked a little bit about that at the Analyst conference.
And in our assumptions for 2022, we indicated that we did not expect in those assumptions to include any type of triggering at SDG&E or SoCalGas but we did mention, Shar, that there is a trigger to occur which looks more likely now, it would probably be limited only to SDG&E and within the confines of that business, Kevin Sagara and his team thinks that they can limit the impact to that forward guidance to roughly 5 to 10 cents.
So I would just summarize by saying the first half of this year causes great optimism for our performance, even against the increased guidance we provided for this year. I will be disappointed if we're not back in front of our investors, taking an increased view of what our performance might be in 2021, we do expect some of that pull-through to continue into 2022.
We're obviously not prepared to revise the guidance for 2022 yet, largely because its cost of capital mechanism is still out there. But we think at least at SDG&E it's well managed to something around $0.05 to $0.10 of impact.
Perfect, I think that message is pretty clear. Thank you for that, Jeff. And then, just on -- I mean, you set clean path on LNG at the Analyst Day.
Since then, some contracts have been moved over from Port Arthur. Do you anticipate Cameron Train 4 is now close to being fully subscribed between existing MOU s and the Polish Oil? And as a follow-up, can you characterize if the economics of Cameron 4 are better than Port Arthur? And is there a way to make Port Arthur more competitive to potentially get the off-take interest back to that site? Thank you.
Sure. Let me take a step back and take a little broader view, and I'll come right back to your question. We talked a little bit at Investor Day about how our focus right now is on making sure that ECA Phase 1 is delivered on time and on budget.
We have that coming into our planning period in the second half of 2024, and that's proceeding quite well. We've been managing the COVID environment down there and the work environment. And we remain optimistic about continuing to meet that deadline.
Secondly, I think we have been consistent, really, over the last 18 months about continuing to have a more bullish view on Cameron Expansion. We're working closely with Mitsui, Mitsubishi, and Total, where we continue to have those conversations throughout the fall. We do think that project will have superior returns, which is one of the questions you are indicating.
And that's largely because at a high level, you can always expect the economics of Brownfield Projects to be generally superior to Greenfield Projects. And the key for Greenfield Projects like Port Arthur, is it's much more advantageous to do that project at multiple phases at scale, which makes it increasing more economic.
But right now, bringing online Train 4 at Cameron is a top priority for Justin and [Indiscernible] on the team. And being able to do that, Shar, at the same time that you debottleneck trains 1, 2, and 3, really adds to its cost advantage. And you mentioned Port Arthur; that continues to be a remarkably well-situated site.
The team is going to ground right now to make it more competitive, and we've outlined some of the steps we're taking to reduce the emissions profile. And I think the recent announcement regarding the Polish Oil & Gas Company, really it's a reflection of the strength number 1 of that customer relationship, and their confidence in our ability to deliver them into a project that meets their long-term needs.
I think that relationship is in good stead. I certainly think ECA 1 is going well. We continue to be quite bullish on Cameron Expansion, and Port Arthur is probably a longer-term opportunity, but we have more work to be done there.
Perfect. That's very clear. Thanks so much, Jeff. Congrats.
Thanks. Thanks, Shar.
We'll now take the next question from Jeremy Tonet of JPMorgan. Please go ahead.
Good morning, Jeremy.
Hi. Good morning. Thanks for having me here. Just want to start off if you might be able to talk a bit about timing considerations that went into the choice to raising Oncor Capex now versus at the Analyst Day or waiting until 3Q? And then could you help us think through some of the limitations might be to add even more Capital, just given all the opportunities down there in Texas?
Well, I think there's a series of questions there and let me try to take them, [Indiscernible] and then Allen, I'll pass it to you to provide some more color, but let me just start with a couple of highlight points. Number one, Jeremy, the growth that we're talking about and the adjustments to the capital program are really around, number 1, strong premise growth, number 2, active transmission interconnection requests, primarily focused on renewables and some baseload generation, and new T&D investments.
In terms of the timing around revising our plan, we had a board meeting with Oncor last week. Allen is very good about bringing back to the board, not only the approval of next year's plan for 2022. We've taken the opportunity to review longer-term, what the opportunity really was to meet some of the growth needs in Texas.
We feel quite bullish about that opportunity. I would add one final comment. We've seen some questions earlier this morning, but the raised expectation that Allen's team has put forward -- they've also got a press release out that provides more detail -- does not impact the continued expectation of incremental Capital in the $775 million range to 1.27 billion.
We've had the opportunity to reevaluate the needs of that business and the needs of our customers over the next 5 years. We'll go into the fall planning cycle with the view toward updating our Board in October -- in November. But I thought the opportunity here was really one of providing our latest view as transparently as possible to the street.
Allen, I know covered a number of these points, but I think if you don't mind, talk a little bit more detail about the growth that you're seeing across your system and maybe your approach to governance with your Board last week.
Yeah, thanks, Jeff, and thanks, Jeremy. I think Jeff covered it to a large degree, but let me just give you a little bit of color. With regards to why now, it's exactly what Jeff said. You know why? I mentioned at the Investor Day that we had a need to go to our board in July to increase our expectations for 2022 in order to get ahead of the game to make sure we have the resources and the equipment to actually execute next year.
And so as Jeff said, we did that, we raised 22 from what we previously said was 2.4 to 2.5, up to 2.8. We also took this opportunity to let you all know that we are seeing some opportunities this year and so we've upped our 2021 from 2.4, which is what we previously had told you all, to 2.5. And then just given the fact that we're going to go ahead, and talking about increasing '21 and '22, we had the opportunity to discuss with our board.
Thanks for seeing some of this growth that Jeff is talking about. And so we've been spending a lot of time on Capex here at Oncor because of what we're seeing. And what we're seeing is, to Jeff's point, and Trevor talked about it earlier, premise growth last year, we had the largest organic growth rate ever in our Company 's history.
And we're on pace this year through two quarters. Both quarters this year were higher than the corresponding quarters last quarter -- last year. Transmission points of interconnection on both the retail and the generation side are above the levels end-of-year last year and above the similar quarters of last year.
Economic development, which I think is in Trevor's earlier remarks -- economic development is another thing we look at. Requests for information which are basically project location-specific discussions we're having with potential builders are up 72% approximately year-over-year. And then always talk about West Texas when we're talking about growth.
The West Texas story continues to be really strong. The latest trend is electrification of fields, people considering ESG ramifications, emissions. So we're getting some uptick there, but we have another peak on our Culberson Loop transmission system in July.
It hit 760 megawatts versus 678 last year. That's an all-time high. Another peak in the Far West Texas weather zone in June. So we're seeing growth all over our system, really strong, which leads to these Capex discussions we're having.
And since I told you all at the Investor Call, our investor meeting, that we're going to address '22 with our board in July. And since we've adjusted '21 up, we thought now is a good opportunity to just provide you all with our expectations of the management team of what we're seeing with regards to those outer years. And those outer years, as you can see in our documents are, we're looking at 2.7 to 3.0 for the 4 years of the -- outer years of the plan.
And that's our expectation right now. But as Jeff said, we're going to go into October like we always do, and have our meeting on our 5-year plan with our shareholders, with our independent directors, and with our board. And we're going to review the information available to us at that time, and we'll have a number then.
It may be 14, it may be something else, so we feel very good about 14 right now. And we'll see where we are when we get to October, and we'll have something to announce after that. To Jeff's point as well, we added about 1.8 billion to our 5-year expectation right now.
The incremental capital that we have talked about in previous meetings and investor calls in the range of 775 to 1,275, which I think is on page 45 of the Investor Day the last time we talked. That remains available. We have -- sometimes, new projects from that incremental bucket into our Capex plans.
Sometimes, we have Capex that comes from outside that incremental bucket, and it goes into our plan. But notwithstanding the fact that we've raised to, right now, our expectation to around 14 billion over 5.
They are significant, they remain significant opportunities to invest on our system. And those additional opportunities are in part reflected in that incremental Capex bucket that we've discussed before. I'd be glad to answer any questions, but thanks a lot.
I would just mention that I appreciate that color, Allen. And for your benefit, Jeremy, remember we as a management team and our Board of Directors underwrote a transaction in the fall of 2017 and we closed it March of 2018, based on the belief that they had made a regulatory commitment to spend roughly $7.4 billion over five years, or roughly $1.48 billion a year on average.
And now we're outlining something that looks like on the back end of the plan, that could be looking more like $3 billion a year. That's an almost doubling of the average output in terms of Capex at that Company, so we're very pleased with the growth in the state. And I think Allen and his team have a great plan to meet that growth in a way which is the most cost-effective for ratepayers.
Got it. That was very helpful. Thank you for the thorough answer there. Maybe if I could just pivot to RNG here, if that's okay. Just want to see if you could provide some color on how California customer demand for RNG has been trending over time.
And do you see any kind of policy or regulatory items that you're watching that could support the 20% goal for 2030? And then maybe, even though RNG has negative carbon attributes, how do you see competing for customers versus the electrification? Do you see customers choosing one path or the other?
Look, I think if we're going to meet our long-term climate goals as a nation, we need on all the above strategy. Electrification is going to be a long-term secular trend. We certainly have the opportunity to play that in a big way, just as Allen described.
In Texas, we expect to be a leader in that market in connecting renewable grid solutions to our -- to load centers. Here in California, we did something that no one else has done across this country. We made a commitment that we would deliver roughly 20% of all of the natural gas delivered on the SoCalGas system, not 2030 using renewable natural gas.
You may have seen the press release in the last week or so. We just connected 2 new biomethane plants to our systems. So whether it's a transportation opportunity, whether it's a maritime opportunity, or an opportunity to basically deliver renewable natural gas across our network; it's a priority.
We have set a goal of being at the 5% level next year. We remain on track to hit that goal. Scott Drew and his team are doing a hell of a job at SoCalGas to transform that business. And by doing so, as you know, exogenous methane in environment has an 80 times higher detriment than gas which is combusted in the ordinary course.
And there has been some exciting developments in terms of how the Commission and the other stakeholders in the state view RNG. I thought maybe Kevin Sagara as our Group President for California could talk about the recent report that came out of the PUC regarding this.
Yeah, I think -- Thank you, Jeremy, for that question. And yeah, as you might expect, we've had a great run so far with the low carbon fuel standard in this state creating a good amount of demand for RNG buttering through to go to the next level and help meet the state's very ambitious climate goals.
We saw that the legislature passed SB-1440. And then recently the PUC staff -- this PUC energy division issued a staff report recommending, essentially an RPS for RNG for the California Utilities. And really, the levels are based on the California statutory obligation to divert organic waste from landfills.
So when you look out to 2025, they're supposed to procure the utilities -- are supposed to procure biomethane from organic at least equal to about 75% of the state's obligation to divert this wastes from landfills, which is about 5.5% of core load. To my 2030, that goes up to about 12.3% of core load. You asked about creating more demand, that would be a good opportunity. That stack of work hasn't yet been active on, but we are hopeful it does shortly.
That's why I think we are glad you asked the question because it really is a priority to our Company. And I think that Scott Drew and the team continue to innovate at SoCalGas. We have opportunity to be a leader in RNG. We've also made some commitments, as you've seen Jeremy, to be a leader in hydrogen.
Got it. Super helpful. If I could slip in one last quick one here, just given some of the resource adequacy concerns that have come up this summer in California, what's your latest thinking on some of the Capital opportunities that might present themselves here?
Yes. This is a great opportunity to go back and talk about our base business model. We're a T&D Company. So one of the things that has privileged our commitment to California and our commitment to Texas is we've moved away from being an owner and operator of electric generation, either fossil or renewable, with exception of Mexico.
And likewise, we don't have a lot of exposure because we're decoupled on whether consumers consume more or less, so we very much like that sweet spot of building that long-term growing bond Portfolio and not being exposed to those issues. In terms of Capital opportunities, there has been a new announcement in the state where they're looking for 11.5 gigawatts of new capacity additions in terms of generation, energy efficiency, and long-duration storage.
And we certainly think long-duration storage in particular is a unique opportunity where we've developed a capability there at San Diego Gas Electric, and that will be a continued opportunity. But in the near term, the state is really being aggressive about making sure we find more needs -- more ways of supporting our resource adequacy.
And I think one of the great challenges, Jeremy, is traditionally during some of the highest demand times of the year, we're importing about 25% of the state's power needs from outside of California and it always makes us subject to what's taken place in those other jurisdictions and what their demand needs are. Over a long period of time, California's got to take steps, and it could take 5 to 7 years to get ahead of these demand needs through new capacity additions.
Got it. Makes sense. I'll leave it there. Thank you very much.
Appreciate you joining the call.
We'll now take the next question from Durgesh Chopra at Evercore ISI. Please go ahead.
Good morning.
Hey, good morning, Jeff. Thank you for taking my question. I have a --
No worries.
I have a clarification and then a follow-up question. Just -- I know you've talked about Oncor at gun, but just -- so the '21 to '25 Capex as it sits now, is it closer to 12.6 billion, 12.7 billion with the 400 million incremental. Is that the right way to think about it or is it still at 12.2?
That's the right way to think about it.
Got it. Okay. Perfect. And then just on SIP getting to the close here. Is -- you have a cash tender offer for the balance of like 4% that you currently don't own for Mexico. Do you have to get to a 100% to close SIP? I'm just thinking about what the -- is it more so a procedural delay in the SIP or does the Mexico -- like owning a 100% of the Mexico needs to get you to take that box before completing that transaction with KKR?
Yeah, I would think about it as two different disjunctive ideas here. Number 1, our long-term goal is to take the IEnova business platform private. As you've indicated, we -- there is still about 3.6%, which is floated to public investors.
And the process that we're following is to set up a cash tender process, which will happen over the next week or two with a view toward taking out that additional pri -- public float and delisting that business. If there's any remaining shares, we'll look to clean that up by a separate mechanism. In terms of closing, that's not really the pacing item for closing.
The pacing item for closing is there's a small number of CPs related to regulatory approvals, and right now we think the pacing item is the Competition Commission in Mexico. And once they finished their analysis, we think we will be in a position to close the transaction, which we're forecasting is around the end of Q3.
Got it. That's super helpful. Thank you, guys.
Thanks a lot for joining us.
We'll now take the next question from Michael Lapides at Goldman Sachs. Please go ahead.
Hey, guys. Thank you for taking my question. Just curious.
Hi, Mike.
Hi, Jeff. Commodity inputs are up a ton. How are you thinking about what this means for the construction cost per ton of any new LNG trains, whether it's Cameron 4 or somewhere else, that haven't already gone FID and don't have the lump-sum contracts? And therefore, what that means really for the economics of North American LNG versus LNG coming from other sources around the world?
Right. So, look, I think you're asking a great question. I think input cost to all infrastructure businesses are being impacted. You're also seeing it in other commodity costs as well. We probably have a multi-pronged strategy here.
I would tell you at ECA Phase 1 obviously we've got an EPC wrapped contract. We feel good about the contract at ECA, but that would be a near-term focus for us. In terms of input costs for future projects, that goes through our whole feed and pre-feed process to make sure we get to the right number.
But I think it does go back to this issue, Michael, that Greenfield Projects which tend to have a little bit of a higher per-unit costs in Brownfield Projects. This will continue to put pressure on that dichotomy. But keep in mind that all the other projects in the world are subject to those same cost pressures.
At the same time that you're seeing cost pressures around construction, you're still seeing a lot higher LNG stock prices around the world. And most people who are observing this industry think it will be the most dominant fuel used in the world by the early part of next decade.
And the only way that's going to occur is, is you are going to see a massive build-out of continued LNG development, and U.S. should expect to take its fair share.
Got it. Thank you, Jeff. Much appreciated. Hey, one for Allen. Just curious. What's the latest on being able to push out the rate case? And I guess a follow-on with the higher Capex budget, how do you think about what that means for regulatory lag?
Yeah, you bet Michael. The answer is yes. We received approval on July 29 by the Public Utility Commission to move our rate case filing deadline to 06/01/2022 of next year. So we're off the calendar for this year, and we're on the clock for 06/01/2022. Second question with regard to lag, and was lag associated with this additional investment; is that right?
Yeah, just -- if you raise Capex, do you -- does that also -- I know the trackers for distribution and transmission could capture much of that. But just curious about the forward versus historical-looking nature of those trackers, as well as what happens to other parts of the income statement that could drive regulatory lag?
Let me answer this way. 97 -- approximately 97% of everything in this plan that we have now, the 5-year plan, is tracker eligible. And those trackers -- as we talked about for the trackers decreased the lag on the transmission side, the interim key cost tracker decreases lag to about 5 months, approximately. While the distribution cost tracker, while it's good, is not quite as efficient and the lag on the distribution side is about 15 months. So about 97% of everything we've talked about this morning, that's a net 14 billion over five, the lag associated with that investment was generally consistent with these two periods of time that I've just described.
Got it. Thank you, Allen. Much appreciated.
Yes, sir. Thank you.
And I would just mention the following for the audiences that volume growth, which they are experiencing in Texas can also offset some of that lag in the regulatory model.
We'll now take the next question from Sophie Karp at KeyBanc Capital Markets. Please go ahead.
Hi. Thank you for taking my question. It's actually Sangeeta for Sophie.
What's the question?
She's [Indiscernible] for Sophie.
Just a couple follow-ups on the Texas Capex. Should we think of inflation as being any factor in the increase in the front-end of the Capex? And then, as a follow-up, my question is, does the recent Texas legislation build into your Capex at any point or do you see upside from that?
So what I would try to do is I'll answer the first part of the question and pass it onto you, Allen, for the legislative question. But the way to think about it Sophie is that, Allen and his team, particularly Jim Greer, deserve a lot of credit because as they've been looking at meeting the needs for 2021 and planning to meet both the hard costs and soft costs needs for 2022.
This is one of the reasons that the timing of these conversations with the board was moved forward. In other words, there are some inflationary and competitive pressures to access the equipment and materials they need to meet their growth needs in the state. And they deserve a lot of credit for being proactive to go ahead and secure and lap those resources well in advance.
But I don't think beyond that it's had any influence in terms of how we're thinking about the recast over 5 years. But Allen, maybe you could talk about the various builds are continuing to -- our pending in the legislature and how you might think about forward Capex related to those bills.
Yes, thanks, Jeff. I agree with that, the answer on the inflation. And with regards to legislation, there's 2 things to think about here. There's what was passed and has been signed by the Governor in the regular session, which has now to large degree, been shifted over to the PUC and to ERCOT.
There's over 30 Rulemakings presently going on at the Public Utility Commission that's basically going to set out how this legislation is going to be implemented. And then there are a number of bills that have been filed right now in special session.
So I'll address it this way. Special session, the governor did not include electric issues in the charge and -- in the call rather and the call is what limits the topics that can be addressed by the legislature. So we're monitoring what's going on with the legislature with these bills that relate to the electric industry, but we don't believe they're going anywhere without the charge or the call being changed, which we don't anticipate happening.
Our focus really is more on the activities of the PUC where the rulemakings are going on. I talked about this, I think during the Investor call, there are quite a few bills, a bunch of rulemakings, a lot of them have to do with PUC ERCOT issues, there is some coordination between agencies and industry participants, and then there's some general costs for weatherization and things like that.
We'll have to see, it's too early to predict, what's going to come out of those rulemakings. They are just at the beginning. But to the extent anything comes out of that, that would be incremental to what we have in our Capex plan right now.
The other thing that I mentioned in the investor call, there was another bill that was not related to winter storm Uri, but it added an economics benefit test to the transmission approval process at ERCOT. And we think that has the potential to potentially allow us to get more projects, economic projects through ERCOT, but again, we'll have to wait and see how that all shakes out before we'll know for sure. That's my answer. Thanks.
And Sangeeta, I just want to make sure we answered both of your questions. Did that answer for you?
Yes. Yes, if I can just add a follow-up, I share a different question. Now that we know that the Texas GRC is pushed to 2022 and otherwise their regulatory calendar kind of looks light through the end of the year, how would you characterize the Puts and Takes that could lead you to the high end of your 2021 guidance versus the low-end?
Well, I would just make a couple of comments. One was the movement of the Texas rate case was assumed in our planning numbers that we provided at the Investor Day. I made some comments earlier on this call that I could not be more pleased with the strength of our financial performance in the first 6 months to be able to post $4.58 of Adjusted EPS.
I think that really bodes well for the second half of this year. And I do expect, Sangeeta, some pull-through into 2022. And I mentioned one of the offsetting considerations was the cost of capital we talked about earlier.
Right. Okay. That answers my questions. Thanks so much.
Wonderful. Thank you for joining us.
We'll now take the next question from James Thalacker at BMO Capital Markets. Please, go ahead.
Good morning. James, you may be on mute.
Good morning, guys. Thank you for taking the call.
Good morning.
This might be a question for Allen. And I'm not putting the cart before the horse, but traditionally, T&D companies in Texas, have been viewed as a smaller risk, and the capital structures have reflected this. Over the last couple of years, we've obviously seen with the impact of the area and increased hurricane risk, and now we've got a new PUCT coming in. Has there been any discussion potentially about thinking the equity layer as the one way to beef up the credit in anticipation of maybe more widespread system hardening?
And Allen, I'll make a quick comment and turn it over to you, and I appreciate that question. I would just make one comment, which is, we as a management team have spent a lot of time in the last 3 years really trying to distinguish what we think is a unique benefit of T&D investments relative to other businesses that are either weather-exposed or consumer volume exposed or exposed to stranded cost risk with generation.
So as you think about in California, the blackouts that happened last summer, you think about how we operated through the pandemic here in California and in Texas, and you think about Storm Uri, which you referenced. All we've really done is raise our guidance and exceed our guidance. This is the strength of having a T&D model that we think gives us unique visibility to consistent financial performance.
So I just want to make that point because we talk very consistently about the value of the model that we're pursuing and why we think it deserves a higher valuation, and I think it really is very much true with the T&D business in Texas. Allen, feel free to go ahead and add some additional color around how you think about your equity layer.
Yes, sure. Thanks, Jeff. I agree. Look, I think our equity layer is lower than, maybe the national average. Things that are going on in other parts of the country. It's something we always look at when we're putting together a rate case. We're probably about, even with CenterPoint API right now. But now, we've got a little time going into June of next year.
Some will spend a lot of time on, figure out what we can accomplish. We have a long, long history, as I've said many times on these calls, of working with the -- all the constituents in our cases. And that was demonstrated again by the support we got for looking this rate case off. And we'll see what we can accomplish, yeah.
Uri, things like that, certainly impact our thoughts and our analysis, and -- but yeah, maybe cart -pull the horse a little bit right now, seeing as we won't go until June of next year. Thanks.
Okay. Great. Thanks, guys. Appreciate the thoughts.
Thanks, James.
[Operator instruction] We'll now take the next question from Paul Zimbardo with Bank of America. Please, go ahead.
Hi. Good morning. Thanks for taking the time.
Good morning.
I want to follow up after the significant Oncor Capex increase that you've talked all about. How should we think about the potential for share repurchases and just overall thoughts on the balance sheet targets that you've previously articulated?
I'll start with share repurchases. If you recall, Paul, that last summer we did an accelerated share repurchase program where we put to work about $500 million. I think the weighted average cost of that program was right around a $123 plus or minus.
The Board also supported a new authorization of $2 billion. And the way we've long time thought about this is, we're really stewards of capital for you, our owners. And whatever creates the best pass for owners, that's what we're going to do. So we have a current outstanding authorization, as I mentioned.
We actively review this as an opportunity from time-to-time, and we expect to be opportunistic in our approach. It's something that we continue to evaluate and it's something that we will use as we have in the past, opportunistically. In terms of the balance sheet, Trevor, you made some comments in terms of how you think about we ended last year in terms of FFO to debt and how you've grown the equity layer.
Yes, sure. Thanks, Jeff. Paul, as you know, last year we ended right around 70% on the FFO to debt, and we're still tracking around that plus or minus 1% and feel good about where we are on the metrics. We also talked about our debt to equity layer, and we're also at the end of the Second Quarter at sub 50% right now.
And again, we have the proceeds that will be coming in from the Sempra Infrastructure Partners transaction that we will be really utilizing to continue to shore up the balance sheet, and as Jeff says, looking at opportunities to deploy that in the most effective way for our shareholders. And we couldn't be more pleased about the opportunities around organic growth, share repurchases, or other opportunities to create shareholder value.
Okay, great. And thinking -- and just to follow up on Jeremy 's question about some of the resource adequacy concerns we've seen in the West. Are you seeing any opportunities potentially increase or accelerate within the plant? Some of those I believe was 2 billion of clean power investments you detailed at the Analyst Day.
Yeah. We talked about a couple of things. On Jeremy 's question, I was speaking more to what the investor on utility opportunity was. Obviously there are opportunities there around energy efficiency, primarily at SDG&E, the big focus on long-duration battery storage, which is desperately needed in the state.
And the state has circled at about an 11.5 gigawatt opportunity for new resources. What you're referring to is on the unregulated cyber business in Sempra Infrastructure. You'll recall that Justin Bird is leading three separate P&L 's with Tonya and the team, one of which is clean power. So we do have about three gigawatts of development opportunities on the border. And we did preview a very interesting project, by the way, at the Investor Day, which is our battery storage projects.
You may recall we have a combined cycle plant on the border. We've got 2 underutilized transmission systems that dispatch directly into the California Independent System Operator. And that thermal plant also has a second plant that was targeted 15 years ago for construction.
We've got all the transmission in place and that's been redesignated as a 500 megawatt opportunity for battery storage. So our goal is to be able to dispatch out of Northern Mexico with both wind and solar resources backed up and supported with its own resource adequacy from its battery production. You are making a great point. That is an opportunity we're going to be active to pursue it.
Okay. Thank you again for the time.
Thank you very much.
It appears there are no further questions at this time. Mr. Jeff Martin, I'd like to turn the conference back to you for any additional or question remarks.
Just a quick couple of comments here. As I know, it's a busy time of the year as people head into the summer vacation period, particularly on Wall Street but we look forward to seeing some of you in person at the Wolfe Conference in September.
Steve always runs a great conference and we're looking forward to being back on the road. Additionally, I would mention that we're going to do some virtual conferences with Goldman and Citi, as well as some NDRs this summer in Asia.
I hope everyone has a great rest of your summer and thank you again for joining us and feel free per custom to reach out to our IR team with additional questions. This concludes today's call.
That's it for today's call. Thank you for your participation. You may now disconnect.