Sempra Energy (SRE) Risk Analysis

Oncor operates in the electric utility industry and is subject to many of the same or similar risks as SDG&E and SoCalGas as we describe above under "Risks Related to All Sempra Businesses" and "Risks Related to Sempra California," particularly with respect to our operational risks, financial risks and specifically regulation by federal, state, and local legislative and regulatory authorities regarding rates and other financial and operational matters. Oncor is subject to a complex regulatory oversight structure with several different regulators, including the PUCT, FERC, North American Electric Reliability Corporation and Texas Reliability Entity, Inc. Oncor operates in the ERCOT market, which is subject to oversight by the PUCT and the Texas legislature, either of which could impose changes to the ERCOT market that could impact Oncor. In ERCOT, rates are set by the PUCT based on a historical test year, and as a result, the rates Oncor is allowed to charge generally will not exactly match its costs at any given point in time and it may not be able to timely or fully recover its actual costs and/or earn its full return on invested capital, particularly during periods of increased capital spending by Oncor, high inflation, or increases in interest rates, storm-related costs, and other operating costs relative to Oncor's most recent base rate review. Further, the levels and timing of any approved recovery could significantly differ from Oncor's requests. In addition to requests to recover its costs, Oncor's rate proceedings may contain other requests. Failure to receive approval of its requests in any rate proceeding could adversely impact Oncor, and those impacts could be material. The costs and burdens of complying with the various federal, state, and local legislative and regulatory requirements applicable to Oncor and adjusting Oncor's business and operations in response to legislative and regulatory developments, including changes in ERCOT, and any fines or penalties that could result from any noncompliance, may have a material adverse effect on Oncor. In addition, insufficient electric generation capacity within ERCOT or significant changes within ERCOT or to the ERCOT market structure that impact transmission and distribution utilities, including adverse publicity or public perception or additional regulatory requirements or oversight, could materially adversely affect Oncor. Moreover, legislative, regulatory, market or industry activities could adversely impact Oncor's collections and cash flows and jeopardize the predictability of utility earnings. For instance, in June 2025, legislation was signed into law to reduce regulatory lag on transmission and distribution capital investments through the UTM process, which we describe in "Part I – Item 1. Business – Ratemaking Mechanisms." Oncor anticipates filing a UTM on or after March 16, 2026 for eligible transmission and distribution investments placed into service after December 31, 2024 through December 31, 2025, and as a result has recorded regulatory assets for recoverable costs associated with those investments and recognized a corresponding amount in other regulated revenues. However, the PUCT has not finalized rules with respect to use of the UTM, and as a result any positions Oncor has taken with respect to interpreting the legislation could be revised as a result of the PUCT's final rules and interpretations, and such revisions could have a material adverse impact on our results of operations, financial condition, cash flows and/or prospects. Additionally, projected load growth across the ERCOT system could, if not sufficiently addressed through generation resources, system design and reliability measures, negatively impact electric infrastructure reliability and potentially cause system-wide stresses, which may be exacerbated by extreme weather events, climate-related conditions, wildfires, cyberattacks and other emergencies. Oncor is not a generator of electricity and has no control over the generation supply in ERCOT. If electricity generation is inadequate or disrupted, Oncor's electricity delivery services may be interrupted or diminished, which could have an adverse impact on our results of operations, financial condition, cash flows and/or prospects. Oncor is subject to periodic audits of its compliance with operations and critical infrastructure protection standards, including reliability and cybersecurity standards, as well as periodic inspections of its facilities for compliance with weatherization standards. Oncor is also required to report to the PUCT on its reliability and weather preparedness. If Oncor is found to be noncompliant with applicable reliability, service quality, weatherization or other standards, it could be subject to reputational harm, regulatory scrutiny or sanctions, including monetary penalties. If Oncor does not successfully manage these risks and respond to any other applicable legislative, regulatory, market or industry developments, Oncor could suffer a deterioration in its results of operations, financial condition, cash flows and/or prospects, which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. Financial Risks

As part of its bankruptcy proceedings, in 2016, EFH distributed all the outstanding shares of common stock of its subsidiary Vistra Corp. (formerly Vistra Energy Corp. and referred to herein as Vistra) to certain creditors of TCEH LLC (the spin-off), and Vistra became an independent, publicly traded company. Vistra's spin-off from EFH was intended to qualify for partially tax-free treatment to EFH and its shareholders under Sections 368(a)(1)(G), 355 and 356 of the U.S. Internal Revenue Code of 1986 (as amended) (collectively referred to as the Intended Tax Treatment). In connection with and as a condition to the spin-off, EFH received a private letter ruling from the IRS regarding certain issues relating to the Intended Tax Treatment, as well as tax opinions from counsel to EFH and Vistra regarding certain aspects of the spin-off not covered by the private letter ruling. In connection with the merger of EFH with a subsidiary of Sempra in 2018 (the Merger), EFH received a supplemental private letter ruling from the IRS and Sempra and EFH received tax opinions from their respective counsels that generally provide that the Merger will not affect the conclusions reached in, respectively, the IRS private letter ruling and tax opinions issued with respect to the spin-off described above. Similar to the IRS private letter ruling and opinions issued with respect to the spin-off, the supplemental private letter ruling is generally binding on the IRS and any opinions issued with respect to the Merger are based on factual representations and assumptions, as well as certain undertakings, made by Sempra and EFH. If such representations and assumptions are untrue or incomplete, any such undertakings are not complied with, or the facts upon which the IRS supplemental private letter ruling or tax opinions (which will not impact the IRS position on the transactions) are based are different from the actual facts relating to the Merger, the tax opinions and/or supplemental private letter ruling may not be valid and could be challenged by the IRS. Even though Sempra Texas Holdings Corp. would have administrative appeal rights if the IRS were to invalidate its private letter ruling and/or supplemental private letter ruling, including the right to challenge any adverse IRS position in court, any such appeal would be costly, subject to uncertainties and could fail. If it is ultimately determined that the Merger caused the spin-off not to qualify for the Intended Tax Treatment, Sempra, through its ownership of Sempra Texas Holdings Corp., could incur substantial tax liabilities, which would materially reduce the value associated with our investment in Oncor and could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Energy Infrastructure Projects We are involved in a number of energy infrastructure projects in various stages of development and construction, which subject us to numerous risks. Success in developing each project depends on, among other things: ?our financial condition and cash flows and other factors that impact our ability to invest sufficient funds in the project, including for preliminary activities conducted before we determine whether the project is viable ?project assessment and design and our ability to foresee and incorporate emerging trends and technologies ?our ability to reach a positive FID or meet other milestones, which may be influenced by factors outside our control, including the global economy and energy and financial markets, actions by regulators, internal and external approval requirements, and many of the other factors described in this risk factor ?negotiation of satisfactory EPC agreements and renegotiation in the event of delays in reaching an FID or other specified deadlines ?identification of suitable partners, customers, contractors, suppliers and other necessary counterparties ?progressing relationships from MOUs, HOAs or other non-binding arrangements to execution of binding, definitive agreements ?negotiation and maintenance of satisfactory equity, purchase, sale, supply, transportation and other appropriate commercial agreements, and satisfaction of any conditions to effectiveness of such agreements, including reaching an FID within agreed timelines ?timely receipt and maintenance of required governmental permits, licenses and other authorizations on acceptable terms ?our project partners', contractors', equipment providers', lenders' and other vendors' and counterparties' willingness and financial or other ability to fulfill their contractual commitments ?timely, satisfactory and on-budget completion of construction, which could be negatively affected by engineering problems; stakeholder relations issues, such as the opposition by some members of the Yaqui tribe to the construction of the Guaymas-El Oro segment of the Sonora pipeline, which we discuss in in Note 1 of the Notes to Consolidated Financial Statements; work stoppages; unavailability or increased costs of materials, equipment, labor and commodities due to inflation, tariffs or supply chain or other issues; and a variety of other factors, many of which we discuss above under "Risks Related to All Sempra Businesses – Operational Risks" and elsewhere in this risk factor ?implementation of new or changes to existing laws or regulations, including increasing influence of the Mexican government on economic and energy matters and risks related to laws and regulation in Mexico generally, which we discuss further in the risk factors below ?obtaining satisfactory financing for the project ?the absence of hidden defects or inherited environmental liabilities on the project site ?timely and cost-effective resolution of any litigation or unsettled property rights affecting the project ?geopolitical events and other uncertainties Any failures with respect to the above factors or other factors relevant to any particular project could involve additional costs, otherwise negatively affect our ability to successfully complete the project and force us to impair or write off amounts we have invested in the project. If we are unable to complete a development project, if we experience delays, or if construction, financing or other project costs exceed our estimated budgets and we are required to make additional capital contributions, we may not receive an adequate or any return on our investment and other resources expended on the project and our results of operations, financial condition, cash flows and/or prospects could be materially adversely affected. The operation of existing facilities and any future projects we complete involves many risks, including the potential for unforeseen design flaws, engineering challenges, or breakdowns of facilities, equipment or processes; labor disputes or shortages; fuel interruption; environmental contamination; increasing regulatory requirements, including from regulations aiming to reduce GHG emissions; and the other operational risks that we discuss above under "Risks Related to All Sempra Businesses – Operational Risks." Any of these events could lead to our facilities being idle or operating below expected levels, which may result in lost revenues or increased expenses, including higher maintenance costs and penalties. Any such occurrence could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. LNG Projects In addition to the risks described above that are applicable to all our energy infrastructure projects, our LNG projects, which we discuss in "Part II – Item 7. MD&A – Capital Resources and Liquidity – Sempra Infrastructure," also face distinct disadvantages relative to some LNG projects being pursued by other project developers, including: ?The proposed Cameron LNG Phase 2 project is subject to certain restrictions and conditions under the JV project financing agreements for the Cameron LNG Phase 1 facility and requires unanimous consent of all the members, including with respect to the equity investment obligation of each member. We may not be able to satisfy these conditions, receive members' consent, obtain satisfactory conclusion on the EPC process, or obtain the extension of our non-FTA approval, in which case our ability to develop the Cameron LNG Phase 2 project would be jeopardized. ?The ECA LNG projects under construction and in development are subject to the Mexican regulatory process and an overlay of U.S. regulation for natural gas exports to LNG facilities in Mexico, which are not well developed and, among other factors, contributed to delays in obtaining a necessary permit from the Mexican government for the ECA LNG Phase 1 project and could cause similar delays or other hurdles in the future. In September 2025, we submitted a filing with the DOE to extend the construction deadline associated with our non-FTA permits for the ECA LNG Phase 1 project until the end of summer 2026, but we may not receive this extension on a timely basis or at all. In addition, the Baja California region does not have extensive sources of natural gas, and at times, natural gas supply to the region is severely constrained and may impact our costs and our ability to source all feed gas required under our ECA LNG Phase 1 supply contracts. Further, while we do not expect the construction or operation of the ECA LNG Phase 1 project to disrupt operations at the ECA Regas Facility, we expect construction of the proposed ECA LNG Phase 2 project would conflict with the current operations at the ECA Regas Facility, which currently has a firm storage and nitrogen injection service agreement with Shell that expires in May 2028. ?The PA LNG Phase 1 project under construction is located at a greenfield site and is therefore subject to certain disadvantages relative to projects being constructed or developed at brownfield sites, such as increased time and costs to develop and construct the project due to lack of existing infrastructure. The PA LNG Phase 2 project under construction is located at the site of the PA LNG Phase 1 project and is therefore subject to potential disadvantages, such as increased complexity of integrating new facilities with existing infrastructure. Development and operation of these or any other LNG projects will depend on the expansion of our existing pipeline interconnections or the ability to permit and construct new pipeline facilities, each of which may require us to enter into additional pipeline interconnection agreements with third-party pipelines, which may not be possible on reasonable terms or at all. The capital requirements for our LNG projects can be significant, even if we do not reach a positive FID. As has happened in the past, our proposed facilities may not be completed in accordance with estimated timelines or budgets or at all as a result of the above or other factors, and delays, cost overruns or our inability to complete one or more of these projects could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

We depend on electric transmission lines, natural gas pipelines and other transportation facilities and services owned and operated by third parties to, among other things: ?deliver the natural gas, LNG, electricity and LPG we sell to customers or use at our LNG facilities ?supply natural gas to our gas storage and electric generation facilities ?provide retail energy services to customers If transportation is disrupted, the construction of necessary interconnecting infrastructure is not completed on schedule or at all or capacity is inadequate, we may be delayed in completing projects under development and/or unable to meet our contractual obligations to customers of those projects or existing projects, in which case we may be responsible for damages they incur, such as the cost of acquiring alternative supplies at then-current spot market rates, and we could lose customers that may be difficult to replace. Any such occurrence could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects. Financial Risks

The impacts from efforts to mitigate climate change and related regulations may increase the costs we incur to procure and transmit energy and provide other services. The changes in costs and preferences for lower carbon and renewable energy sources may impact the demand for, consumption of, and types of energy we transmit and distribute. Environmental and Climate Change Regulation We are subject to extensive federal, state, regional, local, tribal and foreign laws and regulations relating to climate change and environmental protection. To comply with these laws and regulations, we must expend significant capital and employee resources on environmental monitoring, surveillance and other measures to track and disclose performance; acquisition and installation of pollution control equipment; implementation of environmental safety practices; other mitigation efforts; and emissions fees, taxes, penalties and other payments. These requirements could increase as a result of various factors we may not control, including changes to laws and regulations, many of which are becoming more burdensome in light of increasing environmental concerns and related changes to legal and regulatory frameworks; increased readiness and enforcement activities; delays in the renewal and issuance of permits; evolving expectations of investors and other stakeholders; and changes to the mix of energy we transmit and distribute, any of which could negatively impact our operations, costs and corporate planning, demand for our services, customer affordability, and the scope and economics of proposed infrastructure projects or other capital expenditures. In particular, legislation and regulation designed to reduce GHG emissions and mitigate climate change are proliferating, as we discuss in "Part I – Item 1. Environmental Matters." California's goals are facing cost pressures and may experience delays or other challenges that could cause the state to modify its laws and rules, resulting in significant uncertainty. Any failure to comply with these or other environmental laws and regulations may subject us to fines and penalties, including criminal penalties in some cases, and/or curtailment of our operations. In addition, we are generally responsible for hazardous substances and other contamination on, and the conditions of, our projects and properties, regardless of when these conditions arose and whether they are known or unknown. We have been and may in the future be required to pay environmental remediation costs at former facilities and off-site waste disposal sites where any of our businesses is identified as a PRP under federal, state and local environmental laws. For our regulated utilities, some or all of these costs may not be recoverable in rates. Additionally, California laws requiring expansive disclosures on GHG emissions and other environmental measures, targets and claims subject us to potential liability for these disclosures as well as significant compliance costs and could have other consequences that may be difficult to predict, including negative sentiment from current and potential investors, regulators, legislators or other groups. These California disclosure requirements, which remain subject to rulemaking by CARB and have been the subject of legal challenges, and other voluntary disclosures we make may use different reporting frameworks, methodologies and boundaries from each other, which may further increase compliance costs and the risk of compliance failures and may create confusion for stakeholders. Moreover, these disclosure requirements could increase the risk that we become subject to climate change lawsuits. Defense costs associated with such litigation could be significant, and any adverse outcome could require substantial capital expenditures or payment of substantial penalties or damages. Any of these outcomes could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. Other Energy Transition Risks The energy transition in California and elsewhere, including decarbonization goals and increasingly divergent investor sentiment regarding climate change efforts, has led to contradictory expectations from various investors and other stakeholders and uncertainty in long-term investor support, including some investors reducing participation in or divesting from our sector. Maintaining investor confidence and attracting capital at a competitive cost will depend, in part, on demonstrating our ability to address material business risks related to climate and our efforts to help achieve the goals of our consumers and the markets and jurisdictions where we operate. In an effort to maintain a sustainable and durable business risk profile and continue to focus on value creation, Sempra updated its climate aspirations to reflect the changing policy, regulatory, commercial and technological landscape, including stakeholders' evolving focus on reliability, resiliency and affordability and the pace and impact of climate and other public policies. Sempra aims to have net-zero scope 1 and 2 GHG emissions by 2050 and has an interim aim of 50% scope 1 and 2 GHG emissions reductions by 2035 (this interim target is relative to a 2019 baseline, applies to Sempra California's operations and Sempra Infrastructure's Mexico (non-LNG) operations, and may be subject to further revision if Sempra's planned sale of a portion of its equity interest in SI Partners is completed). Sempra's, SDG&E's and SoCalGas' abilities to advance their respective net-zero and other climate objectives and meet the demand for lower-carbon and reliable energy in California and elsewhere will depend on many factors, some of which we do not control, including supportive federal and state energy laws, policies, incentives, tax credits and regulatory decisions; cost and affordability considerations; development, commercialization and regulatory acceptance of affordable, alternative and lower-carbon energy sources, including cleaner fuels; successful research and development efforts focused on lower carbon technologies that are economically and technically feasible; cooperation from our partners, financing sources and commercial counterparties; and consumers' decisions and preferences. In addition, we will need to continue to expend capital and employee resources to develop and deploy new technologies and modernize grid systems, which may not be recoverable in rates or, with respect to our businesses that are not regulated utilities, may not be able to be passed through to customers. Even if such costs are recoverable, these costs, coupled with necessary safety and reliability investments, may negatively impact the affordability of SDG&E's and SoCalGas' services and, for our businesses that are not regulated utilities, may cause costs to increase to levels that reduce customer demand and growth. Moreover, forecasting specified targets over longer-term periods is inherently uncertain and could be significantly impacted by the trajectory of the energy transition. As a result, although we are dedicated to making progress on our climate aims and are continuing to develop capabilities designed to reduce GHG emissions from our own operations as well as to support consumers' and markets' climate goals and applicable legislative and regulatory mandates, we may not be successful in achieving these objectives. We could suffer difficulties attracting investors and business partners, reputational harm and other negative effects if we do not meet or if we further modify our GHG emissions reduction aims or there are negative views about our environmental disclosures or practices generally. We develop our capital expenditure plans based on assumptions and forecasts as well as regulatory and compliance requirements, including those related to safety, reliability and load growth, gas system planning, and transportation electrification, which generally assume that California will continue to pursue consistent environmental and climate-related policies. If the federal government continues to reduce its support for grid and infrastructure modernization or takes further action to prohibit California from pursuing its environmental and climate-related policies, or if California changes its policies, the assumptions and forecasts underlying our capital expenditure plans may prove to be inaccurate, and our investment plans could suffer significant negative effects. The occurrence of any of these risks could have a material adverse effect on our results of operations, financial condition, cash flows and/or prospects.

Our businesses are capital-intensive, with significant and increasing capital spending expected in future periods. In general, we rely on long-term debt to fund a significant portion of our capital expenditures and to repay or refinance outstanding debt, and we rely on short-term debt to fund a significant portion of day-to-day operations. Certain of our businesses also rely on other funding sources, such as Sempra Infrastructure's use of capital contributions from its owners and various forms of project financing, which may involve guarantees, indemnities or other arrangements that expose us to additional risks, such as potential losses upon the occurrence of events related to the development, construction, operation or financing of the applicable projects. Sempra has also raised and may continue to seek capital by issuing equity, including in our ATM program, or selling equity interests in our subsidiaries or investments. External sources of capital may not be adequate or available on reasonable terms, in a timely manner or at all. Limitations on the availability of credit, increases in interest rates or credit spreads due to inflation or otherwise or other negative effects on the terms of any financing we pursue could cause us to fund operations and capital expenditures at a higher cost or fail to raise our targeted amount of funds, which could negatively impact our ability to meet contractual and other commitments, progress development projects, make non-safety related capital expenditures and effectively sustain operations. Any of these outcomes could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. In addition to market and economic conditions, factors that can affect the availability and cost of capital include: ?adverse changes to laws and regulations ?for Sempra and SDG&E, risks related to California wildfires ?for Sempra, SDG&E and SoCalGas, any deterioration of or uncertainty in the political or regulatory environment for companies operating in California ?credit ratings downgrades

More and Increasingly Severe Wildfires In recent years, California has experienced some of the largest wildfires (measured by acres burned and/or structures destroyed) in its history. Frequent and severe drought conditions, inconsistent and extreme swings in precipitation, changes in vegetation, unseasonably warm temperatures, low humidity, strong winds and other factors have increased the duration of the wildfire season and the intensity, prevalence and difficulty of preventing and containing wildfires in California, including in SDG&E's and SoCalGas' service territories. Changing weather patterns, including as a result of climate change, could exacerbate these conditions. Certain California local land use policies and forestry management practices, as well as expanded construction and development of residential and commercial projects in high-risk fire areas, could lead to increased third-party claims and greater losses related to fires for which SDG&E or SoCalGas may be liable. The LA Fires burned in SoCalGas' service territory. The California Department of Forestry and Fire Protection estimates that the Palisades and Eaton fires destroyed approximately 16,200 structures and damaged approximately 2,000 structures. Although the majority of SoCalGas' infrastructure in the fire-affected areas is underground, these fires resulted in service disruptions, response costs and damage to some of SoCalGas' infrastructure and third-party property. SoCalGas and Sempra are subject to pending litigation with respect to the operation of SoCalGas' system and damage sustained as a result of the fires, which we discuss in Note 16 of the Notes to Consolidated Financial Statements. As with other litigation, the timing, impacts and ultimate outcome of these matters is inherently uncertain and may result in substantial costs, some or all of which may not be recoverable from insurance, third parties or in customer rates. We discuss these and other risks associated with litigation above under "Risks Related to All Sempra Businesses – Operational Risks." Future wildfires in SDG&E's or SoCalGas' service territories could compromise SDG&E's and SoCalGas' electric and natural gas infrastructure and result in further service disruptions, which could have a material adverse effect on Sempra's, SDG&E's and SoCalGas' results of operations, financial condition, cash flows and/or prospects. We discuss these risks further in this risk factor below and above under "Risks Related to All Sempra Businesses – Operational Risks." The Wildfire Legislation In July 2019 and September 2025, respectively, the 2019 Wildfire Legislation and the 2025 Wildfire Legislation (collectively, the Wildfire Legislation) were signed into law, which we discuss in Note 1 of the Notes to Consolidated Financial Statements. The 2019 Wildfire Legislation established the Wildfire Fund and the 2025 Wildfire Legislation established the Continuation Account, which offer liquidity to reimburse wildfire-related claims incurred by participating California electric IOUs in excess of $1 billion, subject to the coverage of each fund. The Wildfire Legislation's legal standards for the recovery of wildfire costs may not be implemented effectively or applied consistently. Moreover, the Wildfire Fund and the Continuation Account, if it becomes operative, could be materially reduced, exhausted, or terminated due to claims by SDG&E or other participating IOUs related to fires caused by utility conduct or operations, or SDG&E could fail to maintain a valid annual safety certification from the OEIS or meet other requirements, any of which could result in SDG&E losing eligibility for the Wildfire Legislation's liability cap and the other protections afforded by these funds. As a result, a fire resulting from the conduct or operations of any participating California electric IOU could have a material adverse effect on Sempra's and SDG&E's results of operations, financial condition, cash flows and/or prospects, with potentially material additional exposure if SDG&E's conduct or operations is determined to be a cause of a fire and SDG&E is found to have acted imprudently. In February 2026, a participating IOU publicly disclosed that it has received, or expects to receive, approximately $1.26 billion in aggregate reimbursements from the Wildfire Fund for eligible claims related to wildfires that occurred in 2019 and 2021. Also in February 2026, another participating IOU publicly disclosed it has received, or expects to receive, approximately $134 million in aggregate reimbursements from the Wildfire Fund for losses incurred and expected to be incurred in connection with one of the LA Fires, the cause of which remains under investigation and has not been conclusively determined. The administrator of the Wildfire Fund has confirmed that this wildfire qualifies as a "covered wildfire" for purposes of accessing the Wildfire Fund, and the scope of potential damages caused by this fire could materially reduce or exhaust the Wildfire Fund. The participating IOU stated that it is currently unable to reasonably estimate a range of potential losses associated with this event. Accordingly, SDG&E is unable to estimate a range of potential loss resulting from any reduction in available coverage from the Wildfire Fund. In addition to the risks described above, a material reduction, exhaustion or termination of the Wildfire Fund may require SDG&E to recognize a reduction to its Wildfire Fund asset up to its carrying value. The Wildfire Legislation did not change the doctrine of inverse condemnation, which imposes strict liability for certain types of claims (meaning that liability is irrespective of negligence or intent) on a utility whose equipment is determined to be a cause of a fire. In such an event, the utility would be responsible for the costs of damages, including business interruption losses, interest and attorneys' fees, even if the utility is not found negligent. In the past, the CPUC has denied recovery of incurred costs associated with wildfire claims despite the doctrine of inverse condemnation, which was historically based on the ability of a utility to pass such costs through to rate payers. The doctrine of inverse condemnation also is not exclusive of other theories of liability, such as negligence, under which additional liabilities, such as fire suppression, clean-up and evacuation costs, medical expenses, and personal injury, punitive and other damages, could be imposed. We are unable to predict the impact of the Wildfire Legislation on SDG&E's ability to recover costs and expenses if SDG&E's equipment is determined to be a cause of a fire. The 2025 Wildfire Legislation also established a multi-stakeholder task force, coordinated by the Wildfire Fund's administrator, to prepare and submit to the California legislature and Governor of California on or before April 1, 2026, a report that evaluates and sets forth recommendations on new models to complement or replace the Wildfire Fund and, if it becomes operative, the Continuation Account. We are unable to predict the impact on Sempra or SDG&E of further legislative or regulatory action with respect to the Wildfire Fund or the Continuation Account or wildfire claims liability generally. Cost Recovery Through Insurance or Rates As a result of California's doctrine of inverse condemnation, substantial losses recorded by insurance companies, and increased wildfire risk, obtaining insurance coverage for wildfires potentially associated with SDG&E's equipment (or, to a lesser extent, SoCalGas' equipment) has become increasingly difficult and costly. If these conditions continue or worsen, including as a result of the LA Fires, insurance for wildfire liabilities may become unavailable or may become prohibitively expensive and we may be denied recovery of insurance cost increases through the regulatory process. In addition, insurance for wildfire liabilities may not be sufficient to cover all losses we may incur, or it may not be available to meet the $1.0 billion of primary insurance required by the Wildfire Legislation. Wildfire insurance may also become prohibitively expensive or unavailable for homeowners and businesses in SDG&E's service territory, potentially increasing SDG&E's financial exposure if a wildfire is found to be caused by SDG&E's equipment. We may be unable to recover in rates or from the Wildfire Fund or the Continuation Account the amount of any uninsured losses (including amounts paid for self-insurance and other costs). A loss that is not fully insured, is not sufficiently covered by the Wildfire Fund or the Continuation Account and/or cannot be recovered in customer rates could materially adversely affect Sempra's and one or both of SDG&E's and SoCalGas' results of operations, financial condition, cash flows and/or prospects. Regulatory Actions Related to Wildfire Mitigation Efforts Although we expend significant resources on measures designed to mitigate wildfire risks, these measures may not be effective in preventing wildfires or reducing our wildfire-related losses, and their costs may not be fully recoverable in rates. SDG&E is required by California law to submit WMPs for approval by the OEIS and could be subject to increased risks if these plans are not approved in a timely manner or SDG&E is determined to not have substantially complied with its approved plans, including the risk of fines or penalties for non-implementation or denial of its safety certification. Moreover, wildfire mitigation investments incremental to those authorized in a GRC may be subject to reasonableness reviews after they are made and could be subject to disallowances as a result of such reviews, as was the case with the FD issued in connection with SDG&E's Track 2 request in its 2024 GRC. One of SDG&E's wildfire mitigation strategies is to de-energize certain circuits for safety when there is elevated weather-related wildfire ignition risk. These "public safety power shutoffs" have been subject to scrutiny by various stakeholders, including customers, regulators and lawmakers, which could increase the risk of regulatory fines and penalties, claims for damages and reputational harm if SDG&E is found not to have acted within applicable guidelines and regulations. Such costs may not be recoverable in rates. Unrecoverable costs, adverse legislation or rulemaking, stakeholder scrutiny, ineffective wildfire mitigation measures or other negative effects associated with these efforts could materially adversely affect Sempra's and SDG&E's results of operations, financial condition, cash flows and/or prospects.

Our operations in Mexico pose foreign currency exchange rate and inflation risks. Exchange and inflation rates with respect to Mexico and fluctuations in those rates may have an impact on the revenue, cash flows and costs from our international operations, which could materially adversely affect our results of operations, financial condition, cash flows and/or prospects. We sometimes attempt to hedge cross-currency transactions and earnings exposure through various means, including financial instruments and short-term investments, but these hedges may not fully achieve our objectives of mitigating earnings volatility that would otherwise occur due to exchange rate fluctuations. Because we do not hedge our net investments in foreign countries, we are susceptible to volatility in OCI caused by exchange rate fluctuations for entities whose functional currencies are not the U.S. dollar. Moreover, Mexico has experienced periods of high inflation and exchange rate instability in the past, and severe devaluation of the Mexican peso could result in governmental intervention to institute restrictive exchange control policies, as has occurred in Mexico and other Latin American countries. We discuss our foreign currency exposure at our Mexican subsidiaries in "Part II – Item 7. MD&A" and "Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk."