2019 | ANNUAL REPORT SHAPING THE FUTURE “ There is an energy transition occurring across the globe — and I believe the 21st century will be the Century of Energy.” — JEFFREY W. MARTIN Dear fellow shareholders: Together, we are shaping the future. This is an exciting We executed on that strategy by divesting certain time to be building new energy infrastructure in non-core assets and reinvesting sales proceeds into North America. our core markets: California, Texas and Mexico, and the liquefied natural gas (LNG) export market. After serving as a driver of change across so many industries throughout the past century, the global These markets enable us to focus on the delivery energy market has now reached an inflection point. of cleaner and more secure forms of energy to At Sempra Energy, we believe the energy industry consumers right here in North America as well as will experience significant disruption in the next abroad. Moreover, we are focusing our role in the 20 years. We view this as an opportunity. energy value chain on transmission and distribution investments that provide attractive risk-adjusted By delivering access to safer and more reliable, returns and higher value for our stakeholders. lower-carbon energy solutions, we have a unique opportunity to shape our company’s future. Our We have accomplished many of our goals and made employees are united around a vision to make a great progress in our journey to become North difference in the world by delivering energy with America’s premier energy infrastructure company. purpose, while supporting a high-performing corporate culture that serves all of our stakeholders. Focusing Our Strategy In 2018, we laid out a strategic plan known as “Vision 2022,” centered on the mission of becoming North America’s premier energy infrastructure company. The past two years have been transformational for us. We sharpened our focus on the most attractive growth markets in North America, simplified our business model and strengthened our balance sheet. Jeffrey W. Martin, Chairman and CEO Visit our online annual report at sempra.com/annualreport 1 20323_Sempra_2019AR_TXT_030420.indd 1 3/4/20 11:29 PM Letter to Shareholders (continued) Over the past year, we have accomplished the following: Leading the Global Energy Transition √ Completed the sale of our U.S. renewables business There is an energy transition occurring across the and non-utility natural gas storage assets, which globe — and I believe the 21st century will be the has generated approximately $2.5 billion in total “Century of Energy.” The transition is occurring proceeds since December 2018; differently market by market, with lower-carbon alternatives playing an increasingly important role. √ Entered into separate agreements to sell our Peruvian and Chilean businesses in South America Over the next decade, we will continue to make for $3.59 billion and $2.23 billion, respectively;* critical investments in smart, new energy √ Expanded our footprint in Texas by closing an infrastructure aimed at helping bring energy choice acquisition that extends Oncor Electric Delivery and security to people around the world. Company LLC’s (Oncor) transmission system in I am proud that in every market we serve, our north, central and west Texas; energy infrastructure is helping to reduce the carbon √ Received a final decision in San Diego Gas & Electric footprint of the energy ecosystem. Company’s (SDG&E) and Southern California Gas In California, both of our utilities — SDG&E and Company’s (SoCalGas) 2019 General Rate Cases; SoCalGas — are taking bold steps to reduce √ Commenced shipping LNG from our Cameron LNG greenhouse gas emissions. Approximately 45% joint venture in Hackberry, La., to global markets; of the electricity that SDG&E delivers to homes √ Entered into multiple preliminary agreements and businesses comes from solar, wind and other that provide the framework for cooperation in the renewable energy sources. In 2019, SoCalGas development of potential North American LNG announced a goal to replace 20% of its traditional export projects; natural gas supply with renewable natural gas √ Commenced commercial operations of the Sur de by 2030. SoCalGas is also focused on developing Texas-Tuxpan marine pipeline, developed by a joint hydrogen technologies that will help reduce venture between Infraestructura Energética Nova, greenhouse gas emissions without sacrificing S.A.B. de C.V. (IEnova), our Mexico subsidiary, and energy security and reliability. TC Energy Corporation. The pipeline can deliver up Oncor is expanding its reach in Texas by connecting to 2.6 billion cubic feet per day of U.S. natural gas the next generation of customers to renewable to Mexico; and energy through its approximately 140,000 miles of √ Delivered total shareholder return of 44% in 2019, transmission and distribution lines. Texas leads the compared to 31% for the S&P 500 Index and 26% U.S. in the production of wind energy and is also for the S&P 500 Utilities Index, and increased our among the leading states in solar energy production. dividend by 8%, marking the 10th consecutive year we’ve raised our dividend. * Subject to adjustments and satisfaction of closing conditions. 2 2019 | SEMPRA ENERGY ANNUAL REPORT 20323_Sempra_2019AR_TXT_030420.indd 2 3/4/20 11:29 PM Most of the generation added in Texas over the past decade has been fueled by a combination of natural Our employees are united around gas, wind and solar energy. a vision to make a difference in IEnova also continues to make significant progress the world by delivering energy with in the midstream and refined fuels markets, helping purpose, while supporting a high- Mexico diversify its energy supply and increase performing corporate culture that both the reach and reliability of the country’s energy ecosystem. serves all of our stakeholders. Through our strategically located LNG development I am so proud that our company has the privilege to projects, we are developing infrastructure that is serve more than 40 million consumers and plays an designed to directly dispatch LNG into Atlantic and important role in providing cleaner, more reliable Pacific markets to deliver cleaner, more reliable and energy to countries all around the world. We have more affordable energy to the world, while displacing been successful in improving our earnings profile, fuel oil and coal in power production. while also endeavoring to better serve customers At Sempra Energy, we are focused on growing in and the environment. North America while having a global impact. The What we do truly matters. Our infrastructure connects world is depending on new sources of energy — with people to the energy they need to power their lives many countries needing more secure forms of energy and we do not take that for granted. The dedication to serve the needs of their growing populations. of our more than 20,000 employees to find new and Delivering Energy With Purpose better ways to deliver energy with a relentless focus on safety is something that inspires me every day. Sempra Energy’s vision to deliver energy with purpose is a key component of our culture, uniting We will continue to be forward-thinking as we deliver employees through a shared commitment to have a energy with purpose, with a focus on creating positive impact on the communities we serve and, value for all our stakeholders. And I will continue to more broadly, the world. Our industry as a whole challenge our employees and our industry to think must also lead with purpose and explore big ideas as bigger and more boldly as we embrace opportunities we think about the positive benefits we can create for to make the world an even better place. stakeholders in the future. Ever forward together, Jeffrey W. Martin Chairman and Chief Executive Officer Visit our online annual report at sempra.com/annualreport 3 20323_Sempra_2019AR_TXT_030420.indd 3 3/4/20 11:29 PM 45 Mtpa of LNG projects with one under construction and four in various stages of development $44.2 billion market cap* *As of Dec. 31, 2019 40 20,000 million employees consumers across the world consecutive 10 years of dividend increases 4 2019 | SEMPRA ENERGY ANNUAL REPORT 20323_Sempra_2019AR_TXT_030420.indd 4 3/4/20 11:29 PM Powering the World with LNG Spotlight: Liquefied Natural Gas Export Infrastructure After driving economic development and improving The Cameron LNG liquefaction-export project in quality of life across so many communities Hackberry, La., reached a major milestone this year throughout the past century, the global energy — the project is now exporting LNG to Asian and market is now going through a transition period. European markets. And Port Arthur LNG in Jefferson As more nations shift from higher-emissions fuels County, Texas, is one of several mega projects in to lower-carbon natural gas and renewables, global development around the world. We expect to reach demand for LNG is expected to dramatically increase. a final investment decision on the Port Arthur LNG We believe Sempra Energy is uniquely positioned to project in the third quarter of 2020. capitalize on this trend. Through our five strategically located export projects in various stages of construction or development, our talented commercial and engineering teams are developing infrastructure designed to directly dispatch LNG into Atlantic and Pacific markets to deliver more reliable and affordable energy to the world. Increased exports of LNG can provide a lower- carbon energy alternative to America’s trading partners, while creating jobs at home and reducing our trade deficit. Cameron LNG’s first liquefaction train began commercial operations in August 2019 and is now exporting LNG to customers in the largest world markets. Cameron LNG’s second liquefaction We believe Sempra Energy is train began commercial operations in February 2020. uniquely positioned to capitalize on We are excited to help support the transformation this trend in global energy markets.