Please standby, we are about to begin. Good day, and welcome to the Sempra Energy First Quarter 2019 Earnings Call. Today's conference is being recorded. At this time I'd like to turn the conference over to Faisel Khan. Please go ahead.

Good morning, and welcome to Sempra Energy's first quarter 2019 earnings call. A live webcast of this teleconference and slide presentation is available on our Web site under the Investors section. Here in San Diego are several members of our management team, including Jeff Martin, Chairman and Chief Executive Officer; Joe Householder, President and Chief Operating Officer; Trevor Mihalik, Executive Vice President and Chief Financial Officer; and Peter Wall, Chief Accounting Officer and Controller. 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 discussed 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. It's important to note that all the earnings per share amounts in our presentation are shown on a diluted basis, and that we'll be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for reconciliation to GAAP measures. I'd also like to mention that the forward-looking statements contained in this presentation speak only as of today, May 7, 2019, 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 four, and let me hand the call over to Jeff.

Thanks a lot, Faisel. I'd like to thank everyone who attended our Investor Day here in San Diego. We appreciated having the opportunity to provide a comprehensive update on our strategy and capital plans and enjoyed taking many of you to visit our LNG facility in Baja, California, as well as SDG&E where we highlighted our wildfire mitigation program and showcased our other California utility assets. We hope you came away from our conference with the following: First, we have a sharper strategic focus, second, we've improved our capital discipline and third, we are investing in a high performance culture. Since our Investor Day, we held our internal top 300 leadership meeting, leaders across our company came together here in San Diego to discuss steps we're taking to better align our 20,000 employees to directly support our strategic mission of becoming North America's premier energy infrastructure company. There was a great sense of energy amongst the team as we set our course for the next year and beyond. From an execution standpoint, we continue to make progress on our goals. Just last month, we completed the sale of our wind assets, which bring the total cash proceeds from our renewable to midstream divestitures to approximately $2.5 billion. Well above market expectations. Next our focus is on successfully completing the planned sale of our South American businesses, which we're targeting to close around the end of this year. Proceeds from our asset sales will be used to advance our strategic mission by funding growth while also strengthening our balance sheet by paying down parent debt. Now, looking forward, Sempra is well-positioned, our business is at the intersection of two key trends that are transforming the energy markets, the transition towards cleaner energy, which is happening market-by-market, and the US's growing dominance in the global energy markets. We expect our assets to play a key role in furthering both of these trends, which in turn should create jobs both in the United States and Mexico, bolster the economies of both countries and drive future value creation for our shareholders. Before handing off the call to Joe, I'd also like to highlight that we're affirming our 2019 adjusted EPS guidance range as well as our 2020 EPS guidance range. Please turn to the next slide, where Joe will discuss how we're executing on our operational goals.

Thanks, Jeff. Before touching on some of the legislative discussions happening in California on wildfire risk, I'd like to mention that last week the CPUC issued a favorable proposed decision on SDG&E's wildfire mitigation plan, enabling us to continue to improve our industry leading program. Now, on the legislative front, we're pleased with Governor Newsome and the strike force's leadership and their proposals. The most important aspects are mitigating the threat of wildfires through measures such as increased vegetation management, advancing emergency response to minimize damage if an event occurs, and defining proposals that can help ensure healthy utilities to achieve California's greenhouse gas reduction goals. We believe the strike force's recent recommendations of a liquidity fund, a wildfire fund, and changes to inverse condemnation help narrow the focus of the Blue Ribbon Commission. We're actively engaged to help ensure that our customers and our shareholders' interests are addressed and that our existing wildfire mitigation efforts are recognized. We're optimistic that effective legislative solutions could be introduced and approved this summer. Although positive headway is being made the current regulatory environment and threat of wildfires in this state are factors we must take into account in our regulatory filings including that cost of capital proceeding. Please turn to slide six. This CPUC cost of capital proceeding is very important to our two utilities, because our currently authorized return on equity numbers were last updated in July of 2017, and were the result of a two-year extension from our cost of capital proceeding approved in 2013. A lot has happened since 2017, and even more so since 2013. Over this time period, in California, customer needs, state mandates, energy goals, the environment, the regulatory construct, have all changed considerably. They've had a corresponding and material impact on the risk profile of…

Thanks, Joe. Earlier this morning, we reported first quarter GAAP earnings of $441 million or $1.59 per share. This compares favorably to first quarter 2018 earnings of $347 million or $1.33 per share. On an adjusted basis, first quarter earnings were $534 million or $1.92 per share. This compares favorably to our first quarter 2018 adjusted earnings of $372 million or $1.43 per share. Please turn to slide 10, where I'll discuss the key drivers of our quarterly results. The variance in our first quarter 2019 adjusted earnings when compared to last year was affected by the following items, $79 million of higher equity earnings at the Sempra Texas utility segment resulting from the acquisition of our interest in Oncor in March of 2018. $35 million and $31 million at SoCalGas and SDG&E respectively related to the January 2019 CPUC decision allocating certain deferred income tax balances to shareholders. This benefit was included in our 2019 adjusted guidance. $23 million of higher earnings from South American operation including $15 million at Peru due to an increase in rates and lower cost of purchase power and $7 million of higher earnings combined from both utilities as a result of lower depreciation due to the assets classified as held for sale. $21 million in lower expense related to foreign currency and inflation effects net of foreign currency hedges in Mexico, and $15 million of higher earnings at Sempra LNG from our marketing operations primarily driven by changes in natural gas prices which was offset by $18 million of lower operational earnings at SDG&E comprised of $27 million of lower CPUC base operating margin in 2019 due to the delay in the 2019 GRC decision while absorbing higher operating costs. Offset by $9 million of higher earnings from electric transmission operations. And $25 million of higher cost related to increased net interest expense and mandatory convertible preferred stock dividend at parent driven by the Oncor acquisition. Please turn to slide 11. To recap, we continue to execute on our path to premier. Looking forward, our key priorities are executing on our $25 billion five-year base capital plan, optimizing our capital allocation with a focus on strengthening the balance sheet, advancing our LNG development opportunities and engaging with stakeholders in key regulatory and legislative proceedings at our U.S. utilities. We believe our strategic mission and disciplined capital allocation plan should help us reach our operational and financial goals well into the future. With that, we will conclude the prepared remarks and stop to take your questions.

[Operator Instructions] And our first question will come from question from Greg Gordon with Evercore ISI.

Hi, guys, how are you doing?

Good morning, Greg.

Couple of questions, I think obviously the quarter -- quarterly earnings were significantly better than consensus. And I think that utility analysts no matter how long they have been doing this and have been doing it quite a while often have time -- hard time with the quarterly lease [ph], just given how the regulatory model in California causes things to be extremely lumpy sometimes. In this case, it was the utility income tax benefit that was $66 million positive on the quarter. I know that you put that -- there was also a footnote that was also in your full-year guidance range which you gave on analyst day. But, it's probably not a recurring item even though it's considered an ongoing item. So, how do we bridge to 2020 to the growth guidance that you gave for SDG&E and SoCal Gas? What are sort of not in any specific mathematical terms, but in general terms that sort of replace that and offset it so that you can show growth despite that item being sort of a onetime thing?

Well, thanks for that question, Greg. And obviously I think there is a number of big levers in front of us for 2019. And you can probably list a lot of these. But obviously we are quite focused on getting our GRC approved for both SoCal Gas and SDG&E. You will recall that the year one step up in our filed request for SoCal Gas was closed to a 20% step up and a 10% step up in the attrition for SDG&E. And then in the outer years, SDG&E is roughly 5% to 6% ad SoCal Gas is in 6% to 7%. So, the outcome of the GRC is important both for 2019 and 2020. And I will remind you that in the recorded results for Q1, we held there are no additional attrition revenues above what we guided in 2018. So that should lead to some form of understatement for Q1. Second, you will recall that we have got our FERC ROE pending. I think we requested 11.2% at several hundred basis points above where we are currently at. The expected effective date for that FERC decision independent of when it's going to be ruled upon is the 1st of June, 2019. And then obviously the cost of capital proceeding at the PUC is really, really foundational to what we are trying to accomplish. And in our base plan we have requested a 10.9% number 4 SDG&E. You have followed us enough you will recall in the '08 to 2012 timeframe it was slightly higher than that. I think it was 11.1%. So we think that's adequate, and you did note that we have a 3.4% ADAR [ph] relative to whether the reforms that we are expect in the summer are adequately put in place. The same number for SoCal Gas is a 10.7% ROE. So, in general there is going to some moving pieces in '19. But our ability to execute well around those regulatory initiatives will have a big impact on 2020.

Thanks. My second question bit more general. The governor's framework is released by his I think he calls his strike team or strike force contemplate several ideas to solve the wildfire -- destruction of wildfire problem. And one of them is the idea of this catastrophic wildfire fund. And the understanding is that multiple constituencies would be asked to potentially contribute to capitalize that including the state but also including the utilities. And that that would create a buffer between utility balance sheets and potential future wildfire claims such that inverse condemnation would essentially in many ways be immunized and then if you see [indiscernible] later. I mean how do you contemplate that? Is that a viable outcome for you? Because in some ways I think investors look at it say, well, that's a little bit frustrating. From a Sempra-specific perspective since you have best-in-class wild fire safety provisions. You haven't had a fire in 10 years. And yet, you might be asked to contribute some amount as fund, in the long run it might be in the best interest of your shareholders to contemplate that. And on the other hand you have the best-in-class safety record. So can you talk about you are thinking about the evolution of this negotiation and what that might look like?

Yes. It's a very thoughtful question. Let me try and do this. I will give you a couple contextual comments first. And then I will talk about some of the levers that could be put in play that will bridge buffer that you referred to. First off, we probably will stop short of forecast and the outcome. But I can say across our management team, we have growing optimism that will get some things done this summer that will be adequate. First off, I commented on this on the Q4 call, the Governor Newsome [indiscernible] strong leadership. And I think one of the things I try to focus on, Greg, is up and down the state all the right people that you would expect to be at the table are highly engaged which I think is promising. Secondly, you referenced the strike force report. But it does lay out a roadmap for preventing future wildfires in the future. And this is the point you made a comment on SDG&E. We have been a leader in this regard. We have been recognized nationally. So I think that it gives us some credibility to be at the table. And then thirdly, the commission that was established under SD-901, as this report due to legislature on July 1, I think that will be an important thing for all the investor on utilities and investors to track. But there are three key working groups out of that commission now focused on utility cost for coverage standards, wildfire funding mechanisms and insurance supportability. And the heart of your questions goes to this issue of wildfire funding mechanism. And I would say this first off we think it's a good idea to have this type of fund in place. I think it provides confidence to the…

Thank you, very clear. Have a good morning.

Thank you, Greg.

Our next question will come from Steve Fleishman with Analyst and Wolfe Research.

Hi, thank you. Excuse me.

Good morning, Steve.

Good morning. Turning to Cameron, could you just first of all, clarify that the dates are all first LNG dates, so in terms of actually turning it into earnings producing asset is that like three months after, six months after what is the rough timeline for turning it commercial?

Yes, what we usually look for is that she usually four to six weeks after you get first LNG, it gets a substantial completion as well as earnings.

Okay. And then I know this isn't an issue by 2021, but just for 2020. How should we think about the delay in terms of your guidance range?

Well, I think in my prepared remarks, we talked about the fact that there's really no change. I mean, frankly, you go back to the analyst conference, and we were looking at different contingencies for the year, we build in the expectations of a potential delay like this but 2021 I think, to your point, Steve is still when we expect full run rate earnings. And you recall that at our Investor Day, we raised our expectations around that to $400 million to $450 million.

Okay. And then maybe just switching gears on to California wildfire fixes. So all the right people together, et cetera, just do you think it's feasible to get done by this July timeframe? Are you more focused on just by the end of the session? And what will kind of where you keyed off of to kind of say that this will get done?

Well, we're actually entertaining some of the key stakeholders in Sacramento here in San Diego later this week actually have a group of senior folks and administration tour in our wildfire science center at SDG&E, which we think is positive. All the right conversations are being ahead, we certainly thank Tony Atkins, who's from San Diego, has a very important role to play in the Senate. The governor's got the right folks on it. Guggenheim is our independent financial advisor. They've been meeting with all the credit rating agencies. In fact, some of the agency has actually been out to Sacramento. So we think to your original point, all the right folks are at the table, I continue to be very keyed off of this July 1st date, which is the date that the Blue Ribbon Panel is supposed to make the report to the legislature, which I think is important. And then obviously, there has been a commitment to try to get a bill that is comprehensive to the legislature, the middle of July, which I think is a second data point to follow. But look, I go back to the point Steve but this is the fifth largest economy in the world, we have had a premium regulatory climate here for several decades, I think there is growing recognition in all of my conversations, that they understand the value of having A rated balance sheets from the investor on utilities. I think that, we remain optimistic, we'll get something done.

One last quick question just on the GRC, so we did finally get an Edison GRC and I guess some of the issues there were mixed, but I know you filed. Your GRC, I think it was the first one done under the ramp filing mechanism. So I guess the question really is, how should we view the Edison proposed decision as a parameter at all for years?

I'll make a couple comments and see if Joe wants to add some, but internally, Steve, the way we've talked about it is, it's apples and oranges, right, so this risk assessment program that we use for our rate case, really went into all the fundamentals of how you rank a hierarchy of risk operationally in your service territory. And then you've got to tie that to expected capital spending, right? To make sure that you end up with a different risk mitigated set of outcomes. And if you look at the backdrop that the commission is reviewing our ramp based GRC, that backdrop is around how we take risk out of the system and move toward more constructive regulation. So I'm not sure how much precedent I would assign to the Edison case that Joe do you want to add anything about how you're thinking about our rate case?

Sure. Thanks, Jeff. Hi, Steve. I think you have to consider a few things when you think about it. First each rate case filing is very different, they have different assigned commissioners, different staff, different ALJs, we've already talked about the ramp, I don't need to repeat that, but our filing incorporates safety and reliability spending as directed by the PUC a large component of the filing for SDG&E was including additional wildfire mitigation efforts that include accelerating the hardening increase vegetation management above and beyond what we have to do additional fire prevention technology. And if you look at the wildfire mitigation plan that we have, that was just approved, there's little additional capital in there because most of us already incorporated in this GRC ramp request, and if so, kind of the same thing. It's a continuation of integrity management for transmission, distribution, and storage. So we think we have a very thoughtful filing around safety, reliability, and most of all, importantly, affordability for our customers. So we think as Jeff said, they're apples and oranges.

Thank you.

Thanks, Steve.

Thanks

Next, we'll go to Julien Dumoulin-Smith from Bank of America.

Hey, good morning. Can you hear me?

Good morning, Julien. You are loud and clear.

Excellent. So perhaps just to clarify a couple of things that have already been followed up on here. How do you think about the wildfire mitigation plans and some of the responses and the propositions that came back of late on the LJ side? I suppose, how do you think about translating a wildfire mitigation plan into some form of prudency. And now given the way the things have been developing, how do you think about clarifying that from a legislative perspective? Obviously, this is one Nexus. I'd be curious on your perspectives?

Yes, I'll make two comments in that regard and Joe you feel free to come in behind me but you recall that our wildfire mitigation plan was focused on fire hardening vegetation management, increase in our aerial support, so we have a 24-hour capability with the night time flying helicopter. And then, you may recall, Julien, we've got 177 weather stations in the back country, six of those will be retrofitted as part of our plan. And we've asked for an incremental $100 million to $200 million associated with our mitigation plan for 2019. And that augments what Joe covered because there's a fair amount of capital just in our ramp based GRC filing. So as you think about that contextually, then you move over to how you might think about assigned liability. What we're trying to do is move away from some type of discretionary standard, right? So if the goal is to make sure that you're substantially compliant, the whole goal of having this liquidity fund setup is to meet the needs of those people who have incurred losses. Separate and apart from that, you recall, Julien, that commission always retains discretion regarding penalties. If they think that there should have been a different standard and applied. So what we want to move away from is this idea of a discretionary standard where someone's interpolating, how well you've complied with your established wildfire mitigation plan?

Yes, let me just add on onto that. Hi, Julien. Look, I think that I'm going to go back up to a different level. We really applaud the work of the governor and his leadership and trying to address this. He clearly recognizes that healthy utility companies are a key component of us providing clean, safe, and reliable energy. And in order to have healthy utility companies, we have to have certainty of recovery, right? We have to, and that includes cost in operating our business and those incurred as a result of the application of inverse if we're operating the normal course. So his strike force is laid out a path for the Blue Ribbon Commission and the California Legislature to achieve that. We think that's the way and as Jeff said, we need the certainty. And if you were to look at our U.S. Supreme Court filing, it goes through all of this, right? we have to have certainty of recovery.

That's right.

And you can't have it taken. So I think this is the point we need to make.

Clear. And then just turn it back over very quickly to the McDermott side of the equation. Just curious, are there ongoing negotiations here just to clarify after some of the commentary last week here about the status of the project and not necessarily related to timeline, but just cost and even in that there. Obviously, there is a lot of activity on their side of the equation. How do you think about your leverage in the situation to ensure not just timely completion but also completion on budget as it stands today?

Let me take that, Julien, I think look for all of you the most important thing to recognize is this project is days away from beginning to produce LNG and start delivering it to our customers. And Cameron LNG and the EPC contractor have common goals in getting this world class project completed safely and reliable. And I want to kind of remind you all that simple risk managers' project and the imminent startup is very exciting for a few reasons. One, we were very low-cost world-class LNG project that has created substantial value for the shareholders to this high return asset that we have, it's a very high return asset, it's going to begin producing earnings very soon. Cameron LNG, the business is very strong, we have strong partners, we have strong contracts and that supports our long-term cash flows from this business. So remember we put in our old project, we're going to get like $12 billion of cash flows out of this thing. And there have been ongoing discussions with the contractor over the last year or so. They continue to move things a little to the right. You can see in McDermott's materials that they just have, they're going to end between the two of them about $1 billion to finish this thing. And so they they'd like to get some help but we would like to make sure we get the project done. We want to get it done. We want to get it done as soon as possible. Everybody's focused on it, what we're really excited about is we're starting up right now. And that's about all I can say right now.

Fair enough. Thank you.

Thank you, Julien.

And Christopher Turnure from JPMorgan has our next question.

Good afternoon guys. Just a follow-up on the last question, Joe, is there a way that we can think about kind of your own internal processes for evaluating Cameron timing and cost in construction versus what the contractors are doing there because I think you're being very deliberate in your message that that is what they're forecasting, that's what their latest update points to. Certainly that was your message at the Analyst Day too and that was pretty recently that we had a affirmation of the old schedule versus now?

Look I think that we when I say we let me talk about Cameron LNG, Cameron LNG is a company, it's owned 50% by Sempra and 15.6% by the other three equity owners who are our customers. Cameron LNG has people on the ground at the site every day as they have since the start of the construction. And they oversee what's going on, their big engineering team looking at the forecast of the schedule. I can tell you that McDermott has since last year when they took over CB&I put a lot of focus and effort on this project and have gotten more deeply into the schedule and the cost over time as you've seen in their announcements. I think that David Dixon is very intent on getting this project done. He talks to all the partners as well as to Cameron LNG management. We have assessed it. We've had partners, engineers assess it. We've had our owners engineer assess it. We think the schedule is one that seems very reasonable but it's in the hands of the contractor which is Chiyoda and McDermott. So it's up to them to predict the schedule and the cost. We think that what's laid out there. We took that into account when we did our earnings guidance and that's I would say.

Okay, that's helpful color. And then could you just give us a little bit more detail on the LATAM sale process and kind of how that's progressing next milestones to look for and I guess versus a base case what might move that schedule forward or backward?

Thank you. The current sales process is being handled by Trevor's our CFO and I'll let Trevor address the next milestone.

Thanks, Jeff. Yes, we're progressing well on schedule. We've seen robust interest across the board for these businesses and these are great businesses. Interest has been wide ranged from financial investors to sovereign and pension funds. So we're targeting first round bids by the end of the second quarter and then go into the second round and then we're still targeting close sometime around the end of the year.

Okay. And nothing that could move that forward or backward based on what you're seeing right now?

No, I think we've got a pretty formalized process that we're working through and we're still adhering to the schedule that we laid out.

Okay, great. Thanks, Trevor.

Yes.

Our next question will come from Michael Lapides with Goldman Sachs.

Hey, Jeff. Hey, Joe. Thank you for taking my question. Real quick, if you had to peg which moves forward first, is it Cameron expansion so 4 and 5. Is it the Cameron expansions so 4 and 5. Is it the first trains at Port Arthur or is it the small train at Costa Azul and if so what are the next key milestones we ought to watch for?

Thank you for that question, Michael, and I'll give some color commentary maybe Joe can add into it, but I think that the one that has the lead advantage currently is we currently have three Heads of agreement at ECA Phase 1 are fully contracted and all three of those are moving toward having SDAs in place. So just in terms of documentation that is further along in terms of being 100% contracted and moving toward more definitive agreement. I would also say that Cameron expansion is something we remain optimistic about. You recall that when Total stepped into RNG's position they made it very clear to their shareholders that one of the attractive aspects of being in the original Cameron partnership was they were committed and interested in seeing the expansion go forward which you may recall is something we were trying to do several years earlier. So, I think you've got line of sight to the three participants in the expansion and we continue to have a lot of positive work being done there to make sure that the underlying economic support that. And then obviously at Port Arthur, we've got 2 million tons per annum accounted for with our partner from Poland. We're continuing to have a lot of very positive conversations around Port Arthur and we think that is a remarkable site for a number of reasons. So I think in general, one of the things you'll recall that we did was we did a bottoms up strategic review of our LNG business over the last 12 months and came away with a view Michael that not only is it a core business to Sempra and Sempra can continue to add value in terms of balance sheet and expertise, we really raised our ambitions about what we thought we could accomplish. So we're actually feeling quite constructive on all three of those projects.

Got it. And then a question on the settlement in Texas, any impact meaning the settlement regarding in for reading Sharyland, any impact of that settlement on the potential accretion dilution that you discussed when first announced?

I would say that we've gone back and revisited our underlying economics and we feel equally good about how we underwrote that transaction before maybe 30 or 40 days of slippage in and out of where we expect to close it, we feel great about the transaction frankly. The type of growth that we outlined at the Investor Conference, Michael you recall really had a lot to do with that Sempra in West Texas opportunity and the InfraREIT transaction actually lays into that growth probably even better than we originally thought when we underwrote the deal.

Got it, thank you, Jeff, much appreciated.

Thank you, Michael.

Next to go to Ryan Levine from Citi.

Hi, given the recent weakness in global LNG [indiscernible], do you anticipate any customers who elect not to nominate or with LNG and Cameron 1 after the commissioning phase is complete. Can you comment on the nomination process now that you're nearing first half?

I don't know if we'll go into kind of how we think about nominations Ryan but I think that we do take questions from time to time about whether we see the overall contract and model change and based upon our current conversations in the marketplace, Joe's been on the road, I'm on the road, Carlos Reese. We've got our entire management team been in over to make sure we're talking to the right folks. We still see this as a long-term contract in business and our goal is a first step as we move toward FID is making sure that we have high quality customers contracted for 20 years with very, very strong balance sheets. And remember we're really on the infrastructure side of business, right. So we want to play in exact same role or very similar to what we're doing in Cameron which is a telling model.

Okay. And then on ECA with the non-FDA approval received, are there any remaining comments that the company still looking to procure?

Yes, you raised a great point, we've got the non-FDA approval to export from the United States to Mexico and then to also export from Mexico abroad as issued by the Department of Energy. We also in this year got our Port Arthur approval from FERC. I'll let Joe comment on what other permits we have in Mexico and whether is there any other we're still pursuing.

Thanks, Joe. Hey, Ryan. Yes, really the major permit we got earlier about both the large scale and the mid scale site. And then as Jeff just mentioned the non-FDA, what we still need to get and we have applied for and we've done this before is we need our Mexican export permit. So that's underway. The other things are just small local permits around building the site but those come later in the process. But the only one that's more significant is this export from Mexico, we expect no problems with that.

Thank you.

Thanks, Ryan.

Our next question will come from Shah Pourreza with Guggenheim Partners.

Hi, good morning. It's actually Constantine here for Shah. A lot of the questions have been answered just a couple of kind of housekeeping items. So, on the LNG development projects, now that kind of permitting has been progressing. Can you talk about how you see kind of the ownership structure is going to be similar to Cameron where some of the off-takers might take an equity interest or just how to think about that going forward?

Thank you for that question. I think as we went through our strategic review or LNG business over the last six to eight months, we've also been looking as we move toward an FID decision at ECA Phase 1 later this year and hopefully an FID decision around Port Arthur in Q1 of next year. One of the things we're looking at is how we finance these projects and the potential impacts to our balance sheet. But John a great point, as you saw in the Cameron facility Phase 1 Joe articulated this earlier our three partners are each and just over 16% participation. We think it's a great model to align the interests of partners around these large capital projects. And to your point we expect that will be a model, you'll continue to see us replicate going forward. I would say if you went up to a million feet and looked across the portfolio over LNG projects, we'd like to be in that 60% to 70% range of equity ownership in our projects.

Okay. So kind of thinking about it the same way as it's been, another just kind of small housekeeping item. You mentioned kind of the cost of capital application to equity ratio was going to kind of shore up the credit ratings but kind of both from your perspective and I guess what you can reflect from the CPUC, some of the downgrades have come not on the heels of just formulaic kind of metrics but also some of the regulatory and kind of legislative kind of structures around there. So how are you thinking about that kind of going towards credit metrics?

Well, I mean we have spent a lot of time with our credit rating agencies and obviously they're very focused on the process. We've described on this call around making sure that the legislative and regulatory model moves back to standard utility practice and procedure rights. You always expect to have your reasonable costs returned plus an additional return on what's on your investments. I think that's what broke as you recall with the misapplication of the inverse combination model is, there has been a leakage of utilities ability to recover all the costs that they've incurred. So I think it's really a multipart effort, you've got to get back to the right regulatory regime that allows for the type of funding mechanisms to meet the liquidity requirements, you've got to get a improvement to the regulatory model and you've got to make sure that your return on equity reflects the risk in the marketplace. Now oftentimes said that your return on equity is intended to be a proxy for the regulatory financial and operator risk that you see in the marketplace and that's why we filed our updated ROE requests as we have.

Okay, so I guess it's fair to say that kind of progress on all fronts is what you're targeting in terms of second line?

That's right.

Yes, that answers everything from me. Thanks.

Thanks.

And that does conclude our question-and-answer session today. I'd like to turn the call over to Jeff Martin for closing remarks.

I want to thank everyone for taking the time to join us on the call today. I would say as we've had conversations with our management team, we actually have a lot of exciting things that we're working on right now and look forward to seeing many of you on the road in the next couple of months and per custom. If you have any follow-up questions, feel free to contact Faisel and the IR team. Have a great day.

That does conclude our conference for today. Thank you for your participation.