Okay, good morning. We're going to get the webcast going. Good morning, everyone. And here in the room and on the webcast, I'm Faisal Khan, the Head of Investor Relations, and we are excited to have a full crowd here in San Diego, and we hope the group that went out to the Costa Azul LNG facility yesterday had a productive trip. Before I make our required disclosures, I want to make sure we address safety first.
Your safety and the safety of our employees are critical to our culture. Behind you, there are 4 exit doors. In case of an emergency, we will direct you to walk out those doors to the emergency exits. From there, Sempra personnel will guide you to a staging point for safety. Before starting, let me remind everyone that we will be discussing forward looking statements today 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 annual report or Form 10 ks. I'd also like to note that the earnings per share amounts in our presentation are shown on a diluted basis and that the forward looking statements speak only as of today, March 27, 2019, and the company does not assume any obligation to update or revise any of these forward looking statements. Furthermore, some of the financial information is presented on a non GAAP basis. We've reconciled those figures to the closest GAAP figures in the appendix of the financial presentation.
With that, let's go through today's agenda. We will first hear from our Chairman and CEO, Jeff Martin, on the vision and strategy of our company. We will then hear from Patty Wagner, our Group President of the Utilities. We will then dive right into the utility presentations for San Diego Gas and Electric, Encore and Southern California Gas Company. We will then open it up for Q and A on the utilities.
We would like to hold all Q and A on Vision, Strategy and Financials for the end. Following the Q and A on the utilities, we will have a short break. We will then hear from the LNG and Mexico teams. Carlos Ruiz, the Chairman and CEO of North American Infrastructure, will provide a macro overview of our businesses. We will then go through presentations on Mexico and LNG followed by another Q and A session.
Finally, we will run through our financial plan and then bring the executive management team up for a broader Q and A. For those of you on the webcast, you will be able to submit your questions through the web. We will compile those questions here in the room and make sure we incorporate them into the broader Q and A. After we conclude the presentation and webcast, we will have lunch outside this room and then head up to San Diego Gas and Electric. With that, let me hand the meeting over to Jeff Martin, Sempra's CEO and Chairman.
Thank you, Faizel. Well, first, let me start by again welcoming everyone for joining us today. This is one of the events that we always look forward to. I think as we go back and forth each year, we very much enjoy going to New York. We got a very large crowd in New York, but there's always something special about hosting the event here in San Diego.
I think this year, we're really excited about doing it for three reasons. Number 1, it gives you a chance to have broader exposure to a larger group of our management team. As Faisel indicated, it also gives you a chance to look at some of our assets for those of you who were able to go down to our regas facility yesterday. And certainly, I hope everyone makes the opportunity to go out and visit with SDG and E today, which is really important. The third reason we're excited about this is we've made a lot of progress since last June.
I think one of the some of the key themes you'll hear about today is that we have a sharper focus, we have improved discipline and we've really tried to reinvest in creating a high performance culture. And collectively, those items really cause us to have a fair amount of confidence in the plans we're going to discuss with you today. So let's start with what it means to have a high performance culture. As the CEO of the company, this is something that I personally own, right? So over the last 9 plus months, we've engaged with 20,000 employees about what it means to be a 21st century energy company.
So we think there is a once in generation opportunity to be part of something where over the next decade we expect the energy markets to change more than they have in the last decade. And there's a number of very important themes taking place. We as a company are building a brand around innovation, technology and leadership, right? We think that we have the opportunity to be a leader in every market we're in and we're very committed to acquiring customers, but not just acquiring customers, finding new and better ways to serve them. So as you go out to SDG and E today, hopefully that will be a nice visual about how serious we are about innovation, safety and serving our customers differently.
The other thing we've done is we've taken a lot of input from inside our organization and found the opportunity to refresh our values, our mission statement and our vision. We believe in doing the right thing, championing people and shaping the future. This is a proactive organization, right? We have the opportunity to put our thumbprint on the future of the communities that we serve. We're going to be very active in terms of how we execute going forward.
And when we were together last June, we talked about the importance of our mission statement, which was to become the premier energy infrastructure in North America. And this is quite clearly aligned with our vision of delivering energy with purpose. And the only thing I'd comment on our vision is, it's about being purposeful in what we do every day in terms of safety and customer service reliability, but being purpose driven in the communities that serve. So we believe that the better you serve all stakeholders, you'll get better results for your owners, right? So being purpose driven means just last year we logged over 80,000 volunteer hours in the communities that we serve.
So this is intended to do one thing, align 20,000 employees around the opportunity to make a difference in the communities that we serve, right? The other thing I'd mention is someone said to me, well, Jeff, what does it mean to be Premier, right? It's just a modest way of saying number 1, right? We want to be number 1 in every market we serve. And on the right hand side of the slide, you'll see what we refer to as the path to Premier.
These are the 6 critical success factors that every one of our organizations, whether it's in Dallas or Los Angeles or Mexico City, there's a fundamental commitment that we're going to be number 1 in each one of these areas. We're going to be number 1 in safety, right? We were recognized just last year at SDG and E for having the number 1 safety program in the United States and they were recognized as number 1 in innovation and number 1 in reliability. We are going to be number 1 in energy choice and security, number 1 in innovation and technology, number 1 in talent, diversity and inclusion, number 1 in financial excellence. I tell people that's not just in recording our results, that's in delivering good results.
And we're also going to be recognized for our energy leadership and the purpose by which we bring to the communities that we serve. So let's transition to what does that mean. So you've got a very clear sense of where the company is going. 20,000 employees understand what their North Star is. We understand what the path to Premier is, the critical success factors that we have to execute on every day.
And these are the platforms by which we're going to execute. We've got SoCalGas, Sempra LNG. We've got Eonova, SDG and Encore. We're going to pour $25,000,000,000 our largest capital program in the history of our company over the next 5 years into these five businesses to improve our service to customers. Secondly, when we were together last June, we were active in 18 states in the United States and 3 foreign jurisdictions.
So when I talk about a sharper focus, it starts with the geographic focus. So now we're actually focused on 3 American states and one foreign jurisdiction. This gives you a blow up of where we're focused, right? We're the number one utility player in Texas. We have the number one platform in California and we're the number one market leader in Mexico And we're going to go deeper into these markets with a focus on the fit and focus and clarity of what we're trying to accomplish.
We're going to talk about each of these businesses as we go through today's events. Now in terms of the building blocks of our strategy, we talked last June about what we thought were the most attractive markets. Clearly, when you talk about Mexico, Texas and California, including Louisiana, there are strong demographic trends. There are good business fundamentals, constructive regulatory environments. Alan and I will go through what we think are some of the most important fundamentals in Texas.
We've got more work to do in California in this regard. We're going to talk about that today. But clearly, this is a business that's not in parts of the country that are not growing, right? We've positioned the portfolio where we think we can have the most success. Something that's probably overlooked from time to time is, it's not just about having a sharper focus geographically, it's also about where we want to play in the energy value chain.
So those of you who have followed our company over the last 2 decades, we've been in a variety of different businesses and you've seen us manage a portfolio to deliver good outcomes. We were once had one of the largest commodity trading desks in the world. We also used to have a very, very large IPP generation fleet. And over time, what we have realized is, we can continue to position the portfolio around transmission and distribution investments closer to the customer. Today Sempra Energy is the largest utility holding company in the United States.
We serve over 35,000,000 consumers here in the United States and another 10,000,000 in South America. But being in the right part of the value chain is important. So when you think about capital allocation, think about this. It starts by being in the right markets. It starts by being in the right part of the value chain and then it transitions into making sure that every dollar inside of our company has to compete.
And I talked last June with you about the investment ladder we use where we're always recycling capital into the highest parts of the ladder where we produce the best returns. Over long periods of time, having the right strategic focus, being in the right markets, having solid capital to So we showed a chart similar to this last year and we debated whether we would show it again this year. So we had our 20 year anniversary run last year. The company was founded in 1998. And what we really wanted to show was, it's about not only having the right business strategy and the right focus, but it's about active portfolio management.
And we're going to talk today about some of the things we've accomplished since last June. But you can see over long periods of time, the agility and the thoughtfulness and actively managing the portfolio has produced long term returns for our investors. I talked about this last June. I actually spoke with one of our institutional investors last night at our cocktail reception, who continues to remind me that he's got a very large portfolio that has an average cost basis of $41 So someone along the way was able to achieve a really good investment in this company over a long period of time. So let me say this, we're going to compete every single quarter to produce good returns.
But at the end of the day, this business has been built to produce long term returns in terms of share price appreciation and the return of your capital in the form of a dividend. Next, a fair amount of alacrity around what's most important. We've done a bottoms up review on every one of our businesses. Our Board has been highly engaged in that process. We've restructured our corporate activities and we have line of sight to dropping $50,000,000 pre tax back into the business in terms of cost savings.
That's on top of the $65,000,000 that is currently being taken out of the businesses in our utilities as part of our general rate case. We've made a decision in January about exiting South America and this was a heartfelt decision. These have been one of the best cash on cash return investments our company has ever made. We think that we have a bigger opportunity in North America, right? So remember, the idea of capital discipline and recycling capital to the areas of your business where you can produce the best returns that was central to that determination.
And finally, we want to complete our renewable and natural gas storage transaction sales. 2 of those 3 has been sold. We expect to complete our wind transaction with the AEP Corporation in the second half of April. And finally, the last thing we committed to do when we were together was to update you on our future financial plans and Trevor will be prepared to do that today. So there is a slide in the back of the appendix of my presentation that shows the 100 plus different indices that Sempra is on, But we certainly feel like over the last 5 to 7 years, you've seen growing recognition for the company.
And one of the things we're quite pleased with is the number of sustainability indexes that we've moved on. So all that we do participates in this clean energy transition. California has a leadership position around clean energy. Texas produces more renewables than the other state in the country, but we're also doing positive things around sustainability natural gas trading partner with the United States. We move about 5,000,000,000 cubic feet per day to Mexico, roughly the same size as the average daily consumption of California and we also ship 1,000,000 barrels a day of refined product to Mexico.
Mexico is an important market today to the United States and it will increase in importance over time. Finally, this is kind of my wrap up slide. I refer to this kind of as like the Instagram shot that when you think about 2023, what is it that we want to be known for? And you'll see a slide similar to this in the utility presentations as well as the infrastructure presentations. Let me start by going back to the word for premier.
We're going to be number 1 in the state of California. This is a core market for us. There's roughly 40,000,000 people that live here and we serve 25,000,000 of them, right? So we have an opportunity to continue to extend our leadership position in safety and customer service and reliability. We take it very, very seriously and you're going to get a big dose of that when Kevin Segarra and Brett Lane come up here to talk about those businesses.
We're going to be a recognized leader nationally in safety, right? This is a core priority. No different than Pfizer opening today's event by talking about safety inside this room. It is a core part of our culture all across Sempra. We've made a commitment to gender parity.
I've said within 5 years, we have an aspirational goal that our Board is 50% female. Your management team will reflect the same goal as well as you will all the way down to the director ranks inside of our company. Inclusion and diversity increases our ability to provide better performance. We've got a capital plan of $25,000,000,000 It's the largest in our company's history. It's the largest capital plan for SDG and E.
It's the largest capital plan for SoCalGas. It's the largest capital plan in the history of Encore, right? So we have a lot of opportunity in front of us. And then we're going to continue to make sure that as we recycle capital to improve our balance sheet strength, We're going to still focus on a fifty-fifty debt to cap ratio. And finally, few companies of this size can talk about having a rate based program over 5 years that grows at a 9% CAGR, right?
That goes back to having a sharper focus, being in the right markets and having a commitment to capital discipline. So let me just conclude by saying, I'm personally glad that each one of you are here. There's a lot of excitement on our management team about what we've accomplished in the last 9 months. And sometimes I believe having pride in your past is the most important issue to inspire confidence in your future. I'm going to stop here.
I'll be back on stage later today for Q and A, but I want to introduce one of my partners on the senior team. I've had the chance over the last, I think, 14 years of my career to intersect my career with Patty Wagner from time to time and she is a joy to work with. She's one of our strongest leaders. And in the last 6 months, she's taken on the new role of really being the champion of our U. S.
Utilities as Group President. I'd like to offer a warm welcome to Patti Wagner to the stage.
Okay. Thank you, Jeff. I appreciate it. And Ashley, good morning, everyone. Thank you for making it out to San Diego.
I also enjoy it when we get to go to New York, but having you out here in our home, we really appreciate it. So thank you for making the trip out. And I think most of you know, I've spent most of my career in the U. S. Utilities.
So now in this role, I just really feel like I have the best job in the company. And I'm really proud to be here today, introducing our outstanding and really well run U. S. Utility businesses, SDG and E, Oncor and SoCalGas. So I'm going to give you a high level backdrop to set the stage for our utility CEOs who will follow me.
And I'm going to start with a few aggregate points and some of which Jeff has mentioned already, but I think they're really impressive. The first one is our combined U. S. Utility served over 35,000,000 consumers, 30 5,000,000 consumers, that's over 10% of the U. S.
Population. And that's really important to us. We know 10% of the U. S. Is relying on us for energy every single day.
Secondly, Jeff talked about Sempra's approximate $25,000,000,000 capital plan over the next 5 years. Well, our utilities represent $22,000,000,000 or 92 or 90% of that plan. And importantly though, our capital plan is not reliant on any single large project. This is really a continuation of investing in our systems, primarily focused on safety and reliability enhancements. And third, our $22,000,000,000 capital plan is driving an estimated 9% rate based growth over that timeframe.
I'd like to say that again, 9% rate based growth. That's very impressive and I'm really proud of that. So 35,000,000 consumers, dollars 22,000,000,000 capital plan and 9% projected rate base CAGR. So keep those points in mind as we go on. Jeff also mentioned, we really sharpened our focus on the most attractive markets in North America and our U.
S. Utilities are in 2 of the top economies in the world. So starting with SDG and E. SDG and E is truly a leader in the industry and has been recognized by many as a leader in wildfire mitigation. At the tour later today, you'll see state of the art weather center and you're going to be impressed by this, you will.
But I also want you to remember it's not just the wildfire mitigation efforts. SEDD is ranked number 1 in reliability and number 1 in innovation. I hope you come away today thinking and knowing that we truly are different from the other California utilities in the West here. Next, Encore. This is the largest pure play T and D electric company in the great state of Texas.
And from a risk growth and fit standpoint, we are really excited to have the Oncor team as part of the Sempra family. And the way I look at this, this acquisition has just been a home run for us. And Alan is going to highlight the amazing growth story at Encore that is really driven by increased demand in the state of Texas. And on the natural gas front, SoCalGas is the largest LDC in North America and SoCalGas continues to use its unique scale to help deliver cleaner energy to Southern California, but it also gives Sempra distinguished credibility in the world gas market. They are also known for their innovative use of technology to further enhance the safety of the system, And you're going to see some of this over at, SG and E today.
We have some props set up there for SoCalGas as well. But in my last role as CEO of SoCalGas, I really often thought that our gas business was underappreciated in the market. So today, I hope you're going to study up and pay particular attention to Brett's presentation because it will focus on our significant investments in safety and reliability. Turning to the next slide. This is what we mean when we talk about being in the and we're the only utility holding company that offers an investment opportunity in 2 of these three markets.
So let's start with California, largest economy in the U. S, 5th largest in the world with a GDP of approximately 2,700,000,000,000. In terms of growth, the economy is projected to grow about 2% and the housing market is projected to grow about 7% over the next few years. And as California continues to set aggressive climate change goals, we plan to continue investing in our electric and gas systems to help the state meet these targets. And looking at Texas, another great market and this is the 2nd largest economy in the U.
S. And is the 10th largest economy in the world with a GDP of $1,700,000,000,000 And from a population perspective, the amount of people moving to Texas is really phenomenal. On average, over 1,000 people a day are moving there, and it's home to many Fortune 500 Companies. And you'll hear more from Alan on this, but this projected continued growth in Texas will require investments in the state's transmission distribution system for years to come. So Texas, California, these are 2 of the most attractive markets in North America from a size, scale and growth perspective, and we have created leadership positions in both states.
And this is really driving the value for Sempra and our shareholders. So back to California, and we had a lot of questions on this last night, but here's just a few thoughts from me on the state's policy arena. I really look at this that we have 3 big opportunities that we're working on now that I think will improve our California businesses. Right now with the wildfire discussions, the general rate case and the cost of capital proceeding, we have an unprecedented opportunity to increase our overall legislative front, the wildfire discussion continues and we are in it every day. Our new governor came into office in January and he inherited a very challenging situation, But I have to tell you his leadership early on has created positive momentum.
He's formed a Blue Ribbon Commission and Strike Team and they're moving fast. They're getting input from all stakeholders, ourselves included. And we're really optimistic that a comprehensive solution is in the works that will help reduce the threat of wildfires and also address liability and cost recovery issues. And Kevin will touch more on this during his presentation. And regarding our 2019 rate case, we believe the proposal we filed is in the best interest of our customers with a strong focus on safety and reliability.
The case has been fully litigated and we're hopeful that we will receive a proposed decision mid year 2019. And then once we get a final decision, we'll be providing an update to the SDG and E and SoCalGas Financial projections. And finally, regarding our cost of capital filings, these give us and the other California utilities the ability to reassess our cost of capital as the risk profile of the state has increased in recent years, and we'll be making our filings next month. So we've got wildfire mitigation, general rate case, cost of capital. And I think about where we sit today on these issues, I really believe there are opportunities for multiple wins in 2019 that could have positive near and long term impact to our California businesses.
So stay tuned. I'd also like to highlight our industry leading safety culture. Safety is a central focus on everything we do and is foundational for all of our businesses. In 2018, all three of our business improved their year over year safety performance and you'll hear more from the CEOs on how they're leveraging this positive momentum to take our safety performance to the next level. And they'll also talk about the safety and reliability investments that make up the majority of their capital programs.
I'd like to end with my favorite slide and this shows some of our goals that we expect will put Sempra on the path to premier over the next several years. So remember, I mentioned our $22,000,000,000 capital program and the projected 9% rate base growth. Again, this $22,000,000,000 dollars is investing in our traditional utility capital work and we have the teams in place at all three utilities that know how to execute on this. In 2020, that results in projected U. S.
Utility earnings of $1,800,000,000 for Sempra. But beyond financial metrics, our utilities are really committed to continuing our leading positions in the industry, specifically in safety, reliability and innovation, and it's really that drive that we expect to lead us to be the premier utility companies in North America. And now it's my pleasure, my true pleasure to introduce the CEOs of our utilities. First, Kevin Segarra, the CEO of SDG and E. Kevin and I worked together at Sempra Renewables and he was responsible for building that business into an industry leader.
He also oversaw the sale of the business, which is expected to provide Sempra over $2,000,000,000 in proceeds. Following Kevin will be Alan Nye. He's the CEO of Encore. Alan and I have gotten to know each other quite well over the past year, and I was really impressed with his leadership throughout the Oncor acquisition process. He's highly respected not only in Texas, but throughout the industry.
Following Alan will be Brett Lane. He's the CEO of SoCalGas. And I can't say enough great things about Brett and our partnership over the years. He is nationally recognized for his knowledge and expertise in the natural gas space as a true industry leader. So I'll throw myself in there and combined the 4 of us have about 100 years of energy and utility experience, and these businesses could not be in better hands than they are with these 3 CEOs.
With that, I'd like to turn the stage over to Kevin Segarra.
That was awesome, Patty. So I'm really excited to be here this morning with you to speak to you about SDG and E, but I'm even more excited that many of you have chosen to come out later this afternoon to our campus at Century Park and see what we're doing in the area of wildfire mitigation as well as clean energy. On the way, we're going to stop off at Montgomery Field and give you an opportunity to see one of the world's largest firefighting helicopters. Some of you may be aware that Jeff Martin used to be in the Army and he used to fly helicopters. And so we thought, we'd ask Jeff to take the air crane up for you and give you a unique photo opportunity.
But our risk management department said, that wasn't such a good idea. So I don't think we're going to be able to do that today. So let's start here with SDG and E's mission, improving lives and communities by building the cleanest, safest and most reliable energy infrastructure company in America. That mission is completely aligned with Sempra's vision, but it's also deliberately aligned with the state's policies, cleanest, safest, most reliable. At SDG and E, we're a leader in technology, innovation and clean energy and we provide service to 3,700,000 consumers.
We do that through 1,400,000 electric meters and about 900,000 natural gas meters. The grid is really the backbone of our system. We've got over 2,000 miles of transmission lines and nearly 24,000 miles of distribution lines and 60% of our system is undergrounded. Our T and D infrastructure enables adoption of clean energy and you can see here on the right, we've got 45% renewable penetration right now and over 10% of our customers have rooftop solar. This slide lists the external policy drivers and tailwinds behind our strategy at SDG and E and provides us with ample capital investment opportunities.
This first bucket is really all about safety and operational excellence. You can see here we can these policies are driving investments in wildfire risk mitigation, pipeline safety, pipeline integrity and overall system safety enhancements. The second bucket is really all around California's clean energy policies, providing us with opportunities to invest capital around electric vehicles, energy storage and grid modernization. And this 3rd tailwind that's really impacting us is this movement away in California from a utility centric supply model. I'll remind you that in California, we don't earn on the sale of gas and electricity on the commodity itself.
We essentially have a T and D model with no exposure to commodity prices. Our strategy is directly aligned with state policies and the grid enables all of this, right? The grid is enabling more customer choice. The grid is enabling more renewable energy, more EVs. So the grid is central to all of this.
Taking a bit of a deeper dive around California clean energy policies, they're really aimed at reducing GHG emissions in the state. It started off with a focus around renewable energy and higher RPS requirements, but the state's pivoting now, the state realizes to reach its aggressive GHG emissions goals, it's got to focus on the transportation sector. So you can see here that Governor Brown set an aggressive goal of 5,000,000 EVs on the road by 2,030. San Diego share of that is about 500,000. You can see by the chart on the right that we're growing at about a 27% CAGR.
So we're on our way to meeting those goals. But really to hit those goals, we need to make investments in a more modern grid that's essential to integrating this higher penetration of renewable energy as well as the proliferation of electric vehicles. At SDG and E, we have a very robust capital plan and 80% of it goes to enhancing safety and mitigating wildfire risk. You can see here on the right that we're growing at about a 6% CAGR over the 5 year plan, underpinning future earnings growth. And the capital plan is very diversified with over 50% of the projected rate base coming in the area of natural gas and FERC Electric Transmission.
All right. This is my favorite slide and it's one I like to talk about, even though I really didn't have much to do with it when you think about it because I wasn't here for this. But, Scott Drury, our President is here from SDG and E and Jeff Martin is here and others at SDG and E really take the credit for these types this result here that I'm going to speak about. But SDG and E is a real efficient operator. Over the past 5 years, we've grown our earnings at about 7% year over year, while at the so our earnings have been going up 7% and we reduced our headcount by over 500 positions and our O and M per customers come down by 40% or over 12% year over year.
So really at its core, it's our culture of privileging technology, innovation and continuous improvement that's really responsible for these results. That culture permeates SDG and E and the greater Sempra. At SDG and E, we have relatively low average bills when you compare us across the nation to our peers. A lot of this is due to our mild weather. That mild weather is also causing us to have fairly high volumetric rates.
And so we see an opportunity as we move more toward a pure T and D model for a more modern rate structure, I believe that more modern rate structure looks something like a fixed monthly charge in the future. So our project spotlight naturally, given everything that's going on in the state right now is going to be around wildfire risk mitigation. We're proud to be the industry leader in this area. Our program is differential to others in the state. You're going to many of you are going to come out today and see firsthand what we're doing in this area, but I want to hit a few highlights.
But first off, I'll mention that we didn't just arrive here in the last couple of years of having this program and being the leader in this area. This has been a continuous process of innovation, improvement, reliance on technology over the past 10 years. So it's not something that just happened to us in the last couple. It's been something we've been pushing forward and leveraging our culture to get to over the past 10 years. In that last decade, we've spent about $1,500,000,000 hardening our system and making operational improvements.
Like I mentioned, 60% of our system is undergrounded. We've got 175 weather stations and 100 cameras spread out all over our service territory to give us unparalleled situational awareness. That situational awareness allows us to make very thoughtful, granular, targeted decisions around how we operate our system in advance of enduring a high wind event. Lastly, we collaborate with over 100 community partners across the region. This is really a region wide approach to help us ensure that the entire community is prepared
and
this area and given all that we've accomplished over the past 10 years and the states using SDG and E really as the model, everything we do on this on the operational side is the model for what the other utilities should be doing in the state. It'd be easy for us to kind of sit back, rest on our laurels, think that this program is good enough, but it's never good enough in this area of wildfire risk mitigation. So we're continually leveraging our culture of pushing forward and looking for improvements and innovations to make it even better. So in the operations and engineering area, we're accelerating infrastructure hardening efforts. We're using more micro grids.
We've doubled up on the amount of tree trimming we're doing. We're adding another firefighting helicopter with night flying capability. On the technology side, more cameras, more weather stations, continue to leverage technology, falling conductor protection, drones, lidar. When you come out today, you'll see we're using all this data that we're gathering from this very vast weather network to create very sophisticated weather models and fire behavior models. Those models require the use of supercomputers, so big data play there and a supercomputing play.
Because of our leadership position in wildfire mitigation and safety, we have a preferred position at the table with policymakers. We're in active discussions, as Patti mentioned, with the governor's staff, with the governor's advisors, the strike team, the Blue Ribbon Commission, legislators, the PUC, other heads of agencies. So we're in active discussions day to day about reforming the wildfire liability rules. And given those discussions, I'm very optimistic that something much more sustainable is going to come out for the utilities in California. So to wrap up our 5 key takeaways and pathways to Premier.
Our vision at SDG and E is completely supportive of Sempra's vision of becoming North America's premier energy infrastructure company. We're completely focused every day on safety and reliability. As I mentioned, we're actively participating in discussions with the state around reforming the wildfire liability rules as well as our policies around clean energy. And those policies are giving us a great growth platform as we transition our grid to more forms of clean energy, underpinning strong future rate base growth. So with that, I'll conclude and welcome Texas' favorite son, Alan Nye, the CEO of Encore.
It's me. Thanks, Mike. Thank you, Kevin, and good morning, everyone. It's a pleasure to be with you all again today. Last year, after 4 years of having a parent bankruptcy, I had the opportunity to reintroduce many of you all to our company, Encore.
And I explained at that time that I thought Encore is a great company, a great business model, and a strong and growing state, with a constructive regulatory environment and ample opportunity to invest in our system in ways that benefit our customers and support the ERCOT market.
So I can just skip to
the end and tell you I'm about to say the thing tell you the same thing again. We've got a little more CapEx this year than I did last year, but it continues to be a great story, and I'm excited to share it with you. Before we go into where we're going, let me just remind you a little bit about who we are. As Patty said, we're the largest T and D company in Texas. We're pure wires.
We have no commodity risk, no retail risk, no generation risk. We're actually the largest pure play wire company in the country. We serve over 11,000,000 Texans through 137,000 miles of lines, 3,600,000 advanced meters. And a service territory that you can see on the screen, the blue, that expands over 54,000 square miles, okay? Now Patty talked a lot about macro trends in Texas.
I'm not going to repeat many of those, some of them I might. But suffice to say, what I'm going to tell you and what I'm going to show you through this presentation is that the Texas miracle, as our Governor calls it, is alive and well. Starting with growth. As Patty said, 1,000 people a day move to Texas. That, together with the other economic development we're seeing in our region, results in very strong growth, 2% premise growth, 1.5% load growth.
Also in our service territory, we have some of the fastest growing areas in the country. The Dallas Fort Worth Metroplex area is the largest growing metropolitan region in the country. We serve 4 of the 10 fastest growing counties in the country, 6 of the fastest growing cities. Last year, we set a record for Encore. And One more growth statistic, I've talked to some of you in the past about our larger customers that take service at transmission voltage, okay?
They come in every year, they request points of interconnection POIs at transmission voltage and Texas at 69 KV and above. Historically, we experienced about 10 of those a year. Between 2013 2016, we averaged 11, okay? Last year in 2018, we had 117. This year, we're predicting, anticipating, believing we're going to have 128, more than 11 times the historic level of transmission requests for points of delivery on our system.
Another trend we're seeing in Texas is the continuation of the change in the generation mix, proliferation of renewables. We right now in Texas, as I heard from many of you last night, you know we're sitting on a reserve margin of about 7.4%. That's lower than any of us would like. But as you can see, help is on the way. When I stood before you last year, there were 82, I believe, 1,000 megawatts in the queue.
Presently, there's 98,000 megawatts. Significant amount of that is wind and solar, as you can see. Those new generation projects are represented on this page as those kind of blue and grayish dots. As you can see, to a certain degree, it overlays our footprint fairly well. I'm going to show you where the Infrae facilities are in a minute to the extent we get to complete that transaction.
We believe that our service territory is particularly well situated to participate in the facilitation of this new generation back to the load centers in ERCOT. Permian Basin. Permian Basin is an incredible story and it's responsible for a good piece of the Texas Miracle, the growth engine in Texas. It's really hard to describe unless you've been out there or unless you've flown over it recently like I did flying out here on Sunday for this conference. You start seeing oil and gas development just outside of Abilene, it goes all the way to the Texas border as far as the eye can see both sides of your airplane.
It's an incredible play. It's an incredible story. It's an incredible opportunity for us because we serve a good portion of that region of the state. Last year, when I was before you, I told you that, in certain areas of the Permian and Delaware Basin, we experienced load growth of 400% at historic levels. That situation continues today.
Overall, we're experiencing or we're expecting to experience about 40% West Texas load growth by 2022. All right. InfraREIT. We're presently trying to acquire a company called InfraREIT together with Sempra. I'm going to tell you 2 things about InfraREIT, why and when.
Okay, the why is fairly simple. If you look at the green lines up on this page, the assets fall into what I call 3 buckets. There is what is in Central Texas, right in the middle of the state, the green lines, that's about 258 miles of transmission lines, about $400,000,000 That's the transmission we traded last year when we did the T4D swap, okay? We serve east from those facilities. We serve west from those facilities and in the middle of our transmission system that goes out to obviously the Permian, and we want those back.
We think they're the natural owners for those. We think we're the best owners for those facilities and we'd like to get them back. The second bucket is a more or less a loop in the Midland Odessa area. You see it overlays the Permian fairly well. It also overlays where a lot of generation is coming online or being developed.
So we think those are strategically located to help us better serve the load growth we're experiencing in the Permian, the Delaware and West Texas generally, as well as to help us facilitate the development and generation in the region getting back to the ERCOT market. The 3rd piece of the Infarit assets are up in the Panhandle. This would be a northern expansion of our footprint. We're not up there now. But again, we like those assets because you can see the generation that's generally developing in that area and we think they're a good strategic fit for us in that regard.
Sorry about CapEx. Those of you who followed our many adventures of the PUC over the last few years will remember that, several occasions, including in the Sempra changing control proceeding. We committed to the PUC to spend a minimum of $7,500,000,000 over 5 years, okay? By the time we closed the Sempra transaction, we that at Encore up to 8.4 over 5. I think last year when I was before you, we were doing 3 years and that was 5.1 over 3, I think, were the numbers I gave you.
Late last year, because of the tremendous growth we're seeing on our system, we upped that to 10.6 over 5. Couple of things about that 10.6. 2 thirds of the 10.6 is pure growth capital, all right. That's growth that's coming to us organically from our customers and from economic development in Texas. 98% of that 10.6% is eligible for recovery through our tracker mechanisms.
Now I talked about them last year. I'm not going to talk about them much again this year, but I would point out that there's 3 documents or 3 pieces of paper in the appendix about CapEx that you take a look at. One, the information on our trackers, the information I discussed last year, suffice to say, they significantly decreased the lag associated with our investment in both transmission and distribution. There is a breakdown a further breakdown of this 10.65 project category type. And then there is a page which lists again incremental CapEx opportunities, okay?
Last year, when we were before you, I think I presented $700,000,000 to $950,000,000 over 3 years as potential incremental capital. This year, we have a 5 year projection of, I think, dollars 700,000,000 to $1,025,000,000 dollars and here's how you should think of that. Based on what we're seeing right now, we think we're comfortable at 10.6 over 5. If you assume historic level growth continues in our footprint, then you get into that incremental CapEx piece that's in the appendix. Depending on the amount of growth we see, depending on the facts and circumstances, we'll address this.
We address it every year with our Board in October. We'll do so again this year and we'll figure out what we need to do. But right now, we're comfortable at 10.6. Benchmarking. On your left, we're particularly proud of this chart.
We work very hard to be this way. We, as I said earlier, we're the low cost provider in ERCOT among the IOUs. Significantly, based on what we believe is going to happen in the state with regards to the other utilities and us, we believe we will still be the low cost provider in state after we spend 10.6% over the next 5 years, okay? It's important to our customers, it's important to our regulators, it's important to the legislature and it's important to us. On the top right, effectively for every efficiency metric that we follow O and M, we are at or near top decile.
We run a very efficient operation. We intend to continue to do so. Bottom right, our customer profile. By meters, we're 85% residential, 15% large C and I. An interesting point of the large C and I is why they only constitute 15% of our meters, they make up about 52% of our overall revenues.
Those are very large, very important customers. To just go back for a minute, those transmission POIs are these large C and I customers. All right. So I've got 3 pages worth of project spotlights for you. And I want to kick it off this way, a couple of points.
One, these are actual real life projects. These are not things we're trying to acquire. These are not things that we're trying to win. This is what we're trying to do right now, steel on the ground. They're needed right now.
2, they're not one offs. They're not unique. They're representative of what's going on all around our system. So I'll walk through these and I'll give you some other examples. First is a transmission project.
This is our far West Texas project. As you can see, it's on the very western edge, the blue box or rectangle rather, out in West Texas. This project is about $700,000,000 over 3 years, 300 miles of new transmission lines broken out over 6 individual projects. This project is needed to strengthen our backbone in West Texas to help us serve the load growth we're seeing and to again help facilitate generation development in the region. Not an isolated project.
We have very similar projects going right now in Dallas, about $500,000,000 worth of projects in Dallas. We have another $200,000,000 to $300,000,000 of very similar projects in I-thirty five corridor. So think south of Dallas, just north of Austin in there. So we have strong transmission growth throughout our system. My second example is a combined T and D example.
As you can see on the picture in the background, that's the Cowboy Stadium that was built several years ago. Presently, the Texas Rangers are building a new ballpark. There is an associated entertainment district, bars, restaurants, music venues, hotels that is also springing up in that area. It's a $30,000,000 to $40,000,000 project over the next couple of years. It's about 100 megawatts of new load, 22 miles of new or upgraded transmission, significant upgrades to the distribution network in the area and substations.
Again, not a one off project. We have very similar projects going on in Waco around the Magnolia development, very similar project going on in Fort Worth around Dickey's Arena in the Museum District, very similar situation in Downtown Dallas, very similar situation in Trinity Groves, just west of Downtown Dallas, very similar situation east of Downtown in Deep Ellum, all right. Very similar situation in Frisco, development around the Cowboys facility known as the Star, all right. So we're having strong growth just like this in many places on our system. A couple of other things real quick that we're excited about that we're doing on the left.
That's our Smart Grid rollout, $600,000,000 over 10 years. We are in year 4 right now. This will significantly improve our reliability metrics, our reliability performance as well as give us better situational awareness and control of our operations. On the right, things we're doing with data. Using data from our advanced meters as well as other smart devices on our system, we're now allowed to do what we call predictive maintenance.
We can, using data, predict when a facility like a transformer is going to fail. We can then go out and change it in advance of failure. Changing it in advance takes about 30 minutes. If we wait until it fails, it takes 3, 4 hours, okay? Since 2016, we've replaced over 1,000 transformers.
You start based on data. We've avoided about 3,500 outages in over a 1000000 minutes of customer outage time. It's a very exciting program. We think we're just scratching the surface, but it's a great program for customers. Similarly with weather, using advanced weather modeling and data from our system, we're able to predict where weather is going to impact our system, where we're going to have damage.
We pre stage our people, we pre stage our equipment, again able to get steel back in the air faster than we otherwise would. So it's great for our customers. In conclusion, OnCore's path to Premier, it's a great story. We're the largest T and D in Texas. We have high growth in our service territory.
We have a, for us, historic CapEx plan. We've never spent $2,000,000,000 on CapEx in 1 year. We're going to do that plus each of the next 5. It's a great opportunity for us. Doing that, we're going to maintain the lowest rates of any investor owned utility in the state.
Overall, the outcome is strong earnings, strong earnings growth. It's an exciting time to be at Encore. I'm really happy to be able to share this story with you. I look forward to answering your questions in a little while. And with that, I believe I am supposed to introduce a former Oklahoma State linebacker, number 52 and current CEO, SoCalGas, Brett Link.
Appreciate it.
Well, don't hold that against me, but we have the orange, not the red. So it's a little different program. But I can tell you, it's really an honor to be here with you today to talk a little bit more about SoCalGas and how we fit into the overall Sempra picture of Paths through Premier. So who is SoCalGas? Well, first, we're actually the largest natural gas utility in the United States and in North America and actually one of the largest in the world.
Within SoCalGas, we actually have over 3,500 miles of transmission line, 100,000 miles of distribution pipe and we have 4 underground storage fields with a capacity of 130 Bcf. On the storage fields, just to give you a quick sense there, for California, we actually get over 90% of our supply from out of state. So we're very reliant on that. The storage fields play a critical role for us. They actually act as a shock absorber of when we have peaks, both in the winter and the summer.
With this system, we have a network of almost 6,000,000 meters, serving over 21,000,000 consumers. We actually serve over half California's population. One of the unique things about SoCalGas is also within those consumers, we have a penetration of over 90% that rely on natural gas to heat their homes, heat their water and to cook with. The size and scale of SoCal really position us, I think, uniquely as we move forward, and we set a very ambitious goal of becoming the cleanest natural gas utility in North America, delivering affordable energy and increasingly renewable energy. So a little bit about California, largest economy in the U.
S, but a few other facts. We're actually the largest ag producer, largest dairy producer in the U. S. The Los Angeles area actually is the largest manufacturing region as well. And again, if you think about the size and scale that we have, it positions us well with some different opportunities.
You can see that on the lower left, give you a little further insight into our system. You can see that actually less than 40% of the gas is used for what we call our core market. And the core is mainly the homes and small businesses, but it accounts for over 90% of our revenue. But at the same time, we need to pay attention to the other parts of what we serve. And 1 in particular I'm going to highlight is electric generation because although small in revenue, electric generation actually accounts for 60% of our gas usage in the summer.
So to dive in that a little bit deeper, I want to walk through kind of what a day would look like. And I will tell you that California has set some real aggressive goals. We have our RPS standard and California is leading the country in that regard. But we could not have achieved the RPS goals that we are at today nor moving into the future without natural gas. Natural gas has been the key critical underpinning to be able to achieve it.
If you look at the chart in the lower left, the light blue, most of you are familiar with, that's the DUC curve. And this is actually a chart from CAISO, a day in February. That's the DUC curve. The green line is actually the renewables coming online. You'll see the solar ramp up morning as sun comes up and then it ramps down in the evening as the sun goes down.
The dark blue line in the middle is the one that's actually showing you the equivalent gas usage of firing electric generation. And you can see the peaks that are occurring in the morning and in the evening. And again, this is winter. On the right side, what I'm showing you here is actually our gas send out for that day or for a similar day in February. You can see the same peaks.
The point here is, as we know, as RPS continues to grow, the slope of those peaks and the absolute value of those are going to increase. So we see again the role of natural gas for decades to come will continue to play a critical role in the deployment of more renewables. As we look at the state and some of the policy drivers that we have, we clearly understand we have a duty of providing safe and reliable service. How we respond to that is actually mainly our integrity management programs, distribution, transmission and storage, and I'll go into a little bit more detail with those a little later on. California, they've set we have set some very ambitious and aggressive climate goals.
And this is one we're excited about because we think we actually have a critical role to play. And with innovation, the use of technology, the look at looking at different forms of energy, which I'll go into a little more, not only the continued use of natural gas, but other forms of energy such as renewable natural gas and hydrogen. We never lose sight of our customer, and we also clearly understand we have a duty to provide our customer energy at reasonable rates. Affordability is a very important factor. We're proud that we actually have the 5th lowest gas bill in the country.
And as we focus on that moving forward, one of the big aspirational goals that we've set is actually delivering 20% RNG in our system by 2,030 to help the state continue decarbonizing, but it's a form of energy that today is cheaper than other forms. I really like this slide. This is kind of our perspective at this time, again, thinking with innovation technology, different forms of energy, what I call our time horizon as we look at energy. I've talked about the critical role natural gas will play. Renewable natural gas is something we're actually delivering in our system today.
Actually here in San Diego, we have a wastewater treatment plant and we bring renewable natural gas in from that plant. We've recently attached ourselves to dairy as we move forward. And so we see this as an exciting opportunity. We also think there's other forms of energy delivery such as distributed generation, the greater use of fuel cells, again with natural gas, renewable natural gas and ultimately potentially hydrogen. Hydrogen is a very interesting one from a longer term perspective because, again, it's important to look at this as a time horizon, where at least today, it's the only form of energy that actually has the capacity that's needed to help in the integration with renewables.
From the capital plan, and this is one Patti had mentioned earlier, it's exciting for us. I mean, this is the largest capital plan that we have in our history. But pay particular note to over 90% of it is focused on enhancing the safety and reliability of our system. About half and half between our distribution and transmission side, and it produces a 9% CAGR growth in our rate base. On the efficiency side, and again, this is back to our customer, we don't lose focus here.
Again, doing a benchmark survey recently, we come out at or below our peers. And again, considering the size and scale we're setting at 2nd quarter, my goal is driving us to the Q1, in particular, with the deployment of additional technology, the continued focus on continuous improvement and driving efficiencies ultimately to help the customer. Now shifting to spotlights. And again, as Kevin, I'd look forward to those that come out into Century Park this afternoon, where you'll actually get to see some of the technology that we utilize on the gas system, ranging from the deployment of drones and different types of equipment we put on drones to help us assess our system, the use of pigs and in fact, the use of robotic pigs. So you'll actually get to see one this afternoon, and this is how we do our integrity assessments, all the way to the use of satellite imagery, where we actually use satellites to track ground motion of different kinds of events.
As we shift now to distribution, and again, as a reminder, 100,000 miles of distribution pipe. One question I get asked at times, we don't have any cast iron. We got rid of cast iron over 20 years ago. But we have a very disciplined approach and focus to the different kinds and vintages of pipe we have. One example that we're focused on right now is a kind of pipe called bare and protected steel.
Again, very programmatic in how we're approaching the replacement of that. And again, as a reminder, the next 5 years within distribution, we're going to be spending about $2,500,000,000 on this program. And this program is going to go on for decades. Shifting to transmission, it's something that we're proud of. We do think that we have a world class transmission integrity program.
Today, we have about 80% of our system that's pickable with our goal of getting at or close to 100%. We also have our pipeline safety enhancement plan. And again, as we look out in the next 5 years, we see investments there of over $1,000,000,000 and this program is about testing or replacing pipe that does not meet what's called modern standards. And then finally, storage, where again, we continue to make investments. I'm very proud of where we are today with storage.
I do think we have world class facilities. And the great thing is it's not just us saying this. This is actually state and federal regulators recognizing one of our fields, Aliso, as an example, as the safest storage field in the country. And so in closing, as I sit and think about our path to Premier, for us, it's always our foundational focus on safety and what can we do to better enhance the safety and reliability of our system. As I stated, our goal is to become the cleanest utility gas utility in North America with a focus on affordability, but also increasingly renewable energy.
We think that our size and scale in particular is really a great advantage in particular for California to help further decarbonize our energy sector. And looking at the robust capital program we have with a 9% CAGR ends up producing robust earnings for us both today and into the future. So I'll close with that and I'll invite Patty, Kevin and Alan to join me on the stage for your questions.
Okay. We're going to have Q and A right now in the utilities. I'm just going to move these chairs up. Perfect. Good engineering.
Yes. First question. Julian? Go ahead.
Hey, good morning. Julien Wolter with Bank of America Merrill Lynch. Kevin, I'm probably again, Patty, Kevin, I'm not sure where to focus. So California, obviously, a large portion of the focus here given wildfires and everything else. Could you elaborate a little bit on your specific confidence on legislation and the path this year?
Again, there's a lot of talk about special session, potential other avenues. I don't want to throw them out preemptively. I'd be curious on how you guys see it? And also, what does this legislation mean to you? Again, do we need a fund here?
Or is that really sidestepping the real issue of addressing some of the core issues? And I'll let maybe that's a leading way for you guys to comment a little bit more.
So just for the webcast, the broader question is on the legislative sort of outcomes in California and what we think is going to happen. Well, again, taking a page out of Patty's book, I mean, this governor did not he inherited this issue, right? But he's taking another bull by the horns here and he's making all the right moves initially here about bringing on the right advisors, putting on strike team, Blue Ribbon Commission, that's all getting set. In terms of the path forward, Julian, we see clear and objective rules around rate recovery is really what we need in that area of wildfire liability reform. How are we going to get that?
I think we're going to see pretty soon here some type of announcement from the Strike team kind of moving that forward. And that will move forward into the legislative session. I'm not sure about whether it will be a special session or it will be our regular session, but whatever can't get done on an administrative basis, it's got to go to legislation and that will happen this summer. Yes. And just
to add to that, I mean, I really do think that the governor has created positive momentum around this. And I think he has his strike team that he has several advisors that he's working with that have reached out to stakeholders across the state, and absolutely has reached out to us as well. So we're in active discussions. And when we say we're working this, we're working this on a daily basis with these advisors and other members of the other stakeholders in the state. So this is something that's critical.
We're looking at a number of different avenues. But to Kevin's point, I think that it's going to have there is going to be a comprehensive solution to this that does address not only ways to reduce wildfire risk in the state, but also look at the liability issues and the cost recovery issues.
I think a fund could be part of it. I mean and so I think clear and objective rules around pass through and for regulatory recovery is one thing and then a fund could be part of that solution.
Hey, guys. It's Shar Guggenheim. Just real quick, the incremental opportunities around Encore, it's helpful and obviously you're going to go into a Board meeting and we'll believe it at that. But at what point could we begin to see further opportunities leveraging Sherryland and InfraRE for opportunities outside of Texas, right? So what I'm mainly referring to is, for instance, D.
C. Ties into Mexico. Okay.
Yes. Let me I'm going to answer a question you didn't ask, but I didn't ask.
I told
you guys I was going to tell you why and when and I didn't tell you when. So let me tell you where we are on the when. We're right now in confidential settlement negotiations. If we look at our history down at the commission over the past few years, we've got a pretty strong track record of settling cases. We're trying to do that right now.
If we don't, then we're going to have to try it next month, April 10 through 12, okay? Can't predict the outcome of that case. We continue to believe it's in public interest and we'll see what happens. If we're successful, if the PC gives us the approval we need, we intend to close still mid year, okay. So that's when we'll start looking at The assets we're acquiring, as I showed you on the screen, are really Texas, we're not I think the Mexico stuff is more of a Sempra question, and the utility they're going to have in the South.
Got it. Hey guys, Michael Lapides of Goldman. I actually have a couple of questions and I'll kind of just throw them out and they're mostly California related. 1 on wildfire, I commend all 3 of the utilities for quickly coming up with programs. I have to be honest, from sitting in New York and afar, the thing that shocks me the most, honestly, is how small they were, right?
I mean, you're talking about a state that's had, I don't know, pick a number, dollars 10,000,000,000 to $30,000,000,000 a year for the last couple of years in damage. And if that were to continue as a long term trend, I would think we'd be looking for something dramatically more transformative than the programs all 3 of the utilities have put out. Are there any constraints for significantly more capital and or O and M to be done to help alleviate some of this issue? That's the first question. The second question is, how does the state actually have a cost of capital docket this year?
Can someone tell me what PG and E's cost of equity is? Like how does this docket actually happen? Or we just kind of do a push it down the road delay for a couple of years and kind of go from there? And then third question, can you remind us your CapEx and rate base forecast, is that just assuming what's already authorized and then kind of an SoCalGas and SDG and E, the California portion? Sorry for 3 questions.
That makes it hard, Michael. We won't comment on PG and E. Why don't I start actually, with the first question around the program. I think it's important to recognize and I won't really speak on the other programs that were filed by the other utilities, but we've been investing over $1,500,000,000 over the past 10 years in our wildfire mitigation efforts. So when you think about the incremental that we filed for, it's on top of the already $1,500,000,000 we've done.
And so I think when you're thinking about the other programs, you can kind of compare it to what we've done over the last 10 years and then incremental to that. And Kevin, I don't know, do you have any other comments on that piece? No. I mean,
And so it does give us opportunities to invest capital. I think we've invested a lot and we're going to continue to be allowed to invest even more. Yes. I think when you look at our guidance, our guidance only assumes the attrition rate. We don't assume any outcome for the rate case.
There is spending in there for a lot of things that both Brett and Kevin talked about, but it does not include the impact of the rates associated with that.
One other thing I would add Michael too is that when Patty talks about $1,500,000,000 of spending 2007, you got to think about programs outside like the Cleveland National Forest Program, which we kicked off in 2015 2016. So you've got 60% of the system is underground. I don't think you can find another utility in the country that has that other than Con Ed, number 1. And in that Cleveland National Forest Permit took 80% of all of our 69 kilobytes and above lines. It went from wood to steel, took the conductors higher off the ground and spread the conductors, right.
So those are in the highest fire risk areas. So what you really have is the cumulative benefit of 10 years of investment around technology innovation and hardening in the backcountry. So their recent filings for the fire program really is around what we need to do incrementally this year, right? But I think you're on a good point, which is we have to continue to allocate capital intelligently to make sure that we're damping down risk. But I think our service territory is smaller, more underground and significant investment in innovation and technology over the last decade.
And that what Kevin is going to talk about the cost of capital, but it's also remember in the slide that Kevin showed, substantial amount of our rate base is either regulated by the FERC or its gas distribution. So it's another thing to think about. Yes. But you've identified an issue there, Michael, in terms of what does the state do around the cost of capital filing the California utilities. I think until there's comprehensive and sustainable wildfire liability reforms, you might see something like this.
So it's either a delay issue, which wouldn't be in favor of or it's potentially some type of bifurcated approach where it's like until there's comprehensive wildfire liability reform, it's one rate. And then if there is that liability reform that brings the risk down, maybe there's a different rate.
Yes. But we view the, we view actually the cost of capital as a proxy for the risk reward scenario that we're faced with. So we absolutely want to have a cost of scenario that we're faced with. So we absolutely want to have a cost of capital proceeding this year. We're scheduled to file it, April 22, and we'll be having a robust filing.
Yes. Steve Fleishman, Wolf. Two questions. 1, California. So it seems like one of the key issues is just making sure whatever structure they put in place that if there is a fire that the money for recovery would be addressed upfront and not after a long process.
So fires have happened, we haven't gotten outcomes on recovery. So how confident are you that whatever structure they do, that there will be a more timely recovery in place so that there's not this big lag of unknown? And then on Encore, just to clarify, the $10,600,000,000 is that did you say if you keep the same growth rate of customers you're having right now that that would be too low or
that does assume that growth rate? Let me try again. We feel that 10.6 over 5 is the right amount given what's going on in our system right now. If you assume historic levels of growth going forward over a period of years, then we would need to dip into some of the incremental capital that's in the appendix. But we'll be looking at that in October.
Until then, unless we change something, right now, we believe the 10.6 over 5 is the appropriate number.
And regarding the other comment, I mean, we're really focused on cost recovery and timeliness of that recovery, when we're having our discussions. We can't predict what will be the outcome will be, but those are the things that we are
liquidity around that, right. So we either need a clear path to a fund or we need a clear path into securitization or some other kind of form of getting liquidity in order to pay off fire claims?
Stephen Byrd, Morgan Stanley. Thanks for the thorough update on all the utility businesses, really helpful. In your appendices, you lay out sort of growth CapEx upside and building on Steve's question a little bit. What kind of catalyst or what kind of drivers would you see behind some of these programs? We're trying to kind of think through you've listed a number of categories for all 3 utilities of upside CapEx.
What kinds of milestones or the catalyst would you all expect to think about sort of realizing on those upside CapEx opportunities?
I think it's well, let me give you an example. One example I think and I'll have in front of me is the Smart Grid example, right? So we're rolling out our Smart Grid program over 10 years. We could shorten that time period and increase that number and have our program done in 6 years, 8 years, something like that. I discussed the significant growth we're seeing in the Permian region.
I've read articles like many of you all have about things experiencing any slowdown right now on our facilities. So if you increase flow growth out there, if we have more than 128 transmission POI requests, then that drives transmission investment. If we have more projects like the Star or the Dickies Arena or things in around the Metroplex I-thirty five Corridor, if we have strong growth in Tyler, where we have really strong growth right now. All of those things that would be above and beyond things we're experiencing right now would drive the need to get into the incremental bucket.
I guess from a utility standpoint, the one we've highlighted, right, we're not assuming anything for the GRC. And I think we had a very robust filing, I think a very solid filing. And then there's some of the incremental projects that I think both Kevin and I have listed in appendix as well as potential growth.
In terms of Texas,
could you speak to what you're assuming for Permian growth in your guidance and how sensitive the CapEx opportunity is if that deviates from the growth? And then in California, can you speak to what you're seeing in terms of investment opportunity regarding renewable natural gas given the LCFS mandate within the state?
I mean the exact number of what we're predicting or expecting in the Permian that we have in our models, I can't speak to that. I can merely say what I told you before, which is we're looking at 40% growth in the region by between now and 2022. And in certain areas, primarily Delaware, we're seeing upwards of 400%. That's really the only kind of details I can give you on our growth expectations in the region. We think it's strong.
Most of the growth in Encore is also for just the drilled and uncompleted wells. I think that to the extent that we continue to get right here.
Oh, there you are.
Yes, sorry. To the extent that we get the drilling activity continues to grow, then I think that represents upside too. So just keep that in mind.
And then on the renewable side, Ryan, I think we have some pretty clear definition as far as us connecting from where they actually clean the gas into our system. So I call that kind of our last mile of opportunities. And I think as that industry grows of looking at are there opportunities for us on the conditioning side as well. I think that's still to be determined, but at least the connection points themselves is opportunities as that industry grows.
A couple of questions. This comment potential for utilities to focus on transmission and distribution without potential or without procurement, How large of a focus is that and how near term is that? That's on the California utilities, I believe the legislative discussion. Kevin?
We've stated publicly that we'd like to move more move away from the supply side of this business. Keep in mind that the gas, the natural gas and electricity is really a pass through for us. We don't earn any profit on that. So we'd really like to focus much more on the T and D side and less on the supply. In terms of the pace of that transition, I think it's going to happen sooner than people think in terms of all the utilities moving away.
Those discussions have been kind of ongoing a little bit already. Can I state clearly where an endpoint is? I don't know where the endpoint is, but later this year, there's going to be some there's a procedure around PCI Phase 2 around where do the legacy PPAs generation assets go in terms of customers that are exiting our system and going to a CCA? How do they carry those responsibilities and liabilities with them. And one of the discussions is around a central buyer or some type of central agency that would take those on and then allocate them among the different supply providers.
Okay. So like 5 years something like I mean to some
partner? Yes, I mean outside 5 years, but I think like I said, I think there's opportunities for it to happen a lot faster. Okay.
And then on the cost of capital filing, so I saw you filed at FERC for 11.2. Is that kind of like a marker for how we should think about California? And if you could also just discuss besides ROE, is there any contemplated changes with your equity layer at the utilities that you're thinking about or just how to in the filing? Kevin?
Yes. I meant I said this about the cost of capital, 11 to at the FERC level, but on the PUC level, clearly, we have an issue around wildfire liability and the need for reform. And so until that happens, you're going to see us push for a very fairly aggressive cost of capital. In terms of Just a reminder that on the FERC side, we do get recovery for these claims, but on the CPU side, we don't. So that is a differentiating risk factor in how we think about those two proceedings.
In terms
of the equity layer, I don't think we're right now contemplating, a change in that. We haven't made our filing yet though. So it's we haven't yet quite landed on the outcome. We have a small break for about 10 minutes, and then we'll come back in the room and go through Mexico and LNG. Thank you.
Take a break from the webcast.
How are you enjoying?
We're going to
get started here in a few seconds. So let's get all grabbed receipts. Jeff is going to come up in a second here and introduce the LNG and Nexstar team. Can I grab your seats please? Got the webcast up, Jeff Martin?
All right. Welcome back to everyone. I just wanted to cap off the utility discussion by saying that in the 14 years that I've been here, I could not be more proud of the team that we have leading all three of our U. S. Utilities and to have a $25,000,000,000 capital program of which 90% is really in the top two markets in America, I think is a great statement of the opportunity in front of our utility platform.
Next, I want to transition and I want to invite a couple of folks to the stage while I talk about them. I'd like to ask Carlos Ruiz to come on stage, Justin Bird, Alisa Glatch, as well as Tanya Ortiz. So just by way of a brief introduction, there are a few new faces in front of you, but I want to start by talking about someone that you've met before. But I am so proud as the CEO of Sempra to get a chance to work very closely with Carlos Ruiz. I have the great benefit of working with someone that has served in 5 separate administrations in Mexico.
So he's certainly a very recognized leader on the political side. Secondly, he is formerly the CEO of Pemex and he was on our Board of Directors in the middle part of last decade and it took a little bit of coaxing, but we got him to come off of our Board to lead the EONOVA effort as we rebranded it, created an independent Board of Directors, created a Mexican brand in Mexico and did our IPO in 2013. And on a personal level Carlos, no one is more pleased on the 3rd planet from the sun than me that you're part of our senior team. So he actually wrote something that was much longer than this. So I just shortened a little bit with that introduction.
Secondly, Tanya Ortiz, she is a 19 year veteran of the Sempra family of companies. Obviously, we've been investing in Mexico for just over 20 years. Tanya has been on the front line of that. So we've now built a business that's in the top 15 of the balsa. It's quite exciting.
It's now being led by I think the only female led public company in Mexico that has both a female CEO and a female CFO with Nelly. We're glad Nelly is here with us as well. But Tanya has been named as one of the top 25 business leaders, women business leaders in Mexico. I always say she's number 1 in my heart, but I think she's clearly top 5 in Mexico. So, we're very blessed to have her at the helm.
We've also got Lisa Glatch with us. Many of you have not met Lisa. She's a 35 year veteran of the E and C world. She's worked for 3 of the top 4 engineering firms in America. She's tackled some of the most complex engineering projects in the world.
She certainly has added depth and expertise and leadership to our LNG effort as we move aggressively to build what we think is one of the best LNG export platforms in America. We've made a goal of being number 1, right? We're going to try to build export infrastructure equal to 45,000,000 tons per annum, which is equivalent to roughly 6 Bcf a day or what California consumes today is the number one economic market in the United States. And last but not least, I've had the chance to work very closely with Justin Byrd. In December, he received the Chairman's Award at Sempra, which is our highest award.
And Justin has a background. I was kidding one time that Justin has a background like me. And he actually said, no, I actually graduated number 1 in my class in accounting, Jeff, and that wasn't something you accomplished. So I actually missed that part. But Justin went to University of Pennsylvania for law school.
He was one of the top attorneys at Latham and Watkins in the area of project finance. He led the project financing of Cameron and the JAPIC financing with the Japanese. So he's tackled some of the most complex efforts in the past. And in the last over a year, he served as the Chief Development Officer for LNG and he led the negotiations with Total that led to what I believe is the largest at least MOU that's ever been signed in LNG at 9,000,000 tons per annum. So in addition to his Chief Development duties, he's been named President of LNG and has taken on the marketing responsibilities as well.
So I think we have an A team in infrastructure around LNG
presentation. Thank you
very much.
Thank you. Good morning to you all. It's a great pleasure to be with you again, now with a different role and very exciting responsibilities. Also good morning to the people who are watching us on the webcast. Let me tell you that San Diego is freezing.
Before starting my presentation, Denise, Riola and I, we were talking about something. We saw Patty's presentation and Alan about Texas and they said that Texas is growing very fast, especially that they are adding 1,000 people a day. So we were wondering, are they Mexicans? Well, I also I want to acknowledge Jeff for his leadership and vision. I'm very sure that we are in really good hands to become North America premier energy infrastructure company.
By the way, Gjo Gasholder is not here. He's in China visiting some LNG potential clients. Justin and I will reach him over the weekend to Shanghai to go to Delhi in 2019 and to continue to do the marketing efforts for our 5 very important projects that we have. I would like to start briefly going to the structure of the organization. The Sempra and Orthoamerica Infrastructure Group is primarily formed by 2 companies Sempa Energy and Genova.
In those companies, we develop build and operate safe and efficient price to increase availability and to link global markets and customers. During today's presentations, you will note that our strategy is consistent with same provision of becoming North America's premier energy infrastructure company. We strongly believe that we are in the right business with the right assets and at the right moment. As we move forward the presentation, my team will explain you the reasons why. Now let me start by briefly presenting to you the macro environment of LNG.
Please take a look at this map. Asia continues to be the fastest growing energy consuming region in the world. Asia natural gas demand is projected to double over the next 20 years, primarily driven by new climate policies and very important coal to gas switching. This has created a large demand for cleaner fuels in China, India and in other parts of Asia. In fact, China is now the world's largest importer.
On the other hand, it's important to mention that Europe's natural gas demand will be primarily driven by energy security. Natural gas demand is projected to grow faster than any other source. This means that natural gas is rapidly outpacing fossil fuels as the cleanest and lowest cost solution. It's clear that driving by robust North America production as well as low cost basins, Natural Gas continue gaining market share and will play a very important role to supply the world's energy needs. Let's now focus for a minute on the growing importance of LNG in the world.
Projections indicate that LNG demand is expected to grow by 75% through 2,035. This growth is projected to be led by Asia and Europe. We expect that the global demand would almost reach 400,000,000 tons per year in the mid-twenty 20s. And based on the SITEL projections, we expect that LNG supply will tighten, creating a significant shortfall. As shown in this slide, the LNG shortfall is projected to begin 4 or 5 years from now and is forecasted to dramatically increase to around 280,000,000 tons per year by 2,035.
It is important to note that the majority of this shortfall will be filled by LNG for the United States. This is the main reason why during the last year, we witnessed a rebound in long term LNG contracted for new projects, which increased global investment in LNG mainly in North America. In this, LNG investment in North America continues to be supported by positive market dynamics. 1st, dairy demand growth in Asia is expected to continue to remain strong. 2nd, natural gas prices in the United States continue to stay relatively low in relation to oils and international gas prices.
And third, the strong production of natural gas and the strategic location of LNG projects position North America to be one of the lowest cost and most competitive providers of LNG in the world. All of this is very good news for us. By 2023, the United States is projected to be the world LNG leader and 2 years later, export will reach over 100,000,000 tons per year. Our goal is better missions to have close to 50% market share on this export market. The opportunity is very clear.
Sempra's goal is to take advantage of this momentum and become the leading supplier of energy in North America. Justin and Eliza will take us later why. Now let's move a bit south of the border and talk about a Soviet time sure that is on everyone's minds, Mexico and Mexican politics. Let me begin by repeating something that I said to you last year. Mexico is part of North America.
Right, Jeff? That's correct. Okay. Now let me tell you why Mexico is so strategic to Sempra. Mexico is one of the largest and most dynamic economies in the world with 125,000,000 people is the 11th most populated country.
In terms of territory, it's the 13th and we are the 15th largest economy. By 2,050, it's expected the population will reach 150,000,000 and we will become the 8th largest economy in the world. Mexico economy is highly integrated. We are part of some more important trade agreements. And even so, that Mexico is quite an important economy, per capita energy use is still very low.
But projections indicate that energy demand will continue to grow significantly. As the country develops, investment in energy structure will be required not only to guarantee access to safe and affordable energy, but also to support economic growth. No doubt, we're living very interesting times in Mexico. I'm sure that you would like to further discuss the current political situation. So let me take a moment to address the Mexican political landscape.
President Eduardo Obrador took office on December 1 after winning the Mexican election with over 54% of operational support. Today, his approval ratings are at an impressive 85%. Nevertheless, certain messages and decisions have created some uncertainty among investors as well as volatility in the markets. Particularly in the energy sector, some decision could show could slow down the piece of investment. But let me tell you something.
I held various government roles through my career and have seen multiple changes in the Mexican political landscape. While different leaders and systems have existed in the past, as you may know, there have been some up and downs, Investment infrastructure have always continued and the country outlook has remained stable. As we have always done in the past, we are adapting and working with this new reality. Therefore, at Innova, we have a very clear strategy. 1st, we're developing constructive relations at all levels of the Mexican government, Congress and local authorities.
2nd, we are proactive approaching and engaging with the government to advance projects that address specific needs, connect with the government priorities and ensure affordable access to energy, especially for all our clients. 3rd, and this is very important, we are reinforcing our communication strategy to further highlight Innova's strengths, capabilities and core values. 4, we're making sure that our investment continues to be critical and essential to promote the country development. And lastly, we will continue, as we have done in the past 2 years, diversifying our asset and customer base. I am sure that this strategy will help us to align ourselves with the new government's objectives.
A very important example of this cooperation is that we are actively working with the government in order to address some issues regarding a section of our Sonora pipeline currently not in operation. We have met with the CFE and other authorities with the common objective of placing a section of this pipeline back into service. We have seen a very positive effort to solve the problem. And as we have done in the past, we are open to discussing multiple beneficial solutions. We believe that the current situation will bring new opportunities for Innova, especially for companies like us that are in Mexico for the long run.
While all other investors may plan to sell in the short term, Innova, as I mentioned before, is adapting to the new environment and will continue to develop important projects. It's clear that the government focus is on the social agenda and very important, it has pledged to maintain fiscal discipline. Last Friday, for example, the Mexican Secretary of the Treasury said that at the bankers convention that public investment in Mexico is less than 3% of GDP. This is very low by any standards. Therefore, he says that private investment will be required to develop the infrastructure of the country that needs to continue to grow.
This is very encouraging. Therefore, in relation to Mexico and Inova, I choose to be optimistic for two reasons. First, I believe in my country, Mexico and second, it certainly feels much, much better. Let me emphasize that trussepredly gi and Genova, we are supporting North America's clean energy transition and we are developing infrastructure that allows the region to benefit from the new U. S.
Abundant gas supplies. This is very important for both for the United States and for Mexico. Let me now close by talking about our goals by 2023. In the case of SEK 4,000,000, CAD 1,000,000,000 to $250,000,000 towards same priorities and this is $30,000,000 increase over the previous range that we gave you before. We will beat our customer base around long term contracts and strong customer grade ratings.
We will be the leader of the medical company, and we will achieve this by developing 5 strategically located world class LNG projects that Lisa and Justin will talk about. Of course, this is possible because we have in our parent company, Sentra, the best sponsor, which give us a fantastic competitive advantage. And now for our basic goals are to remain the number one private area company in the country, to contribute to achieve significant EBITDA growth, to build an operating infrastructure with the highest safety standards and to continue to diversify our assets and customer base. I am confident that we will be achieve our goals because in Sempren AG and Inova, we have an excellent management team. The presentation now will follow with Tania, Justin and Lisa.
Since Jeff already made the introduction, I will invite Tania to come and ask you ask us answer the question of how things are going in Mexico.
Thank you, Carlos. Good morning to everyone. I'm really very proud to be leading Genova after spending 19 years with the company, and I'm very honored to be following Carlos Footsteps. So we have built Yanova from scratch over 22 years with a proven and sustainable business model. For those of you and I see some YENOVA investors in the audience, our business model is very simple.
We develop large infrastructure projects that are anchored with long term take or pay dollar based contracts. But we've also been forward looking. We've been able to anticipate Mexico's infrastructure needs and move very, very quickly on these opportunities. So that's how we started with 1 gas distribution company in Western Mexico and 1 gas pipeline that went right here from San Diego to Rosarito. That was my first job at Sempra was managing that first pipeline.
And today, we have assets in every border state and in 17 out of the 32 Mexican states. We have become Mexico's premier private energy company. What we do is important for Mexico. We develop businesses. And what we're doing is helping the Mexican economy grow and be more competitive.
So as Carlos mentioned, we have been able to maintain our business model, but we've also been able to continue to grow by diversifying our asset base and diversifying our customer base, and that means we're always adapting to a changing environment. So today, we have a strong and diversified portfolio that includes almost 3,000 kilometers of pipelines, over 120,000 customers in our gas distribution business. We have LNG and LPG storage facilities and we have more than 1,000 megawatts in operation of clean and conventional generation. So we expect that 2018 2019 to be slow years. This happens in Mexico every 6 years with the change of government.
But we anticipated the slowdown and we captured a lot of opportunities before the slowdown happened. So believe it or not, this year we're this year than we've ever been before. We have more projects under construction this year than we've ever had before. This is a snapshot of the next 2 years for Yanova. You see the red circles.
We have 11 projects either in development or in construction that are fully generation facilities and one wind facilities. And of course, or I would say, our most important project, the Energia Costasul liquefaction project, which Justin and Lisa will talk about, but let me just say that it's a unique project because it's the only West Coast project that has access to inexpensive U. S. Gas. For those of you who had the opportunity to go out there, I hope you got a sense of the excitement of what we've achieved there and as to how it's really a brownfield facility where we're confident that we can reach FID by the end of this year.
So this year's priority is to execute all of these projects on budget and on schedule. So today, we are Mexico's premier private energy infrastructure and I have to say thank you to Carlos for his leadership. But also very importantly, thanks to Jeff for his long term vision. Jeff has really believed in the Mexican economy and its potential long term. As you know, we were the 1st energy company listed in the Mexican Stock Exchange.
We were the 1st and we're still the only energy company in Mexico Sustainability Index. We're among the top 10 out of all Mexican companies in terms of sustainability, and I'm confident we'll soon be among the top 5. We're Mexico's largest company in terms of natural gas transportation capacity. We own the largest of 3 LNG storage terminals and we've quickly positioned ourselves as leaders in refined product storage infrastructure. So to answer the question, this is a question that I've been getting from every single one of our investors for the past 6 months.
How are we adapting to Mexico's new environment? And I have to say, we continue to rely on our core strengths because they're the key to our success. We have a very strong management team. I believe that we have the best team in the Mexican energy industry. We have a disciplined business model and a sustainable business model.
But I would say more importantly, we're aligned with Mexico's needs. We identify Mexico's infrastructure needs and we move in that direction. So as Carlos said, we've always been a reliable partner. Genova has an impeccable regulation with our customers, with our communities, with government, with regulators because we do what we say we're going to do. We meet our commitments.
As Carlos mentioned, we are very proactively approaching and engaging with every level of the new administration. I'm personally spending, I would say, most of my time presenting the company to the new administration. We've reinforced our external affairs team with an incredible leader who's in the audience today, Abraham Zamora, in case you get a chance to speak with him. We're also reinforcing our communication strategy to highlight why what Genova does is important for the country and how our values are consistent with the values of the new administration. We're an ethical company, we're a respectful company, we have a long term commitment to the country.
And again, we've had the ability to address Mexico's urgent infrastructure needs. For example, when we saw gas shortages in Western Mexico, we built a Riga facility. When we saw the opportunity to access inexpensive U. S. Gas, we built pipelines.
Now we're seeing industrials demanding clean energy, we're building renewable facilities. So this is the way we operate. Let me walk you through this example. It's my favorite example as to how we've been able to anticipate Mexico's infrastructure needs move quickly and position ourselves as leaders in new spaces. 2 almost two and a half years ago, Mexico's retail market opened up to private retailers of fuels.
Before that, we only had PAMEX gasoline stations in Mexico. So the large U. S. Refiners and marketers ran to the market to capture retail position, open up gasoline stations. But we have done our homework and we knew that existing infrastructure was insufficient for all of those refiners to bring the product from the refineries in the U.
S. Gulf Coast and West Coast to the Mexican market. So we started reaching out to them. First, they weren't paying much attention. It took us 1 month to get our first meeting with a company that turned out to be our first customer.
And but once we explained who we were and our track record in Mexico and they met our team, they trusted us to develop infrastructure for them. Mexico imports between 70% 80% of its gasoline demand. So this infrastructure is very relevant. So today, we position ourselves as leaders in this space. We're investing a little bit over $900,000,000 in 6 terminal strategic locations in both the Gulf Coast and the Pacific.
We'll be building approximately 7,000,000 barrels of storage with 5 world class customers, including Chevron, Marathon, BP, Valero and Trafigura. This is an opportunity that I see continuing to grow very, very quickly. We have been successful in diversifying our asset base and our customer base. Last year, more than 50% of our revenues came from high quality private off including Shell, Gazprom, some very large Mexican industrials. We've also diversified our asset base.
At the time of our IPO, 60% of our earnings came from 1 facility or LNG facility. Today, only 25% of our earnings come from that facility and 60% of our earnings come from our 14 different pipelines. We will continue to diversify our assets and customer base, obviously, as we place our refined products terminals into operations and you'll continue to see more and more private off takers in that space. We've also continuously delivered outstanding growth. Our compound annual growth rate since our IPO has been 25%.
At the time of our IPO, our adjusted EBITDA was a little bit over $300,000,000 today. Last year, in fact, we exceeded $860,000,000 We have a strong track record of executing ambitious capital plans and this year will not be an exception or investment for this year will be $825,000,000 same business model, long term take or pay, dollar based contract with and we're also, by the way, very disciplined about our rates of return, between 9% to 11% unlevered. By 2020, our asset base will reach $10,000,000,000 We started out with a $20,000,000 investment 20 years ago. So as Carlos discussed, Mexico requires significant infrastructure. The government budget is insufficient to cover those needs and we're very well positioned to cover Mexico's infrastructure needs.
Let me give you a few example of urgent infrastructure that's needed in Mexico. Mexico imports over 50% of its natural gas, but we have no underground storage. If there are any interruptions Southern Mexico. Industries are frequently curtailed in Southern Mexico because of the lack of sufficient infrastructure. In gas distribution, only 7% of Mexican homes have access to natural gas.
I've already spoken about the opportunity in the liquid space, in the refined product space, but probably read in the paper earlier this year, many gas stations in Mexico ran out of product because of insufficient import infrastructure. And on the Power segment, of course, as the market continues to grow, there's demand for clean and conventional generation. Carlos mentioned M and A. We're always looking very pragmatically at M and A opportunities because of our diversified asset base because of our scope and our scale, we believe that we will continue to be able to capture some interesting opportunities. So to summarize, I believe that we will continue to be Mexico's leading private energy infrastructure company.
We will continue to be a reliable partner to our customers, to our communities and to our government. We will continue to grow our company through the same sustainable solid business model. We will continue to serve Mexico's growing energy infrastructure needs. So to close, I'm very proud of what we have achieved at Genova over the past 20 years and I'm very proud of what we're doing to help Mexico's growth. So now let me introduce Justin Bird and Lisa Glatch, who will be talking about Sempra LNG.
And I'm very happy of the partnership between Sempra and YENOVA to make the ECA liquefaction project a reality. Thank you, Lisa and Justin.
Thank you, Tanya. Good morning to those here and those on the webcast. I'm Justin Bird, again President of Sempra LNG. I'm joined on the stage by Lisa Glatch, our COO. At the risk of contradicting Patti, given the size of the opportunity in front of us and the growing strength of our team, I would say that we, Lisa and I have the best jobs at the company.
For me, it's been a pleasure. When I began my career at Sempra 15 years ago, I started working on the regas facility. So I was working on the contracting and the development at ECA and at Cameron. Then I got to spend time. I formed the project finance group here at Sempra and I got to work on the financing for Cameron.
And finally, I get to come back kind of coming full circle in this role. It's been a pleasure to spend time with many of you over the last 6 months talking about the vision we have for this business, but more importantly talking about our plan to execute. As we work with the Board of Directors and management on our bottoms up strategic review of this business, we wanted to answer 2 key questions. 1st, what is the market opportunity? And 2, is this the right market opportunity for Sempra?
We came away with 3 key takeaways. First, the market opportunity is bigger. We see, as Carlos referenced, growing demand we see, as Carlos referenced, growing demand and we
think that demand
is going to be supplied by U. S. Natural gas. 2nd, based on our development experience, our ability to partner successfully with others in our 5 world class projects, Sempra LNG is a privileged position to capitalize on this opportunity. 3rd, the time to capitalize on this opportunity is right now.
By execution over the next 12 months to 18 months, we can create significant long term shareholder value and fuel our mission of being North America's premier energy infrastructure company. So how are we going to capitalize on this opportunity and drive this value? By executing on our 5 world class projects, unlocking North America's energy potential, completing commissioning at Train 1 and completing construction and commissioning of Trains 23 at our Cameron Phase 1 project, continuing to work with our partners in the development of Cameron Phase 2, completing our marketing efforts and our development at the Port Arthur facility, taking the heads of agreements we have with Total, Mitsui and Tokyo Gas, converting those into sale and purchase agreements and developing ECA Phase 1 and finally, working with our engineering team, our permitting team and with our existing regas customers to see if we can bring forward in time the development of ECA Phase 2. Before we take a closer look at our projects, let's take a step back. When this business began over 15 years ago, it was founded upon our experience in gas supply, transmission and distribution by providing natural gas service to millions of customers as well as our expertise and experience as one of the nation's largest gas commodity traders.
Like many others at the time, our original strategy was premised on the perceived deficit of natural gas in the United States and was centered around developing regas projects. Executing on that strategy, we constructed and operated regas projects at ECA and Cameron, projects that can now be leveraged for the brownfield development of our Cameron and Costa Azul opportunities. As you know, at one of these regas facilities, we've already made that transition, the Cameron Phase 1 project. Along the way, we've had the privilege of aligning ourselves with many of the key players in the LNG industry, building on our natural gas experience, our investment grade plus credit rating, our demonstrated track record of world class safety and operational excellence and importantly, a deep commitment to meeting the needs of our customers has allowed us to work and grow relationships with these parties and in many instances has provided us the ability to broaden these relationships to other areas of our business. As we continue our development and marketing efforts, these relationships and alliances will become more important, Allowing our foundation customers the option to hold equity in our projects gives us sorry, gives our customers the ability to align their interests with ours and equally important, our customers' option to secure LNG from multiple facilities, including from both the Pacific Coast and the Gulf Coast, facilitates broad strategic relationships that allow us to align ourselves with their broad ambitions.
These two items were critical to the alliance we formed with Total last year. This alliance centered upon our ability to align their interests through equity and align our interests with their broader ambitions in the LNG space. Let's now take a closer look at each of our development projects. Lisa will spotlight the Cameron project and the strength of our Cameron partnership.
Thank you, Justin. Thank you, and good morning to everyone. So I'm Lisa Glotch. I'm the Chief Operating Officer for Sempra LNG. I also serve as the Chairman of the Board for Cameron LNG.
As you know, I'm a newcomer and I've been with the firm for 6 months. Previous to that, I spent about 35 years in Global Engineering and Construction. As such, I've been around some pretty impressive mega projects. And so with that perspective, I really just wanted to start off today by saying that Cameron LNG, it's truly a world class project. I'm proud to be associated with it and I'm excited to be part of this team that's bringing Sempra's LNG vision to reality.
You really have to visit Cameron, which I regularly do, to fully experience how amazing this facility really is. It's 5 stories tall, it's 2 miles long. There's a pipe to stretch from New York to Los Angeles and it just sits grandly in the watery beauty of Campan Parrish, Louisiana. Like some of Sempra's other projects, Cameron started as a brownfield site. Its roots go back 15 years when Sempra developed it as an LNG import facility and re gasification and then it was in 2011 anticipating market changes when they began repurposing it as an LNG liquefaction and an export facility.
You can see key milestones here on the slide associated with Phase 1 and these have not changed since our most recent earnings call, so nothing new there. But I would like to highlight just a couple of things that are important relative to Phase 1, which is trains 1 to 3. First, it's on track. So Train 1, all of the pretreatment systems, the site wide utilities, infrastructure, it's 100% construction complete, well into the commissioning process and Train 1 is on track to begin producing LNG here in this next quarter. It's actually quite an exciting time for Sempra, for our customers, for the employees and hopefully for you too, our shareholders.
2nd, I want to highlight it's safe and take this opportunity to really complement Cameron LNG and its contractor for outstanding safety performance to date. This team has worked over 70,000,000 hours without a lost time incident and to date has achieved a 0.26 total recordable incident rate. It is excellent. And I might add, it's really reflective of the way Sempra Companies do business and protect shareholder value through safety above all. And the 3rd point I want to make is it's operationally ready.
We talk a lot about construction, equally important is putting the people, the processes, the systems, building a culture for safe, reliable and profitable operations. We feel very good about that positioning, about that operational readiness and positioning for operational excellence, which is yet another hallmark of Sempra Companies. So financially, financially Phase 1 is projected to bring Sempra between $400,000,000 $450,000,000 in full run rate earnings. That's Sempra's share. Because we're getting closer and have more visibility to the earnings on this, on Phase 1, we just have greater clarity at this point.
And Carlos mentioned it, but we can't say it enough. Please take note that's a $30,000,000 increase from our previous projections of the earnings from Cameron Phase 1.
And really it's
a result of just very disciplined management of this venture. Looking at cash distribution, we project nearly $12,000,000,000 in cash distributions, that's net of debt service. And again, that's Sempra's share. And we also have the opportunity to move some of these cash distributions forward, increase the net present value by refinancing the debt. Like the Cameron facility itself, we think the Cameron financials are also a thing of beauty.
So clearly, laser focused on delivering Phase 1, it's a huge priority for us. But in parallel, we're pretty excited about the momentum that we've got going for Phase 2. Phase 2 is the expansion of Cameron. And what that's about is the potential addition of a 4th and a 5th LNG liquefaction train. Just to put it in perspective for you, Phase 1 will deliver 12,000,000 tons per annum of LNG and Phase 2 would add another 8,000,000 tons per annum, a 70% increase.
There are a lot of strategic advantages of expanding Cameron, but let me just hit a couple. A very big one is the fact that it's yet another brownfield site with a whole lot of room and let me show you. So you can see here existing facilities. You can see where Trains 1 to 3 sit and you can clearly see that there's plenty of room for Train 45. And in fact, we own enough land to the north here to put a future Train 67.
I might add that a lot of pre investment was made in Phase 1 such that for Phase 2, the civil works, the site itself is already prepared for pile driving for Phase 2. And I would be well, another advantage for Train 2, let me mention that one, is the fact that it's a repeat design. There's actually a lot of advantages to that, but very big one is FERC and DOE have already approved 2 additional trains, 2 additional tanks and that additional export capacity. And I'd be remiss if I didn't pick up on what Justin talked about, which is the tremendous value of the relationships that we forged during Phase 1 and beyond with Total, with Mitsubishi, with Mitsui. All three have expressed support for a Cameron expansion.
We are undergoing studies as we speak. All the partners support those studies and looking at those scenarios. And so we're just thrilled that those are underway at this time. And I would add importantly, Total has already signed an MOU for a portion of the capacity for the expansion. So all those factors and more translate to the potential for cost effective LNG and speed to market.
So with that, that's the Cameron update and I'll turn it back over to Justin who put a spotlight on Port Arthur.
Thank you, Lisa. So the Port Arthur project is designed as a 2 train development with approximately 11 MPP of capacity. We continue to work with Bechtel through front end engineering and design, FEED, as well as value engineering as we move toward an open book estimate and ultimately a lump sum turnkey contract. Port Arthur's two trains are similar to the trains at Cameron, but through innovation, making some changes to operating pressures, some of the equipment, our teams have been able to optimize the output and reduce or lower the cost per unit of output. Notably Port Arthur site has significant expansion upside, up to 8 trains and up to 45,000,000 tons per annum of potential offtake.
This allows this facility to grow along with our strategic customers' ambitions. Perverting for the first phase or the first two trains of Port Arthur remains on track. On schedule, we received our final environmental impact statement from FERC on January 31, and we expect to receive our FERC order and our DOE non FDA authorization later this year. We are pleased to have converted what was a heads of agreement into a definitive sale and purchase agreement with the Polish National Gas Company late last year. We're excited and looking forward to providing 2,000,000 tons per annum of clean U.
S. Natural gas in the form of LNG to our allies in Poland. We are actively working with many parties to convert strong market interest in the remaining LNG offtake and equity participation in the Commercial Link agreements. Finalizing these marketing efforts is one of my highest priorities. As Carlos referenced, I'll be joined with joining Joe in China later this week with Carlos at LNG 19 where we'll have lots of discussions with some of those interested parties.
Moving next to ECA. As Tanya referenced, we're jointly developing both the ECA projects with EANOVA. And as you saw yesterday, partnering with EANOVA provides complementary and additional capacity given the depth and breadth of their experience developing energy infrastructure assets in Mexico. Both ECA-one and ECA Phase 2 have significant geographic advantages for delivering LNG into the growing markets in Asia. Their Pacific Coast location means that our customer ships do not have to traverse the Panama Canal and shipping times can be reduced by nearly 50% when delivering to Asia.
This reduction in time is significant because the cost of shipping LNG is a relatively high percentage of the total delivered cost of LNG, accounting for approximately 20% of the total cost versus only 2% in shipping crude. Phase 1 is projected to provide approximately 2,400,000 tons per annum of capacity to our customers and we continue to work through FEED and value engineer again, in this case with Techdeep and KeyWitt moving toward an open book estimate and again a lump sum turnkey construction contract. We have secured the major Mexican permits and anticipate receiving DOE non FTA export authorization later this year. In November of 2018, we signed heads of agreements with again Total, Mitsui and Tokyo Gas and our teams are actively engaged in the conversion of those into definitive SBAs. ECA Phase 1 is really the gateway to the larger ECA Phase 2 project.
This project has the same geographic advantages, but provides much larger scale. It's projected to deliver an approximate an additional me clarify that because there's been some questions about this an additional approximately 12 MTPA to our customers. So in total, the ECA facility could provide up to 15 MTPA if you look at Phase 1 and Phase 2. As you might expect, given its geographic privilege, there's significant market interest in this project. In November of 2018, as part of our alliance with Total, we chose to sign an MOU with them for up to 4 MTPA of this phase.
We are in discussions with several parties with respect to their interest in this project. In fact, market demand is so large that I've challenged our project team to look at opportunities through innovation and technology to increase the size and capacity of this project. At the same time, similar to what we did at Cameron with Eni, we are working with our regas customers to expedite the conclusion of the regas contracts so that we can bring forward in development I'm sorry, bring forward in time the development of ECA Phase 2. When completed, our projects are projected to provide 45,000,000 tons per annum of LNG, significant earnings and cash flow growth for our business and significant shareholder value, fueling our mission of being the number 1 energy infrastructure company in the United States. To conclude, we believe the market opportunity is larger and Sempra LNG's position is more privileged.
We believe moving forward with our 5 exceptional development projects will position us for success. As such, we've raised our ambition and our ability to execute. We believe this business offers our owners the ability to capitalize on global LNG demand growth by investing in projects right here in North America, projects with attractive risk adjusted returns and projects supported by long term take or pay contracts with creditworthy customers. Through purpose driven execution over the next 12 to 18 months, we'll make this business a success and capitalize on this exciting opportunity. I hope you have a sense of why I feel so privileged to be in my position.
I look forward to working with Carlos, Tanya, Lisa and our entire leadership team as we make this vision a reality. I'd now like to invite Carlos and Tanya back to the stage to join us where we'll take some of your questions.
Okay. We'll open up to Q and A in just a second. Okay. Questions? Julie?
Julie DeBlowitz, Bank of America Merrill Lynch. Thank you again for the presentation. Just focusing first on the LNG side, understanding a little bit what's driving the uplift at Cameron, the $30,000,000 And just to clarify within that, you mentioned potential opportunities or refinancing. I assume that's not in that number, just be extra clear about it. And then secondly, what are thoughts about debottlenecking now as we begin to really put this thing in service?
I assume that's not net 30.
Yes. So, Phil, you want to try to do that? Yes.
Let me I'll take the first two questions on that before we get to the debottlenecking. From what's really driving, 1, the uplift is we have lower interest costs associated with the project looking out the way the interest is going. And then also as the project is getting closer to completion now, we have a more tighter handle on the total construction costs. So we were able to narrow that range in a little bit and then raise that for the overall long term run rate of 400 to 450.
That is not inclusive of refinancing. Refinancing would be outside of that.
Right. Now the refinancing Julian, necessarily add to earnings but that would do is would add to cash flow because we would just re sculpt the earnings or re sculpt the debt payment.
And debottlenecking?
Okay. So the question is about debottlenecking now. So our intent and the scenarios we're studying really look at identical repeat designs. We will also look at what can be achieved. Once we get Phase 1 up and running, we'll know more about that.
So that will weigh into the studies and it's part of the study scope we're looking at.
Justin, super quick. You mentioned in your comments very briefly something about an acceleration on the ECA Phase II, I think you said. Can you elaborate a little bit on that? And then also just talk about the capabilities on-site at ECA beyond 2012, if it is possible? Sure.
So I referenced 2 ways we're working to try to bring forward that development. Phase 2 is really well, let me take a larger step back. Phase 1 was created because it could coexist with the existing regas contracts. So there was enough market demand. They wanted it now.
So we decided to proceed with Phase 1. Phase 2, as originally designed, was a project that could not coexist with the existing re gas contracts, which expire in 2028. So what we're doing is 2 things. 1, seeing if we can actually provide additional trains and coexist with the existing regas customers. The other option we're pursuing is we're working with our existing regas customers to see if by mutual agreement we can terminate those earlier and bring that entire development cycle.
So move that out of the way. And that's similar to what we did with Cameron at E and I. To your second question, Julian, I have challenged the team to see if we can get more One of the things we're looking at is could we put, 5 mid scale design trains going east to west. So in the same space instead of 2 this way, we would have 5 going north to south, which would allow us to put 15 additional there. Again, the demand is there.
The opportunity is there. It's really up to us to see whether we can satisfy it in a larger way and sooner.
Thanks. Ryan Levine, Citigroup. Just to further clarify the uplift in the Cameron guidance, is any portion of that kind of the NPV neutral contracts that you're getting some revenue uplift as due to the delay at Cameron? Or is it or is there any cost savings beyond the interest?
I can tell you. So basically what it is, is as we get closer and you get the total capital spending complete with the project, then you have better clarity on exactly what the tariff is. So there's no real change to the entire cost of the facility, but we have more clarity on that. And then as Trevor mentioned, we're no longer unless we're heading to 4% or 5% interest rates for short term rates, then that's an unlikely scenario. So that gives us sort of the ability to sort of increase the range to $400,000,000 $450,000,000
Question on Enova. So just maybe a little more color on as someone who's watching a little from afar, just the political environment. And I guess specifically related to the force majeure issues, could you give an update on whether I guess it was never officially effectuated on the in terms of CFE force majeure issues. So just is there a risk that you would have some lost earnings from those from that issue?
We as I mentioned in my presentation and Tania did as well, we are working with the government to get closer to explain what Innova is and also to explain better the benefits of this pipeline. There's 24 pipelines that have been built. They give substantial savings for every if you change from diesel or fuel to natural gas, you save like $600,000 $700,000 per day. If you have a couple of those things in the pipeline, the pipeline will pay for itself in 2 or 3 years. So that's the type of allocation that we have that we're here.
On the 1st major on the Sonora pipeline is a pipeline that we finish. It was in operation and 3 months after we had a sabotage. So that became a first major. We have been collecting for the government and now we are working. The idea is to put that pipeline into operation, the sooner the better.
That is not our larger position on that community, just a few people and I'm convinced that the new government has the tools to convince them that let us let us work immediately. And this could be solved pretty soon.
Carlos, and I would add that with the new administration, we formed a work group with the Ministry of the Interior, with CFE, with the federal government representative in Sonora. The group is meeting every week to find a solution to the problem and put the pipeline back into service. So I would say on the we're cautiously positive in that the new administration is very focused on getting that pipeline back in service.
I think the other thing to focus on too is that the new administration did come out and say that they plan to uphold the Sanke Dives contracts. So I mean that's something that's been fairly published too.
Hey, guys. Michael Lapides of Goldman. Just curious, how do you think about on a cost per MCF for MMBTU, the cost competitiveness of Cameron 45 relative to Cameron 1 through 3 and maybe relative to some of the other competing potential new trains in the Gulf?
Yes.
Lisa, please start.
Well, we think
it bodes well for cost competitiveness. Obviously, when you're doing 45, you have the benefits of having learned what you learned on Trains 1, 23. Some of the things I mentioned about pre investment and site civil works and that sort of thing, you won't have to go through. Again, that's pre investment that's been made. So we feel pretty good about that cost competitiveness for the additional trains.
Okay. Thank you so
much. Thank you.
Thank you.
Okay. So we'll wrap up with the financial presentation here. And of course, coming after an impressive group of folks on the management team, it's always difficult to bat blast in the order here. But again, I think we have a very optimistic and great message to deliver. And look, I think we've had a busy 9 months since our last analyst conference.
And I'm excited to recap really today what 2018 has brought and then what 2019 2020 is going to also bring to bear for our shareholders. As you've seen throughout the day, we have been streamlining Sempra, driving to capitalize on the most important markets and the most consequential initiatives that we can undertake. We have sharpened our focus on total shareholder return and we're executing with discipline and purpose. This next slide is one that, again, we showed earlier in the day, and Jeff said that we showed it last year at the analyst conference, and he was deciding whether or not he was going to put it into his slide deck. So my thought, what better way than to show it twice, right?
So this is a great indication of the long term value that Sempra has brought to our shareholders. Since 1998, we've delivered total shareholder return of over 8 30%. This is significantly outperforming the utility index. And this is really a testament to our diversified portfolio and the proactive approach that this management team has undertaken over the years to recycle capital and execute on value added opportunities. We've gotten into and out of businesses, I believe, at the right times.
And 2018, you absolutely saw a continuation of this. In fact, I would say if our Board came to this management team and the employees of the Sempra Companies and said at the beginning of 2018, I want you to do the following. Want you to start the year by successfully executing the largest ever utility equity offering ever and I want you to also do it as the largest in any space. And then I want you to do the week later execute a $5,000,000,000 bond offering, all in support of the M and A transaction. I want you to close the Oncor transaction through a settled proceeding and do it ahead of schedule.
Then I want you to go out and successfully raise the remaining $1,600,000,000 of equity in support of the Encore transaction and do that a year earlier. I want you to announce agreements to acquire a $2,000,000,000 public company with Encore with their agreement to acquire InfraREIT and Sempra to acquire 50% of Sherri Land. I want you to go out and sell your solar, your wind and your gas portfolio, and I want you to do that at market premiums, and I want you to bring in over $2,500,000,000 of cash proceeds from those transactions. Then I want you to work with your advisors and the Board to determine whether or not we're going to sell the South American businesses, and I want you to come to a decision on that. And then let's go ahead and have SDG and E win the prestigious Edison Award, recognizing innovation, excellence and investments around grid resiliency and wildfire risk mitigation.
I want you to materially advance the LNG projects and do all of this while you deliver your 2018 adjusted earnings share per guidance above consensus, I would tell our Board, I think you're out of your mind. I think you can deliver 1 or 2 or 3 of those things, but to do all of that, I think, is really a herculean task. But I think this management team and our employees rose to the occasion. And I really think 2018 is a proxy from what you can expect this team to deliver for you in 2019 2020. In 2019, we are absolutely focused on 3 things: executing our disciplined capital program 2, strengthening our balance sheet and 3, continuing to effectively manage our streamlined portfolio and operate the best businesses in the most consequential markets of California, Texas, Mexico and the global LNGG space.
So now I'd like to provide a little bit of a high level overview of our investor based capital allocation framework that has spoke on long term value creation. 1st, investing in organic growth continues to be the absolute foundation of our long term strategy. We evaluate our growth projects and prioritize capital around this company with a focus on generating superior shareholder returns. 2nd, we're focused on strengthening the balance sheet to restore flexibility and to fund the growth that you have heard about today and to maintain our investment grade plus credit ratings. And just when I say investment grade, just for clarity, that's BBB plus or Baa1.
And 3rd, as evidenced by our historical dividend track record, we're committed to growing our dividend and we raised the dividend in 2019 by 8% and our Board has signaled out to the market that we can go out to the market and signal that we would continue to grow the dividend until Cameron comes online. But again, we're always looking at what is the best way to optimize value for our shareholders and returning capital back to you. Now I'm going to turn to the next slide where we're going to talk about the balance sheet a little bit. As others and I have talked about today, the path to Premier has many facets, and certainly financial excellence is one of those facets. And as Jeff said, financial excellence is not just ensuring that you can compile the numbers and put out a 10 ks or 10 Q, but financial excellence is delivering superior numbers to the market and consistently delivering on what we've committed to.
And I'm also pleased with the strong credit metrics that our operating companies provide for us. And once Cameron comes online, we expect it to be one of the strongest FFO to debt contributors in our portfolio. Again, we talked about the $12,000,000,000 of after tax or after debt service cash flows back to Sempra, and this really demonstrates the value proposition that this project is delivering. These funds are projected to help reduce parent debt and also to finance the additional growth that we've talked about today. Additionally, we continue to explore other ways to strengthen the balance sheet.
And you also heard some of us talk about today about the Cameron refinancing and the questions we got, Julian. But what we're looking at on the Cameron refinancing is to potentially refinance the Cameron debt because it is front loaded and potentially stretch that out over the full 20 year term, and we're working on that, but that's just an example of things that we're looking at to strengthen the cash flows and the balance sheet to Sempra. As I've said before, I am absolutely and our Board and this management team is committed to our investment grade plus credit ratings and the strong performance our operating companies are absolutely a foundation of this. We're targeting a Sempra debt to cap ratio of 50% and I'm targeting an FFO to debt ratio of greater than 16% for the long term. We'll make progress towards this goal as we receive the anticipated proceeds from the sale of our renewables business and we've seen both the solar and the gas storage businesses sell and transact, and we will soon be closing on the wind business.
And then also, the proceeds from our South American business will go to help fund this as well as the $1,800,000,000 of remaining equity forwards that we've issued. So I can guarantee that we are focused on our credit ratings and we're working hard to ensure we're well positioned in this regard. Let's turn to the financials here. We are pleased to reaffirm our 2019 adjusted EPS guidance range of 5.70 $30 and put out our 2020 guidance range of $6.70 to $7.50 And again, we're reaffirming these numbers from the last year's analyst conference. And why I'm pleased about this is because last year we had the renewables business in there and we've taken $100,000,000 of earnings out of our business, but we're reaffirming these numbers.
So again, what we've done is we've recycled the proceeds from the renewables business, some portion of it into InfraREIT into the acquisition and then also paying down parent debt. The other things that we are moving here with regards to the line items is we're adjusting our earnings ranges for LNG and to add a little bit of cushion into our ranges when we're adjusting the lower end of the ranges to add some cushion for weather, construction and commissioning for Trains 23. And as Lisa stated, I very But I really do want to reiterate the point that was made earlier, and this is really significant in that we are raising the range for Cameron from $365,000,000 to $425,000,000 Now it's $400,000,000 to $450,000,000 on full run rate, and that really is an impressive project when you think about it. And really the increase as we said in the Q and A before is really from lower interest rates and also greater visibility into the project and cost as we nearing completion. 3rd, the South American utilities are slightly higher, one, due to the AES transmission asset acquisition that we made as well as we had some positive regulatory outcomes in both Chile and Peru.
And then 4th, if you look at the parent interest, I've broken it out this time in parent, so you can see the interest and the preferreds and then also the retained costs. And so when you take a look at the parents side of things here, there is a little bit of a shift in the timing of our forward equity settlements. And so what that's doing is raising the interest expense a little bit, but the share count you can see is a little lower. There's a couple of things I do also past convention, and this is really consistent with what we did at last year's analyst conference around the renewables, we really don't try to predict the timing or the expected proceeds from any sale of these businesses. And so what I've done is I've left South America in these earnings.
And what I'm anticipating is South America will close at the end of 2019 or potentially early 2020. So really the 20 19 numbers for South America would stay in these numbers, but then for 2020, we would pull those numbers out and then we would really determine what we would do with the proceeds and the amount of the proceeds we get at that time. I would say though that even with the pulling out of the earnings for South America, we've indicated when we announced this transaction that we believe it would be dilutive. But I will say that many of you have published out there on the sell side that you believe that given the way the trading multiples are between South America and North America, this actually could be value enhancing for us given the change in the multiples. And then again, as Patty and, the utilities folks talked about, we're excluding the outcome of any California GRC or the cost of capital proceedings, which also could provide, we believe, some level of uplift on these earnings, given that we've just included the but one of the things I really want to point out is we're taking our rate base from $28,600,000,000 to almost $44,000,000,000 over this 5 year period.
And this rate based growth at SDG and E, SoCalGas and the Texas utilities are really projected to be the key drivers of our future earnings growth, of course, outside of Cameron coming online. And again, as I said, what we've really done is we've just put the attrition rate of 3.5% in these numbers just because we don't and can't forecast really the outcome of a GRC. So if you look at really and I'll go through these individually, but if you look at SCG and E, as Kevin outlined today, the projected rate base growth is driven by our continued focus on safety, reliability and grid modernization. And over 80% of the projected investments at SDG and E over the next 5 years are really expected to be related to safety and wildfire mitigation efforts. And we plan to accelerate our infrastructure hardening efforts and leverage the technology to even further enhance the wildfire mitigation capabilities we have undertaken at SDG and E over the last decade.
Shifting to SoCalGas, we heard Brett talk about today the company's focus on providing clean, safe and reliable natural gas. And that focus is driving significant investments in safety and reliability on the distribution system through investments in storage, transmission and distribution integrity management systems. And then again, looking at Texas, as Alan highlighted, Encore is situated in some of the fastest growing regions in the U. S, and this success story just continues to get better and better for us. I think we really have hit a home run with Encore.
And this significant investment is expected to be required to support the grid expansion in Encore service territory. So through the investments in safety and reliability, our U. S. Utilities are projected to have combined rate base growth of 9% and take us to $44,000,000,000 of rate base, driving high quality T and D like earnings for our shareholders. So here, let's talk about Texas real quick.
As mentioned on the previous slide, Encore continues to be what we consider a significant growth driver for us. The incremental capital that we alluded to last year has absolutely become tangible and is now part of the updated plan. And as Alan mentioned, we made the regulatory commitment when we acquired Encore to invest a minimum of $7,500,000,000 over a 5 year period. And then when we closed the transaction, that $7,500,000,000 was actually $8,400,000,000 And then when we went to the analyst conference last year, the management team came to us and said, look, I think we could probably go out and indicate to the market that there's another 750 to 950 of incremental growth capital at Encore, and so we signaled that. And now that Encore capital is $11,200,000,000 with Infareit, which really just signals that these are real projects and these are real opportunities driving value to our shareholders.
Our 5 year capital plan of $25,000,000,000 is focused on our U. S. Utilities with approximately 90% coming from SDG and E, SoCalGas and from the Texas utilities. And as Patti mentioned, the capital plan at our utilities is not really reliant on any one single major mega project, but rather this is a continuation of investing in safe, reliable and operating systems around our businesses. And as you'll recall, one of the conventions that we use is we don't include in the unregulated side of the business, to put projects in there that we don't have contracts on.
So only those projects that we have contracts in the unregulated side do we put into our plan. And our U. S. Utilities also have further upside as people have mentioned today in the Q and A. And then our team in Mexico is doing an outstanding job and they continue to have a sustainable plan to capture growth opportunities.
And I think when we talked about what was going on at Enovo that Tanya mentioned with the liquids terminals, that's just a great example of the opportunities that that team is capitalizing on. And then I would also like to say that our capital plan does not include any capital for the 4 LNG development projects outside of Cameron Phase 1. And we continue to make great progress as Justin highlighted around the LNG development opportunities. So one of the things that I'd like to spend a few minutes on is I get this question a lot when we're out on the road is people ask, well, how are you going to finance the LNG business? And I think we have multiple avenues to effectively and efficiently fund these projects and minimize the amount of equity needed from Sempra.
First, we have strong projected operating cash flows from our businesses. This includes Cameron, which we have said all along, dollars 12,000,000,000 of cash flows back to Sempra after debt service. 2nd, these are large strategically positioned projects that are highly attractive, and we have world class partners at Cameron with Total, Mitsui and Mitsubishi, and we would expect similar type equity arrangements at Port Arthur and ECA. And 3rd, these projects are absolutely well suited for project financing. Long term contracts with strong creditworthy off takers really will allow us to pursue financing options that could reduce the amount and the timing of cash contributions required by Sempra.
So I really believe we have a really good handle on how we're going to finance this going forward. So as we look to 2019 and beyond, I couldn't be more excited about the extraordinary opportunities that this management team has in front of it to create value for you, our shareholders. And I think if you look to 2018 and what we accomplished in 2018 from the management team and the employees of Sempra, I think you can expect more of the same going into 2019 2020 as we continue to drive value for our shareholders. So with that, I'm going to stop and ask Jeff and some of the other management team to come up, Jeff is going to run through our year end goals for 2019, and then we'll stop and take some questions.
So we started a process back when I was the Chief Financial Officer. We called it the value creation initiative. And what we would do is we would meet as a management team bimonthly with our top 25 officers and talk about our top five challenges as a company and our top five opportunities. And we created this process by which the whole goal is to make sure that when you have 20,000 employees everybody knows what the top priorities are. So those would over time continue to translate into each of our business units having 10 goals as well.
These are my 10 goals. These are goals I'm held accountable to our Board of Directors. As you go through these, we believe that these ten items if successfully executed will make us have a more valuable company by the end of the year. So I would just note a couple of these for you as we look to materially improve the franchise value of LNG by the end of the year. We're certainly trying to take FID on EcoOne.
FID on Port Arthur could be end of the year Q1 of 2020. We want to execute on the Encore growth model. Obviously, Al went through a very robust discussion about the opportunity in Texas. And even though he spotlighted some of the growth opportunities like the Entertainment District in Arlington, he also went through and talked about another 8 to 10 just like that. In that one example he gave you in Arlington, that was an expected 100 megawatt of growth from that one area.
There's a lot of companies all around the country that would die to have 100 megawatts of growth from anything in the service territory. I would also mention in California, I think Patty did a great job of talking about 3 ways to improve the franchise value of SoCalGas and SDG and E. Obviously, the rate case is a big opportunity. There's one thing I'd like to highlight about that rate case is for both SoCalGas and SDG and E, it's risk based. For the first time in California's history, those rate cases are intended to reflect the prioritization of how we allocate capital to mitigate risk in the state.
We think that's something that all of the policymakers have a hard look at and we're optimistic about that outcome. Also we talked a little bit earlier today about cost capital as well as ongoing discussion from the legislative standpoint of lowering the risk in the regulatory model. So we think there is a clear opportunity and we're very focused on improving the franchise value of both of our California utilities. I would also mention this idea that I talked about from the very beginning. Since we were together in New York last June, we have really focused on being more laser sharp in our strategy, more disciplined in capital allocation.
And this concept on the slide about building a high performance culture over a long period of time it's our investment in people and our culture that will lead to more innovation and more opportunity for our company. We're going to make progress on that this year. And just like in 2018, we certainly hope to beat the midpoint of our range, which is $6 for the year. At the end of the day, I said this earlier, we're going to compete every quarter to hit our numbers. At the end of the year, our goal is to continue to put points on the board about winning your confidence about how we can execute.
So I'll stop and we're certainly available and Pfizer will moderate. If you don't mind just mention your name and your company, we'll try to spend as much time as possible to answer your question.
Before we take the first question, there was one question over the webcast. And the question was on the investment in the backcountry. What are our plans to continue to harden the infrastructure and grounding in the backcountry for SKG and E?
Okay. Well, I'll take that. And Jessica, you want to add to it, we can. But like Trevor mentioned and Scott mentioned or actually Kevin mentioned and I mentioned, about 80% of the capital plan that we have at SDG and E is actually for safety and reliability improvements. And so if you think about that, we definitely will be continuing to harden our system where it makes sense.
And Jeff mentioned the Cleveland National Forest before, that's a project that we're going to finish. But there's also other work that will be going on, throughout the backcountry and throughout the service territory.
Okay. Any questions?
Kristin Holzard from Northwestern Mutual. I have two questions primarily from a debt perspective. First, with the holdco debt as a percentage of total, your reduction plan, 38% year end 2018 trending down to potentially 32% by 2020. Could you put some more context around the variables of what makes that more of a potential target rather than firm? And then secondly, with the commitment to high BBB ratings, what is your strategy for stabilization at Moody's?
And then maybe even more pressingly at this juncture, stabilization at S and P, especially given the agency's recent commentary around implications of another downgrade at San Diego?
Sure. I'll take the first, Jeff, and then we can speak also to the ratings. But with regards to getting parent debt down, the biggest variable is the continuation of the recycling of the capital and how we are going to preference some of that debt pay or preference some of that to debt pay down. So of course you've got South America which we're not indicating right now what our expected proceeds are, but that could also have a fairly material impact on paying down parent debt. And then we have utilized some of the proceeds from the recycling of the renewables and the gas storage business to pay down parent debt, but we did use a portion of that in the plan to fund the acquisition for InfraREIT.
Just to add to Trevor's comments, there's still $1,800,000,000 of forward equity settlements. In the Q1, there's about $300,000,000 in proceeds from the storage assets. And you still have the AEP assets that are going to close here in the Q2. So that's how you get down to that lower ratio.
The only thing I would add is we made a clear commitment to fortress our balance sheet. I think we were very premeditated about how we thought that we would finance the Encore transaction and we would use we over equitize that deal to make sure we're being thoughtful. If you look back historically, we took on more debt on a short term basis to finance that deal, but there's a commitment on the management team as well as the Board to work that back down to a 50% debt to cap ratio and as you indicated lower fairly aggressive your HoldCo debt relative to total debt. And by the way, that's also incentive that's part of the tax reform is to lower the HoldCo debt. So that's something we're going to be very active on.
The second part of your question was on SDG and E's credit rating and how that impacts the overall credit metrics of the company. Is that what you're asking? Yes. So this is a broader question on California and the impact of California legislation and, what's going on in the state on our credit ratings and how that broadly affects the separate corporate credit rating. I think that's what you're getting at.
I would just say and Trevor you can add to this. Trevor reflected kind of the FFO quality of our operating businesses including Cameron. I would argue that we spend as much time with anyone in America with our credit rating agencies over the last 2 years. Gabe has had the good fortune of actually coming to visit us and see some of the same type of technology you'll see this afternoon. And he's also actually spent time with the Governor's team recently in the last 3 or 4 weeks.
So we believe that there is a plan in place where a couple of things are taking place. Number 1, we're going to operate our businesses safely every day. I like to go back and look at the transcript about how many times we use the word safety in today's conference. And number 2, one thing that's fundamentally different, it has been raised over and over again is our Governor walked into a difficult situation and raised his hand to be a big part of solving the problem and that's very important. And number 3, we actually thought SB zero one was terrific last year.
As this process moves forward, our expectation is we're going to end up with something that's SB-nine zero one better, right? So the real issue here is operate safety, continue to encourage leadership across our industry and the state and the outcome would be we believe a better risk environment from a regulatory standpoint and that will solve the issues that you're raising.
And the only thing I would add to what Jeff said there is with regards to Sempra's overall BBB plus or Baa1 credit rating, think you've seen us de risk our portfolio over this last year as we're now investing in more T and D like businesses, exiting out of generation. I think you can really see this team focusing on the de risking and the focus.
Steve?
Yes. It's Steve Fleishman, Wolfe Research. So Jeff, I know you're not giving long term earnings guidance as you guys used to, but you are giving kind of the vision of very high rate base growth and the LNG growth. And so maybe just at a high level, can do you expect that the company can continue to grow above kind of the industry average earnings and dividend growth over this period? Like is there any negatives out there in the future that we need to be aware of that offsets some of this rate based growth and LNG growth?
Just any perspective on that?
It's a very nuanced question which I appreciate very much. But I would say this is, I think you saw over the next the 2019 2020 period Trevor slide shows a 13% EPS growth rate. And I do feel like obviously the visibility we have not just to utility capital allocation, but also U. S.-based utility. Even 12 months ago, we looked at basically 80% of our forward capital being U.
S. Utilities, now it's 90%. If you'd actually transacted on South America a week ago, it will be closer to 93%. So that's part of the derisking part and you also have better visibility. So on the basis of our utilities alone, I think I'm comfortable saying that I believe over the next 5 years, we can grow at a rate as you alluded to faster than our industry.
And the great news Steve is, I think there are upside opportunities around California that Patty enumerated. And clearly I think there is growing confidence. We've talked about it in prior calls around what's taking place in LNG. We've made a decision that we're going to drive a piece of steel in the ground and we're going to own this space. We're putting a team together to do it.
We've got the right relationships. The President of this company is not at an analyst conference. He hasn't missed one in probably in 10 years because we've got priorities right now with customers and LNG. So I think I feel very comfortable saying that we've got a record capital forecast. It is more heavily weighted toward the U.
S. And U. S. Utilities than any time in our history, which gives us very good visibility into growth.
And I guess one other separate strategic question. So the issues in the state kind of creating potentially also some opportunities for you as someone who's operated well, no fires recently, etcetera. Like how would you think about investing more in a big way in California
from here? Well, that's also a very good question. And what I would say is that with our Board of Directors, there's been a conscious focus about continuing to sharpen our strategic direction. And we've clearly limited the number of markets we're focused on and we've talked about limiting where in the value chain we want to play. Our number one priority in California is to increase the franchise value of SDG and E and SoCalGas.
So that's really the focus of what we're looking at. And in terms of mergers and acquisitions and those type of things, A, we don't comment on them. In general, most folks in our industry tend to destroy value when they do those things. We need to execute the plan that's in front of us and there's a laser focus on that.
Carrie?
I was wondering if you could comment on TTi and their stub piece that they hold in Encore and just thinking about are you the right long term owner for that and when that transaction could potentially make sense. I'm trying to think forward to this the LatAm sale and proceeds. And just strategically, does that also help with credit ratings and kind of showing more diversity out of California and so forth?
Well, I'll take that if Trevor or Patty will chip in. I would just in my last response, I said we don't comment on M and A. And of course, you asked me an M and A question. But I would say that I've been on the Board of Directors of Encore for the last 12 months and I've really had a wonderful window into the quality of that business and the quality of the dynamics. I think that Alan has done a good job of articulating at last year's Analyst Conference and today we think Texas is a wonderful market.
There was a question earlier today about market reforms in California. We've long thought that Texas was a great model in terms of how generation procurement was separated from T and D. So we very much like the Texas marketplace. We certainly see that as one of our number one growth marketplaces and we want to continue to look for opportunities to do that. As it pertains to TTi, they're great partners with us on the board both Ulmer's and GIC, and we'll continue to kind of make sure that we're good partners with those folks, but we would not want to comment beyond that.
Well, maybe just could I follow-up. Is there anything that prohibits you from owning it? Like is there any type of standstill or it's just okay, there's nothing?
There's nothing. I mean, you have to go through an ordinary process of change control at the PUCT, just like you're doing with them for REIT.
Yes. And then just a clarification, I think there was a couple of comments about the staging of the remaining $1,800,000,000 in equity forward proceeds. Could you just comment on what's changed there and when we should be expecting that $1,800,000,000 to phase in?
Yes. So we've got that right now at the back end of 2020. And so we've pushed that out to the latter parts. I think it's in December in the plan right now in 2020 that we would issue the last remaining piece of the equity forwards.
Thank you.
All right. So let's pick up where with that one last off. Again, Julien, Bank of America Merrill Lynch. So just trying to put the pieces together here looking from 2020 to 2021 and beyond, right? How do we think about the various pieces here, right?
I think you just mentioned the equity piece that we got to be thinking about. What are some of these other pieces that we might not necessarily be intuitive? And maybe let me just be a little bit more leading on this. Cost cutting, I think, Jeff, even on last call, you said you'd be I don't want to put maybe disappointed if it wasn't better than 50. How are we looking and measuring against that 50 yardstick and again annualizing that in 2020 versus onwards?
I want to be
a little bit thoughtful here which is we're in growth mode, right? We certainly want to grow EONOVA's platform. We want to grow the LNG platform. We are incurring more developmental costs at LNG. So I think that the way I would think about cost is think don't think of these as projects Julian.
Think of this as a continuous improvement. So one of my favorite slides today was a slide that Kevin Segar put up there that talked about lowering the per customer O and M cost at SDG and E by 40% over 5 years. And this is really reflective of the culture we have, right? So remember, we've got $65,000,000 today that we circled at our utilities that's coming out of those businesses as part of our GRC. Incremental to that, we've circled $50,000,000 pre tax that were taken out of the parent company as we stage our divestitures and that full run rate benefit should be in 2020.
You can see that in some of the numbers when Trevor divided out the parent line. So we are going to be on our front foot about continuing to take cost out of the business. We're going to be managing the development cost at LNG. But I think if you think about potential upsides going into 2021, it's probably less going to be about cost. It's going to be more about how we execute in California regarding our rate case, the legislative outcome and cost of capital.
And what if any of those incremental capital opportunities that we've outlined in today's materials, we can pull forward into an earlier timeframe.
But just to clarify, so 50 is in the 20 already, anything incremental we'll talk about that later.
That's right. That's right. That's right.
Thank you.
So we
just have we have one last question from the webcast. And we have Adam, do you want to give the microphone to Alan? So it's on Encore. What is the rate case filing schedule for Encore? And are we assuming the continuation of the DCRF and TCOS in our projections?
Is this back on? Yes. Okay, great. One at a time.
Rate case? Rate case
the rate case filing schedule for Encore.
So coming out of the last change in control proceeding with Sempra and with the passage of Senate Bill 735, Kelly Hancock's bill last year, we're not scheduled to go in. Every utility is now scheduled to come in on a scheduled basis. We're scheduled to come in, I think it's October of 2021 right now. I think, InfraRE is scheduled to come in, in July the year before. So that's where we're on right now.
I think one thing I would tell you, if you followed our change of control proceedings, the one constant is every time you go in for a change of control, this issue is going to come up and it's going to be negotiated. I've been standing outside talking to the parties today, trying to figure out if we can settle the case like I told you before. But right now, what's on the schedule for us is October 21 from a rate case perspective. What was the second question?
2nd question is, are we assuming the continuation of the DCRF and the TCOS sort of recoveries in our projections or is there something else?
Yes, we are. Okay.
There you go.
You don't
want to announce any breaking news to the group about I
was hoping to. I'm still working on
it. I'm joking.
Okay. With that, we really thank you all for coming to San Diego. Jeff, I don't know if you have any other remarks? No.
I would just say that, I'd say this every time we're together. This is our favorite conference. We really enjoy spending time with you and answering your questions and certainly appreciate your confidence invested in our company. Thank you very much.
With that, we're going to end the webcast. And for those in the room, we're going to have lunch outside and then promptly at noon, we're going to go up to SDG and E. We'll first stop at Montgomery Airfield and that we'll see the aerial assets and then we'll go up to Central Park West and East to where SG and A is headquartered Century Park, sorry.