Key Takeaways
- • Voss Capital, holding less than 1% of Sempra's shares, urges separation of Oncor Electric Delivery Company, estimating the independent Texas utility could reach $78 billion valuation by end of 2028 versus Sempra's current $60 billion combined market value.
- • A spun-off Oncor would position itself as the highest-growth public transmission utility in the U.S., with capital spending already approved by regulators and exposure to surging Texas power demand without California wildfire risk exposure.
- • Sempra's current structure combines three distinct businesses—Southern California utility operations, Texas-based Oncor (which Sempra controls 80% of), and Sempra Infrastructure's liquefied natural gas export facilities—creating what Voss characterizes as unnecessary complexity for investors.
- • The separation would unlock value by allowing investors to isolate Oncor's growth profile from Sempra's California operations, which have faced depressed valuations due to wildfire-related liabilities and regulatory headwinds.
Summary
Activist hedge fund Voss Capital has formally urged Sempra Energy to spin off its Oncor Electric Delivery Company subsidiary, arguing that separating the high-growth Texas transmission utility from the $60 billion energy conglomerate would unlock significant shareholder value. In a letter dated May 28 and reviewed by Reuters, Voss—which owns approximately 2 million shares representing less than 1% of Sempra's outstanding equity—contends that an independent Oncor could trade at $78 billion by the end of 2028, a valuation exceeding Sempra's current combined market capitalization.
The thesis centers on valuation disconnect and operational clarity. Voss argues that Sempra's three-part structure—comprising its Southern California utility business, the Texas-based Oncor transmission platform, and Sempra Infrastructure's liquefied natural gas export operations—obscures Oncor's growth trajectory. By isolating Oncor as a standalone entity, the hedge fund suggests investors would gain transparency into a transmission utility positioned to capitalize on rapidly expanding Texas electricity demand. Sempra's 80% ownership stake in the spun-off company would itself exceed the parent company's current standalone value, according to Voss's analysis.
The spinoff rationale is further supported by Oncor's regulatory and operational advantages. The utility's capital expenditure program for coming years is substantially funded through pre-approved regulatory projects aligned with regional economic growth. Critically, a separated Oncor would eliminate exposure to California's wildfire and catastrophic loss risks, which have compressed valuations across utilities operating in the state over the past decade. Sempra's California operations have faced persistent regulatory and liability headwinds that Voss believes unfairly penalize Oncor's valuation multiple when held within the consolidated structure.
The thesis centers on valuation disconnect and operational clarity. Voss argues that Sempra's three-part structure—comprising its Southern California utility business, the Texas-based Oncor transmission platform, and Sempra Infrastructure's liquefied natural gas export operations—obscures Oncor's growth trajectory. By isolating Oncor as a standalone entity, the hedge fund suggests investors would gain transparency into a transmission utility positioned to capitalize on rapidly expanding Texas electricity demand. Sempra's 80% ownership stake in the spun-off company would itself exceed the parent company's current standalone value, according to Voss's analysis.
The spinoff rationale is further supported by Oncor's regulatory and operational advantages. The utility's capital expenditure program for coming years is substantially funded through pre-approved regulatory projects aligned with regional economic growth. Critically, a separated Oncor would eliminate exposure to California's wildfire and catastrophic loss risks, which have compressed valuations across utilities operating in the state over the past decade. Sempra's California operations have faced persistent regulatory and liability headwinds that Voss believes unfairly penalize Oncor's valuation multiple when held within the consolidated structure.
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