Company: SREA
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001032208-25-000012
Chunk: 466

Company: SEMPRA
Filing Date: 2025-02-25
Form: 10-K
Item: Item 1
Chunk 466
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 the Consolidated Statements of Operations. Because unrealized gains and losses are recorded as regulatory assets and liabilities, they do not affect earnings.

Other Sempra The table below sets forth reconciliations of changes in the fair value of Sempra’s Support Agreement for the benefit of CFIN classified as Level 3 in the fair value hierarchy.LEVEL 3 RECONCILIATIONS(Dollars in millions) 202420232022Balance at January 1$23 $17 $7 Realized and unrealized gains (losses), net(1)11 15 19 Settlements(9)(9)(9)Balance at December 31(2)$25 $23 $17 Change in unrealized gains relating to instruments still held at December 31$8 $13 $18 (1)    Net gains are included in Interest Income and net losses are included in Interest Expense on Sempra’s Consolidated Statements of Operations.(2)    Balance at December 31, 2024 and 2023 includes $7 in Other Current Assets, and $18 and $16, respectively, in Other Long-Term Assets on Sempra’s Consolidated Balance Sheet.The fair value of the Support Agreement, net of related guarantee fees, is based on a discounted cash flow model using a probability of default and survival methodology. Our estimate of fair value considers inputs such as third-party default rates, credit ratings, recovery rates, and risk-adjusted discount rates, which may be readily observable, market corroborated or generally unobservable inputs. Because CFIN’s credit rating and related default and survival rates are unobservable inputs that are significant to the valuation, the Support Agreement, net of related guarantee fees, is classified as Level 3. We assigned CFIN an internally developed credit rating of A3 and relied on default rate data published by Moody’s to assign a probability of default. A hypothetical change in the credit rating up or down one notch could result in a significant change in the fair value of the Support Agreement.

2024 Form 10-K  |  F-110

Fair Value of Financial InstrumentsThe fair values of certain of our financial instruments (cash, current and noncurrent accounts receivable, amounts due to/from unconsolidated affiliates with original maturities of less than 90 days, dividends and accounts payable due in one year or less, short-term debt and customer deposits) approximate their carrying amounts because of the short-term nature of these instruments. Investments in life insurance contracts