Q4 2023 Earnings Summary
- Dominion Energy is experiencing strong commercial load growth, particularly from data centers, with an increase of nearly 9% in 2023. The company expects this growth to continue and is investing in transmission projects to support it.
- The company has secured approximately $2.5 billion in additional transmission projects from PJM, primarily supporting data center growth, which will contribute positively to future earnings.
- Dominion Energy has entered into a strategic partnership by adding a noncontrolling equity partner to the Coastal Virginia Offshore Wind project, which reduces credit risk, provides meaningful protection from unforeseen project cost increases, and strengthens the balance sheet.
- Projected decrease in earnings per share: The company anticipates that earnings per share could be $0.20 lower on average between 2025 and 2029 due to pension plan adjustments and changes in accounting for investment tax credits.
- Potential risks to dividend sustainability: Despite management stating they are "100% committed to the current dividend," they also acknowledge awareness of "trends in the space around payout ratios," which may suggest future dividend pressure.
- Regulatory approval risk: The company's recent offshore wind project transaction requires approvals from multiple regulatory bodies, and any delays or denials could impact their plans. While management
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Final Asset Sale
Q: Is this the last asset sale, or are more expected?
A: Yes, the offshore wind equity partnership is the final strategic step; no further asset sales are planned.
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Dividend Commitment
Q: Any new messaging on the dividend outlook?
A: No change; we're 100% committed to the current dividend, and this remains consistent. You shouldn't expect any change next week.
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Credit Metrics and Ratings
Q: How does the transaction impact credit metrics and ratings?
A: The transaction is unambiguously credit positive; rating agencies view steps as supportive. We've engaged with them in detail, and they understand our plans.
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Regulatory Approvals
Q: What are the expectations for regulatory approvals for the transaction?
A: Confident approvals will be granted by year's end; the process requires state-level approvals in Virginia and North Carolina, and legislation supports the partnership structure. We're highly confident regulators will see the benefits and approve it.
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Commercial Load Growth
Q: Commercial load growth was up almost 9% in 2023; will constraints limit 2024 growth?
A: Data center growth continues strongly; we've addressed constraints in Northern Virginia, specifically in Loudoun County, by undertaking projects to relieve transmission constraints. We expect this growth to continue and are investing to serve future demand.
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Locking in Fixed Costs
Q: What are the plans to lock in more fixed costs on the project?
A: Remaining fixed costs will gradually be locked in over time, primarily related to onshore transmission and fuel for offshore construction vessels. Miscellaneous project management costs remain and will be addressed as we progress.
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2025 Earnings Considerations
Q: Is the pension and ITC impact incremental to 2025 view?
A: We haven't provided 2025 guidance; factors like pension expense and ITC need to be thoughtfully considered. We'll share comprehensive details in our upcoming strategic and financial plan next week.
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Minimizing External Equity
Q: How does the announcement inform views on external equity needs?
A: We'll share our comprehensive financial plan next week, but our aim is to minimize external equity. The transactions announced to date have been supportive of this objective, and we seek to meet and exceed our downgrade thresholds.