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Dominion Energy Inc Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company achieved a near-record setting employee safety performance and advanced its all-of-the-above strategy to reliably and affordably meet customers' rapidly expanding energy demand, including the largest data center cluster in the world.
- The company implemented changes to its process on how it handles new delivery point requests on its system, which has led to an increase in demand from customers.
- The company is confident in its ability to execute for the benefit of its customers, and continues to see opportunities for additional investment across the value chain, biased towards the end of the decade and beyond.
- The company's partner, EEW, continues to make strong progress, and deliveries are expected to continue steadily in the coming weeks.
- The company's positioning in a rate case is strong, with reliability and affordability being incredibly strong in Virginia.
- The cost increase is disappointing.
- The regulatory framework for DESC creates regulatory lag that makes it practically impossible to earn the allowed return, especially as compared to neighboring southeastern regulated jurisdictions, including Virginia.
- The estimate for network upgrades proved to be too low.
- The company is confident in its updated estimate and believes that if there is a revision up or down with respect to PJM network upgrades come July, it would not be of a similar magnitude.
- The company is providing a five-year look at sources and uses, meaningful operating cash flows, combined with a balanced mix of external financings, to satisfy its capital investment and dividend forecasts.
- Dominion's share of the joint planning agreement will lead to approximately $1 billion of incremental capital spend in the five-year plan.
Q&A Highlights from Dominion Energy Inc Earnings Call Q4 2024
- Analyst asked about the remaining variability in the projects and how flexible the schedule is, as well as how the standby costs would be recovered with suppliers pay.
- The company is in a very good position with the project and has done a lot of work to de-risk it. The data used for the project seems to be consistent with what PJM is looking at. The project has $200 million of contingency within the current project budget of $10.7 billion, up to $11.3 billion. 50% of costs are recoverable from customers, and costs are shared 50-50 with Stonepeak. The company has fixed price contracts for all the major equipment, and fabrication is going very well. The company is feeling good about the final estimate on PJM.
- The company is in a very good position with the project and has done a lot of work to de-risk it. The data used for the project seems to be consistent with what PJM is looking at. The project has $200 million of contingency within the current project budget of $10.7 billion, up to $11.3 billion. 50% of costs are recoverable from customers, and costs are shared 50-50 with Stonepeak. The company has fixed price contracts for all the major equipment, and fabrication is going very well. The company is feeling good about the final estimate on PJM.
- Analyst asked about the timeline to wrap some of the data center hook ups into the plan in the current decade.
- The company is focused on the current project and has no capital in the plan associated with other leases. The data center demand in Virginia continues to be very significant, and the company is working on transmission projects to accommodate the expansion of data centers.
- The company is focused on the current project and has no capital in the plan associated with other leases. The data center demand in Virginia continues to be very significant, and the company is working on transmission projects to accommodate the expansion of data centers.
- Analyst asked about the focus on additionality and co-location in the context of the data center contract opportunity.
- The company is focused on additionality, but it is not a gating item. They are continuing to talk to potential data center co-locator customers in Massachusetts, Connecticut, and other states in New England. They need to make sure they are taking into account the interests of stakeholders in Connecticut as they think about this valuable asset.
- The company is focused on additionality, but it is not a gating item. They are continuing to talk to potential data center co-locator customers in Massachusetts, Connecticut, and other states in New England. They need to make sure they are taking into account the interests of stakeholders in Connecticut as they think about this valuable asset.
- Analyst asked about reactions from stakeholders and the thought of bill headroom in Virginia's data center opportunity.
- Policymakers in Virginia are very focused on data center build-out because they see the economic benefits of it. The tax bills in Loudoun County are lower than they would be without the tax revenue from data centers, and there is an interest in continuing to see data center expansion. As more megawatt hours are sold to data centers, it can help with customer bill headroom. There may be debates about one customer class subsidizing another, but Virginia has ways to address this issue, and the company is confident that the Commission will make a decision that ensures data center growth in Virginia works for all customers.
- Policymakers in Virginia are very focused on data center build-out because they see the economic benefits of it. The tax bills in Loudoun County are lower than they would be without the tax revenue from data centers, and there is an interest in continuing to see data center expansion. As more megawatt hours are sold to data centers, it can help with customer bill headroom. There may be debates about one customer class subsidizing another, but Virginia has ways to address this issue, and the company is confident that the Commission will make a decision that ensures data center growth in Virginia works for all customers.
- Analyst asked about the company's approach to the biennial rate case in Virginia, specifically regarding stakeholder engagement and key issues to address.
- The company plans to file a straightforward rate case in Virginia, focusing on reliability and affordability, which are both strong in the state. The company has a strong position in the rate case, and the general environment is constructive. There's nothing particularly exotic in the upcoming biennial.
- The company plans to file a straightforward rate case in Virginia, focusing on reliability and affordability, which are both strong in the state. The company has a strong position in the rate case, and the general environment is constructive. There's nothing particularly exotic in the upcoming biennial.
- Analyst asked about the impact of the Executive Order on existing leases like CVOW.
- The company doesn't expect the Executive Order to have an impact on CVOW, as it has all the necessary permits, including federal permits, and is consistent with the administration's energy objectives. Stopping CVOW would be the most inflationary action with respect to energy in Virginia, and it would harm American energy dominance and job creation. Additionally, CVOW is specifically authorized by Virginia law, has bipartisan support, and is needed to power the growing data center market.
- The company doesn't expect the Executive Order to have an impact on CVOW, as it has all the necessary permits, including federal permits, and is consistent with the administration's energy objectives. Stopping CVOW would be the most inflationary action with respect to energy in Virginia, and it would harm American energy dominance and job creation. Additionally, CVOW is specifically authorized by Virginia law, has bipartisan support, and is needed to power the growing data center market.
- Analyst asked about the possibility of data centers not connecting to Dominion Energy's system, and if there are constraints preventing their connection.
- Robert Blue, CEO of Dominion Energy, explained that the company is highly confident that the data centers will show up in their system, as they have been serving data center customers longer than anyone else and understand their needs better than other companies. He also mentioned that the new batch system may have had an effect on the number of customers who have jumped into the Substation Engineering Letter of Authorization group, but the bottom line is that there is a lot of growth coming in data centers in Virginia, and they are building the infrastructure to support it.
- Robert Blue, CEO of Dominion Energy, explained that the company is highly confident that the data centers will show up in their system, as they have been serving data center customers longer than anyone else and understand their needs better than other companies. He also mentioned that the new batch system may have had an effect on the number of customers who have jumped into the Substation Engineering Letter of Authorization group, but the bottom line is that there is a lot of growth coming in data centers in Virginia, and they are building the infrastructure to support it.
- Analyst asked about the possibility of a lag in Dominion Energy's projects, specifically in Virginia and South Carolina.
- Steven D. Ridge, CFO of Dominion Energy, explained that the company has not given specific guidance on the lag period, as they engage with stakeholders and go through periodic rate cases. However, he mentioned that they have indicated in the past that they have a fairly significant amount of investment in riders, which generally earn allowed returns, and they see a good ability to achieve allowed returns. In South Carolina, they have quantified a potential under-earning of 80 to 90 basis points immediately after rates go into effect, and on average of 100 to 200 basis points during the rate case cycle. They have made a point of focus in their discussions with stakeholders in South Carolina, and are excited about supporting the needs for growth in the state while also discussing the ability for them to earn a return that's closer to their allowed. He mentioned that they have assumed that they have the ability to do better than what they've done in the past through some mechanism, whether it's legislation or the potential for more frequent rate cases in South Carolina. However, he also mentioned that they have tried to be reasonably conservative in their assumptions, without getting into specifics.
- Steven D. Ridge, CFO of Dominion Energy, explained that the company has not given specific guidance on the lag period, as they engage with stakeholders and go through periodic rate cases. However, he mentioned that they have indicated in the past that they have a fairly significant amount of investment in riders, which generally earn allowed returns, and they see a good ability to achieve allowed returns. In South Carolina, they have quantified a potential under-earning of 80 to 90 basis points immediately after rates go into effect, and on average of 100 to 200 basis points during the rate case cycle. They have made a point of focus in their discussions with stakeholders in South Carolina, and are excited about supporting the needs for growth in the state while also discussing the ability for them to earn a return that's closer to their allowed. He mentioned that they have assumed that they have the ability to do better than what they've done in the past through some mechanism, whether it's legislation or the potential for more frequent rate cases in South Carolina. However, he also mentioned that they have tried to be reasonably conservative in their assumptions, without getting into specifics.
- Analyst asked about Dominion Energy's participation in the $7 billion total capital increase project.
- Steven D. Ridge clarified that Dominion Energy is not participating or interested in the project. He emphasized that the project is not related to the V.C. Summer project.
- Steven D. Ridge clarified that Dominion Energy is not participating or interested in the project. He emphasized that the project is not related to the V.C. Summer project.