Dominion Energy, Inc. (D) Earnings Call Transcript & Summary

Welcome to the Dominion Energy Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to David McFarland, Senior Vice President, Investor Relations and Treasurer.

Good morning, and thank you for joining Dominion Energy's Third Quarter 2026 Earnings Call. Earnings materials, including today's prepared remarks, contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings, including our most recent annual report on Form 10-K and our quarterly reports on Form 10-Q for a discussion of factors that may cause results to differ from management's estimates and expectations. This morning, we will discuss some measures of our company's performance that differ from those recognized by GAAP. Reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures which we can calculate are contained in the Earnings Release Kit. I encourage you to visit our Investor Relations website to review webcast slides as well as the Earnings Release Kit. Joining today's call are Bob Blue, Chair, President and Chief Executive Officer; Steven Ridge, Executive Vice President and Chief Financial Officer; and other members of senior management. I will now turn the call over to Steven.

Thank you, David, and good morning, everyone. We continue to be focused on 3 top priorities: First, consistent achievement of our financial commitments; second, continued achievement of major construction milestones for the Coastal Virginia Offshore Wind project; and third, constructive achievement of regulatory outcomes that demonstrate our ability to work cooperatively with regulators and stakeholders to benefit both customers and shareholders. As we'll discuss today, we continue to demonstrate success against these priorities, extending our track record of high quality and consistent execution. I'll cover financial results in my remarks. Bob will provide updates on the NextEra Energy combination, CVOW and other business items in his remarks. Turning first to third quarter results, as shown on Slide 3. Third quarter operating earnings were $1.28 per share, including $0.05 from RNG 45Z credits and $0.05 from better-than-normal weather. Third quarter GAAP results were $1.30 per share. A summary of earnings drivers relative to the prior year period is included in Schedule 4 of the Earnings Release Kit, and a summary of all adjustments between operating and GAAP results is included in Schedule 2 of the Earnings Release Kit. Turning now to guidance. Year-to-date operating EPS has benefited from better than budgeted sales, better than normal weather and higher-than-expected 45Z credit income, combined with strong overall, financial and operational execution. Inclusive of conservatism for balance of year weather as well as potential opportunities to derisk future financial performance, we now expect full year results to be in the top half of our original guidance range. We've provided year-over-year drivers for the fourth quarter in the appendix of today's materials for your reference. Additionally, we are reaffirming all other existing financial guidance provided on our fourth quarter earnings call, including credit, dividend and long-term growth guidance. Turning to financing on Slide 4. We made significant progress on our financing plan during the quarter, successfully executing several planned transactions while continuing to manage the balance sheet, consistent with our robust credit guidance. In September, the Virginia State Corporation Commission approved our fuel securitization financing petition, representing a balance of approximately $900 million, helping mitigate near-term fuel-related impacts on customer bills. Turning briefly to sales. We're continuing to see strong sales in our service areas with LTM weather-normal electric sales growth of 3.4% across DEV and DESC. In addition, all 10 of the DOM zones' summer peak demand days have occurred in 2026. And in August, DESC set a new all-time electric peak. Turning to Slide 5. Since our last update, we continue to see robust and durable demand from our differentiated, high-quality, low-risk data center customers across multiple localities in Virginia, and we're bringing these customers on to our system in the right way, protecting existing customers from cost shifts while mitigating stranded cost risk by utilizing a large load framework approved by the Virginia State Corporation Commission in our most recent biannual review that ensures these customers continue to pay their fair share of the investments required to support their growth. We now have over 54 gigawatts of data center capacity in various stages of contracting, including over 12 gigawatts of capacity contracted under electric service agreements. To put that in context, we've added over 6 gigawatts of contracts or 13% since the end of last year. In conclusion, I am highly confident in our ability to deliver on our financial plan. We've built our plan to be appropriately, but also not unreasonably conservative to whether unforeseen challenges that may occur. And with that, I'll turn the call over to Bob.

Thank you, Steven. I'll begin with safety on Slide 6. Through September, our employee OSHA injury recordable rate was 0.41, which remains well below industry average. Safety is our first core value. And we're always focused on driving workplace injuries to 0. Turning next to our announced combination with NextEra Energy. As we detailed in May, this transaction represents a truly transformational opportunity to bring together 2 world-class utilities with 238 years of collective industry experience to even better serve millions of regulated customers across 4 states. Looking ahead, we believe we can accomplish far more on behalf of our customers together than we can apart. In mid-September, NextEra and Dominion announced an enhanced Virginia benefits package that puts customers first and positions the Commonwealth as a global energy leader. That proposal doubled the duration of residential bill credits, expanded energy bill assistance by $100 million, included a $100 million workforce development fund, committed to creating at least 1,000 new jobs in the Commonwealth, building a new shareholder-funded co-headquarters tower in Richmond and supporting Virginia companies through a $1 billion annual 5-year Virginia supplier program. Over the longer term, customers and communities will benefit from a stronger company with the scale and capabilities to buy, build, finance and operate critical energy infrastructure more efficiently, helping support reliability, affordability and economic growth. In Virginia, we've received testimony from parties which we will address through rebuttal testimony due November 2. Evidentiary hearings begin on November 17, and the final order is due by January 11 of next year. Ultimately, the State Corporation Commission will decide the case based on the record presented to it and on the legal standard, whether adequate service to the public at just and reasonable rates will not be impaired or jeopardized by the proposed transaction. Another way of thinking about this is whether the transaction will do no harm to customers. We're confident that we have met that standard. In fact, we've exceeded the standard by proposing significant benefits in terms of customer affordability, jobs in our service area and development of needed energy resources. In South Carolina, we've received testimony from parties, which we will address through rebuttal testimony due November 18. Hearings begin on December 8, with a final order by January 29, 2027. In North Carolina, hearings begin on February 23, 2027. The time lines for each of the proceedings are shown on Slide 7. Required federal approvals have all been filed and continue to progress. We continue to expect the transaction to close in the second half of 2027. I could not be more excited about the combination of these 2 companies. We'll continue to share updates as we progress through the regulatory process. Turning next to offshore wind on Slide 8. CVOW continues to make significant progress, with the project approximately 85% complete and the fabrication of all nacelles, towers and blades now complete. We've installed 44 turbines representing more than 640 megawatts of generating capacity, with the installation of the 45th turbine happening now. Installation continues to average approximately 2 days from jackup to jack down, consistent with our assumptions. July and August turbine installation cadence was in line with expectations, while September and October were below due to a combination of weather and Charybdis maintenance activities, which were completed earlier this month. Importantly, these impacts were within the types of risks contemplated when we added scheduled contingency last quarter. While we've utilized a portion of that contingency, our outlook has not changed. We continue to expect project completion by the end of 2027 and energization of the third and final offshore substation by year-end 2026. From a cost perspective, our current budget remains $11.65 billion, including $123 million of unused contingency. We also continue to see strong customer value. The project's LCOE remains well below the statutory threshold, as well as the range contemplated in our original filing. And we estimate CVOW will generate approximately $5 billion of fuel savings for customers during its first 10 years of operation. Our overall view of the project remains unchanged. CVOW installation has been significantly derisked and continues to make progress against its schedule and cost objectives while delivering significant long-term customer value. Now I'll turn to other business updates as shown on Slide 10. In mid-October, we filed our Virginia Integrated Resource Plan update, which included several possible generation build portfolios designed to meet robust customer demand growth. Relative to last year's company preferred plan, we've added and accelerated 4 gigawatts of solar and 2 gigawatts of battery storage. Importantly, under the company's preferred plan, we're meeting our customer needs, protecting system reliability, maintaining affordability, with monthly residential electric bills forecasted to increase on average by about 2.3% annually. We continue to see a growing role for energy storage in Virginia. Our recently filed IRP is an update and represents a snapshot in time, but it already reflects a meaningful increase in storage relative to our prior plan. Importantly, Virginia also enacted significant energy storage legislation this year that establishes substantially higher targets for both short- and long-duration storage. We expect storage to play an increasingly important role as use cases continue to broaden and the technology continues to advance. We're actively evaluating both short-duration battery storage and emerging long-duration technologies through the lens of reliability, affordability and customer need. And looking longer term, the proposed combination with NextEra Energy would bring together significant capabilities and experience in energy storage. We believe that positions the combined company exceptionally well to deploy storage at scale as the technology matures and system needs evolve. Finally, on Millstone. In September, the Connecticut Department of Energy and Environmental Protection provided an update on the zero carbon energy request for proposals, indicating that it intends to announce a decision later this year. The facility's existing PPA has delivered tremendous value to customers, lower cost and significantly reduced volatility. Despite being priced at the time in 2019 above prevailing price outlooks, the contract is expected to save customers over $245 million this year, including $200 million year-to-date, in addition to the over $200 million in savings to customers last year. Based on current forward curves, the contract is expected to save customers in Connecticut over $900 million over the 10-year life, driven by lower energy pricing. We remain focused on achieving a constructive outcome for the facility, which has delivered tremendous value and produced bill reductions for customers in Connecticut through its existing contract. We will continue to provide updates as things develop. With that, let me summarize our remarks on Slide 11 by reiterating our focus on our 3 top priorities: consistently achieving our financial commitments; continued achievement of major construction milestones for the Coastal Virginia Offshore Wind project; and achieving constructive regulatory outcomes that demonstrate our ability to work cooperatively with regulators and stakeholders to deliver results that benefit both customers and shareholders. We remain committed to delivering reliable, affordable and increasingly clean power for our customers. With that, we're ready to take your questions.

[Operator Instructions] And we will take our first question from Shar Pourreza with Wells Fargo.

So Bob, just on -- just as we're thinking about the deal and sort of the staff, I mean, 57 conditions, I guess, can you highlight you and the staff are kind of further apart? What's the deal breaker? Is it like the ring fencing? Is it the dividend restrictions? Can you close any of these gaps before the hearings next month? And then maybe just lastly, comment on the governor's intervention, which kind of seems a little bit excessive to us? How is that dialogue going?

Yes, Shar. Great question. 57 conditions, a chunk of them are conditions that were ones that we had already voluntarily proposed. So I think it's important to keep that in mind. But fundamentally, as you heard from John on NextEra's call a week or so ago, we're still focused on the statutory standard, which is no harm. That's what the judges are going to follow. We'll file our rebuttal testimony on Monday. I look forward to the hearing beginning on the 17th of November. And we remain confident that our position goes beyond the statutory standard will deliver benefits, not just no harm to Virginia customers to employees and communities. It's going to keep our company locally led, still regulated by the SEC, fully accountable to them. John said it on their call, the judges of the SEC are going to follow the law. That's the best that we could possibly ask for. And we look forward to presenting our rebuttal testimony on Monday.

Got it. And then just the governor, how is that dialogue going? Just, I guess, I don't want to say behind closed doors, but is what we're seeing publicly different than what conversations you're having privately?

Well, the governor is participating as an intervener in the case as she is obviously entitled to do, and we welcome her intervention. We're participating in the case through the filings that we make in the case. We obviously talk to parties as makes sense. But really, our focus right now is the testimony that we're filing on Monday, making sure that we're all very focused on the no harm legal standard.

It got. Perfect. And then just lastly, on CVOW, I mean, obviously, we saw a little bit of a healthy drop in the LCOE to $62. Obviously, a lot of that was driven by RECs going to 38. I guess, what are you seeing in the RECs market to drive that in this sort of 38 kind of sustainable in your view?

Sure, it's Steve. It's hard to predict the price. We obviously reflect it quarterly when we update the filing, and very transparent about it. What we're seeing is a tightening of supply and demand sort of unsurprisingly. And remember that a large portion of those RECs need to be generated by Virginia resources. And so that obviously adds an additional constraint, which pushes prices up. And remember, the way that math works is that we credit the revenue from those REC generated sales by CVOW against the LCOE. That's why you see that price come down. But we've seen it kind of go up and down. It was a little higher, now it's back down a little lower in terms of the LCOE. I think the most important thing is we continue to believe CVOW will provide significant value to our customers.

Our next question comes from Nicholas Campanella with Barclays.

Maybe just sticking with the merger -- maybe just keeping with the merger, a similar question just on South Carolina. Any reactions to testimony there that recently came in? Is there a path forward to settle South Carolina? And any thoughts on just the bill credit, 4 years versus 2 years?

Yes. I'll give a similar answer, Nick, to the question I gave on Virginia. We're in the process, in the regulatory process there. We continue to work our way through. You all have the procedural time lines in front of you. Next step for us is to -- for us to file our rebuttal testimony and then go into the hearing. We continue to believe that we've presented a very strong package in South Carolina, the same way we did in Virginia, and we look forward to an opportunity to demonstrate that to the commission. Obviously, we work with parties in all states in all the regulatory proceedings that we're involved in to try to find a good outcome.

Okay. And then maybe moving to Millstone. Can -- I know you're saying there's a decision here potentially by year-end in the slides. Can you just remind folks of the general time line? Do you get term and price by then? Or is that just that Millstone could be -- could have been selected as part of this wider process? Maybe just a little mark-to-market on those discussions?

Nick, we're encouraged and constructively engaged with the parties in that process. A little difficult to say with certainty as to sort of what would be public at the end of the year. We don't -- certainly don't want to speak for get ahead of the regulators in this case. But I do think we'll feel like we've got a little bit better sense of where that process is going by the end of the year. And then of course, as we have announcements to make, we'll be excited to make that public to folks.

Our next question is from Paul Zimbardo with Jefferies.

Hey, Paul.

We'll move to our next question from Anthony Crowdell with Mizuho. Anthony, your line is now open.

How about now? Can you hear me? Sorry, has that worked?

Yes, we were starting to get a little worried there.

I know. I think Paul is out trick or treating. So he's just probably getting his last candy.

I'm glad to know you waited until the call was over.

I just have 1 quick question. You guys gave us great clarity on CVOW, continuing to derisk it, I think you're 85% complete. I think maybe it's more of a sector-wide question. The sector is now approaching some large generating project construction. You guys have clearly plowed through this project, which is maybe 1 of the bigger ones going across the country. I guess, how should investors think about execution risk across the sector as we're starting to see utilities pursue like larger generating units? You guys have plowed through it, you continue to de-risk it. But I don't know if it's lessons learned or something. Or what would you tell us we should focus on as you guys are successful with CVOW and we're seeing now other utilities go down this path?