Dominion Energy Third Quarter 2026 Earnings Conference Call - DOMINION ENERGY INC

Financial Performance:

• Third quarter operating earnings reached $1.28 per share, while GAAP earnings were $1.30 per share; results included $0.05 per share from RNG 45Z tax credits and $0.05 per share from better-than-normal weather.
• Year-to-date operating EPS is driven by higher-than-budgeted sales, favorable weather, and elevated 45Z credit income.
• Updated full-year guidance reflects a strong execution trajectory, with expected results in the top half of the original guidance range, incorporating conservatism for potential winter weather and risk mitigation strategies.
• Long-term credit and dividend guidance remain reaffirmed.
• Virginia State Corporation Commission approved a $900 million fuel securitization financing transaction to mitigate near-term customer bill impacts.

Guidance and Future Outlook:

• The company maintains a 2027 project completion target for the Coastal Virginia Offshore Wind (CVOW) project and expects energization of the third offshore substation by year-end 2026.
• Full-year 2026 guidance for EPS is set for the top half of the initial range, supported by revenue growth and operational efficiency.
• The merger with NextEra Energy is projected to close in the second half of 2027, pending regulatory approvals in Virginia, South Carolina, and North Carolina.
• The 2026 Virginia Integrated Resource Plan (IRP) update includes accelerating four gigawatts of solar and two gigawatts of battery storage, with a forecasted average residential bill increase of 2.3% annually.
• Management expects data center demand to remain robust, with over 54 gigawatts of capacity under various contracting stages, representing a 13% increase since the prior year.

Business Segments and Product Lines:

• Data Centers: Over 12 gigawatts contracted under electric service agreements within a differentiated, low-risk portfolio across multiple Virginia localities, protected by a large load framework to prevent cost shifts.
• Offshore Wind (CVOW): Project is approximately 85% complete with fabrication of nacelles, towers, and blades finished; 44 of 48 turbines installed (640+ MW), with the 45th currently under installation; estimated Levelized Cost of Energy (LCOE) is well below statutory thresholds, projecting $5 billion in fuel savings for customers over the first decade.
• Energy Storage: IRP update reflects a fourfold increase in battery capacity between 2030-2034 compared to the prior plan; Virginia enacted new legislation setting higher targets for short and long-duration storage.
• Nuclear Assets: Millstone Power Station continues to deliver significant value through existing Power Purchase Agreements (PPA), saving Connecticut customers approximately $200 million year-to-date and projecting $900 million in savings over the 10-year contract life; future work focuses on license renewals for the regulated fleet.
• Transmission & Generation: Continued strong sales with LTM weather-normal electric sales growth of 3.4% across Dominion Energy Virginia (DEV) and Dominion Energy South Carolina (DESC); DESC set a new all-time summer peak demand in August.

Market and Competitive Landscape:

• The utility sector is facing robust demand growth driven by data centers, requiring significant capacity expansion and infrastructure investment.
• The proposed combination with NextEra Energy aims to create a more efficient, larger-scale entity capable of financing and building critical energy infrastructure, leveraging 238 years of collective industry experience across four states.
• Market trends indicate a tightening supply and demand for Renewable Energy Certificates (RECs) due to Virginia-specific generation requirements, influencing REC pricing and LCOE calculations for CVOW.
• Competition in regulatory approvals involves multiple states (VA, SC, NC) with distinct procedural timelines for hearings and final orders.

Risks and Challenges:

• Regulatory Uncertainty: The merger faces a complex multi-state regulatory review process with specific timelines for rebuttal testimony and hearings; the State Corporation Commission will decide based on the "no harm" legal standard.
• Weather and Maintenance: CVOW installation cadence was impacted by weather and Charybdis vessel maintenance in September/October, though these risks were factored into contingency plans.
• Execution Risk: Large-scale generation projects face potential labor constraints, supply chain disruptions, and permitting delays, though management cites experienced teams and supply chain familiarity as mitigation factors.
• Financial Exposure: Balancing the funding requirements for the merger, CVOW, and expanded renewable portfolio while maintaining credit metrics and avoiding undue customer cost shifts.

Management Commentary and Tone:

• Management expressed high confidence in their ability to execute the financial plan, citing a "robust" and "appropriately conservative" budget for CVOW.
• The tone regarding the NextEra merger was enthusiastic and strategic, emphasizing transformational opportunities for customers and the workforce, with a strong belief that the deal exceeds the "no harm" standard.
• Leadership reiterated three top priorities: consistent financial commitment achievement, major CVOW construction milestones, and constructive regulatory outcomes.
• Safety remains a core value, with an employee OSHA injury recordable rate of 0.41, well below the industry average.

Analyst Questions and Answers:

• Merger Conditions (Shar Pureza, Wells Fargo): Management declined to disclose specific "deal-breakers" regarding the 57 conditions, emphasizing focus on the statutory "no harm" standard and upcoming rebuttal testimony; confirmed the Governor's intervention is welcomed but the focus remains on legal compliance.
• REC Market (Shar Pureza): LCOE reductions to ~$62/MWh are driven by REC prices (down to ~$38) and the credit mechanism applied to CVAO revenue; supply/demand constraints in Virginia support pricing, though volatility exists.
• South Carolina Merger (Nicholas Campanella, Barclays): Similar to Virginia, the team is proceeding through testimony and hearings, confident in the strong package presented for the state.
• Sector Execution (Anthony Crowdwell, Mizuho): Utility execution risks are mitigated by experienced construction teams, familiar contractors, and established permitting relationships; lessons from transmission projects and recent combined cycles are applicable.
• CVOW Scheduling (Carly Davenport, Goldman Sachs): Installation efficiency is improving significantly (35-45% faster turbine installation over recent quarters); the remaining 132 turbines can be installed within the 2027 window even with conservative weather/maintenance contingencies (~30-95 days of slack time).
• Nuclear Upgrades (Paul Zimbardo, Jefferies): Regulated fleet focus is on license renewals (20-year extensions); limited upgrade opportunities exist at Millstone, with the PPA continuing to provide substantial customer savings.
• Capital Plan (Paul Zimbardo, Jefferies): The IRP update significantly increases battery capital requirements (e.g., 850 MW to 3.3 GW in 2030-2034), estimated at $2.5-$3 billion per gigawatt, impacting the 2027+ capital cycle.
• Merger Funding (Nick Amaguchi, Evercore ISI): Equity issuance requirements are expected to remain back-end loaded; 2027-2028 are viewed as relatively lighter equity years compared to the end of the plan.

Other Key Points:

• The merger proposal includes an enhanced Virginia Benefits package with doubled residential bill credits, a $100 million workforce development fund, and a $1 billion annual Virginia Supplier Program.
• CVOW fabrication of all nacelles, towers, and blades is complete; the installation rate averages two days from jack-up to jack-down.
• Virginia enacted significant energy storage legislation establishing higher targets for storage capacity.
• Millstone's PPA, priced above market in 2019, is expected to save customers over $900 million over its life due to current lower forward energy curves.
• The company maintains a large load framework in Virginia to ensure data center growth does not shift costs to other customers.