Q1 2024 Dominion Energy Inc Earnings Call

In This Article:

Participants

David McFarland; VP of IR; Dominion Energy, Inc.

Diane G. Leopold; Executive VP & COO; Dominion Energy, Inc.

Robert M. Blue; President, CEO & Chairman of the Board; Dominion Energy, Inc.

Steven D. Ridge; Executive VP & CFO; Dominion Energy, Inc.

Jeremy Bryan Tonet; Senior Analyst; JPMorgan Chase & Co, Research Division

Nicholas Joseph Campanella; Research Analyst; Barclays Bank PLC, Research Division

Shahriar Pourreza; Senior MD & Equity Research Analyst; Guggenheim Securities, LLC, Research Division

Steven Isaac Fleishman; MD & Senior Analyst; Wolfe Research, LLC

William Appicelli; Analyst; UBS Investment Bank, Research Division

Presentation

Operator

Ladies and gentlemen, welcome to the Dominion Energy First Quarter Earnings Conference Call. (Operator Instructions) I would now like to turn the call over to David McFarland, Vice President, Investor Relations and Treasurer.

David McFarland

Good morning, and thank you for joining today's 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 reports 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 Diane Leopold, Executive Vice President and Chief Operating Officer. I will now turn the call over to Steven.

Steven D. Ridge

Thank you, David, and good morning, everyone. Our first quarter 2024 operating earnings, as shown on Slide 3, were $0.55 per share, which included $0.06 of headwind from worse-than-normal weather in our utility service areas. Offsets to weather included modest interest savings driven by an earlier-than-budgeted close of the East Ohio Gas Company sale as well as O&M timing. Relative to last year, positive factors for the quarter were higher sales, regulated investment growth and better weather. Recall that we experienced a $0.10 weather headwind in the first quarter last year. So by comparison, a $0.06 weather headwind this quarter is actually a positive year-over-year driver.
Other factors include higher interest expense and the revenue reduction at Dominion Energy Virginia related to moving certain riders to base rates. A summary of all drivers for earnings relative to the prior year period is included in Schedule 4 of the earnings release kit.
First quarter GAAP results were $0.78 per share, which includes the net benefit from discontinued operations, primarily associated with the sale of gas distribution operations, unrealized noncash net gains on nuclear decommissioning trust funds, and the unrealized noncash mark-to-market impact of economic hedging activities. A summary of all adjustments between operating and reported results is included in Schedule 2 of the earnings release kit.
Turning to guidance on Page 4. We are affirming all of the financial guidance we provided at our March 1 Investor Meeting. As such, we continue to expect 2024 operating earnings per share to be between $2.62 and $2.87 with a midpoint of $2.75. As discussed with the March investor meeting, we're no longer providing quarterly earnings guidance. We are, however, replicating in the appendix of today's materials, the expected cadence of earnings across 2024, including anticipated year-over-year drivers by quarter. There haven't been any changes to that guidance from the investor meeting.
We continue to expect 2025 operating earnings per share to be between $3.25 and $3.54, inclusive of the impact of RNG 45Z credits with a midpoint of $3.40. We also continue to forecast an operating earnings annual growth rate range of 5% to 7% through 2029, up a midpoint of $3.30, which excludes the impact of the RNG 45Z credits. As a reminder, authorizing legislation applies to produce RNG volumes in 2025, 2026 and 2027, but sunsets thereafter. For the avoidance of doubt, no changes to any of the other financial guidance we provided on March 1, including credit, dividend and financing guidance.
Turning now to a status update on our business review initiatives as shown on Slide 5. During the review, we announced transactions that represent approximately $21 billion of debt reduction. With the closings of the Cove Point and East Ohio gas sales and completion of the DEV fuel securitization, we've now achieved 53% of the targeted debt reduction, representing over $11 billion. With regard to the remaining 47%, we're working methodically towards timely closings for the sales of Questar Gas, Wexpro and Public Service of North Carolina as well as the noncontrolling equity financing for the Coastal Virginia offshore wind project. In all cases, no changes to our original timing expectations. We look forward to continuing to work with involved parties and expect regulatory proceedings to conclude and transaction closings to occur during 2024.
For a little more color, in Utah, parties to the merger proceeding agreed to a comprehensive settlement in late March, which was followed by an evidentiary hearing in front of the commission on April 11. In Wyoming, a commission hearing is currently scheduled for May 23. And in North Carolina, a commission hearing is currently scheduled for June 11. As it relates to our announced offshore wind partnership, the transaction requires approvals from the Virginia State Corporation Commission and North Carolina Utilities Commission as well as certain consents from the BOEM and other regulatory agencies. All regulatory filings have now been submitted and procedural schedules have been published in both Virginia and North Carolina.
We are excited to have a well-capitalized and experienced financing partner on terms that significantly derisked the project for Dominion Energy customers and shareholders.
On credit, the business review resulted in significant quantitative and qualitative improvement to our credit profile. Recent comments by the rating agencies with whom we maintain frequent engagement highlighted the credit positive nature of the business review results. As a result of the review, we have strengthened the company's credit position with an existing consolidated rating categories at each of our 3 rating agencies.
Turning to financing on Slide 6. No changes to the financing plans that we shared at the investor meeting. Specific to 2024, we have normal course long-term debt issuance at DEV in the plan for later this year. We expect to issue between $600 million and $800 million of common equity during 2024, including $200 million through our DRIP program and between $400 million and $600 million via ATM. We view this level of steady common equity issuance as prudent, EPS accretive and in the context of our sizable growth capital spending program, appropriate to keep our consolidated credit metrics within the guidelines for our strong credit ratings category.
Our plan includes the ongoing utilization of hybrid securities in our capital structure. We have $700 million of junior subordinated notes that will mature in August. And as a reminder, we expect to issue between $700 million and $1.5 billion of hybrids this year. We expect to structure any new hybrids to qualify for 50% equity treatment from the credit rating agencies.
In conclusion, I'll reiterate that I'm highly confident in our ability to deliver on our financial plan. The post review guidance has been built to be appropriately but also not unreasonably conservative to weather unforeseen challenges that may come our way.
With that, I'll turn the call over to Bob.