Stock story: Dominion Energy

Sustainable energy for key US states and sustainable returns for investors.

Stock story: Dominion Energy

Dominion Energy, headquartered in Richmond, Virginia, is one of the largest producers and transporters of energy in the US. Dominion Energy’s strategy is to be a leading sustainable provider of electricity, natural gas and related services to customers primarily in the eastern and Rocky Mountain regions of the US.

As of 31 December 2018, Dominion Energy’s portfolio of assets included about:

  • 26,000 megawatts of electricity generating capacity
  • 6,700 miles (10,800 kilometres) of electricity transmission lines
  • 58,300 miles of electricity distribution lines
  • 14,800 miles of natural gas transmission
  • Gathering and storage pipelines
  • 52,300 miles of gas distribution pipeline. 

Dominion Energy serves more than five million utility and retail energy customers and operates one of the US’s largest underground natural-gas storage systems, one that has about one trillion cubic feet of storage capacity.

Businesses of Dominion Energy

Dominion Energy manages its operations through four primary operating segments:

Source: Company presentation

  • Dominion Energy Virginia, which includes electricity distribution, transmission and generation in the states of Virginia and North Carolina. Dominion Energy Virginia has a rate base at 31 December 2019 of US$24 billion;
  • Gas Distribution, which includes gas distribution in the states of Idaho, Utah, Wyoming, Ohio, West Virginia and North Carolina;
  • Dominion Energy South Carolina, which includes electricity distribution, transmission, generation and gas distribution in the state of South Carolina; and
  • Contracted Assets, which includes 50% of the Cove Point LNG shipping terminal and storage facility and long-term contracted zero carbon generation.

Dominion Energy’s strategy

Dominion Energy has transitioned over the past decade to a more regulated, less volatile earnings mix. The company expects about 95% of earnings from its primary operating segments to come from regulated and long-term contracted businesses.

Dominion Energy is focused on expanding and improving its regulated and long-term contracted electricity and natural-gas businesses while transitioning to a cleaner energy future. 

The capital investment program for 2020 through 2024 includes a focus on upgrading the electricity grid in Virginia through investments in renewable generation facilities, safety, energy conservation programs and smart-grid devices. Renewable generation facilities are expected to include investments in utility-scale solar and offshore wind projects. Dominion Energy plans to upgrade its gas and electricity transmission and distribution networks.

Renewable Energy investment opportunity

The Virginia Clean Economy Act became law in April 2020, mandating the retirement of fossil-fuel-based generation plant and deeming investment in renewable energy to be in the public interest and eligible for cost recovery. The act will result in investment by Dominion Energy in offshore wind, solar, onshore wind and energy storage and this investment will form part of the regulated rate base. 

Dominion Energy’s five-year plan (2020-2024) for the renewable capital investment projects are:

  • Offshore wind - US$3.5 billion
  • Solar and onshore wind  - US$5.5 billion
  • Energy storage - US$0.9 billion

The US$9.9 billion total is a 71% increase in spending for these categories compared with the 2019-2023 plan. If the act is implemented as planned, this will lead to a significant increase in Dominion Energy’s rate base, which was US$24 billion as of 31 December 2019.

 


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