Dominion Energy, Inc.

ShareLines is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. Instructions will be given for the procedure to follow if you would like to ask a question. I would now like to turn the call over to Stephen Rich, Vice President, Investor Relations.

Thank you, and good morning, everyone. Thanks for joining today's call. Earnings materials, including today's prepared remarks, may 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 measure 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, Jim Chapman, Executive Vice President, Chief Financial Officer and Treasurer, and other members of the executive management team. I'll now turn the call over to Jim.

Thank you, Stephen. Good morning, everyone. I know there's some competition for utility investors' attention this morning, a couple of competing calls in this time slot, so thank you for joining our call, and we promise to keep our call today somewhat brief. Before I report on our strong quarterly financial results, I'm going to start with a recap of our compelling investment proposition. and highlight our focus on the consistent execution of our repositioned strategy. We expect to grow our earnings per share 6.5% per year through at least 2025, supported by our $32 billion five-year growth capital plan. As outlined on our fourth quarter call in February, over 80% of that capital investment is emissions reduction enabling investments. And over 70% is rider recovery eligible. We offer nearly 3.5% yield and expect dividends per share to grow 6% per year based on a target payout ratio of 65%. Taken together, Dominion Energy offers an approximately 10% total return premised on a pure play state regulated utility profile operating in premier regions of the country. More on that last theme in a minute. Our industry-leading ESG positioning includes the largest regulated decarbonization investment opportunity in the nation, which, as you'll hear in today's prepared remarks, is steadily transforming from opportunity to reality. Turning now to earnings, our second quarter 2021 operating earnings, as shown on slide four, were 76 cents per share. which included a one penny hurt from worse than normal weather in our utility service territories. Both actual results and weather normalized results of 77 cents were above the midpoint of our quarterly guidance range. So this is our 22nd consecutive quarter, so five and a half years now, of delivering weather normal quarterly results that meet or exceed the midpoint of our quarterly guidance range. Note that our second quarter and year-to-date gap and operating earnings, together with comparative periods, are adjusted to account for discontinued operations, including those associated with our gas transmission and storage assets. Second quarter gap earnings were $0.33 per share and reflect the mark-to-market impact of economic hedging activities, unrealized changes in the value of our nuclear decommissioning trust funds, The contribution from Questar Pipeline, which will continue to be accounted for as discontinued operations until divested, and other adjustments. A summary of all adjustments between operating and reported results is, as usual, included in Schedule 2 of our earnings release kit. Turning now to guidance on slide 5, as usual, we're providing a quarterly guidance range, which is designed primarily to account for variations from normal weather. For the third quarter of 2021, we expect operating earnings to be between $0.95 and $1.10 per share. We are affirming our existing full year and long-term operating earnings and dividend growth guidance as well. No changes here from prior communications. For the first half of the year, weather normal operating EPS of $1.86 represents approximately half of our full year guidance midpoint. So we're tracking nicely in line with our expectations. We'll provide our formal fourth quarter earnings guidance as is typical on our next earnings call. But let me provide some commentary on the implied cadence of our earnings over the second half of the year. While Q3 guidance is roughly in line with weather normal results from a year ago, we will see a multitude of small year-over-year helps in Q4. such as normal course regulated rider growth the impact of the south carolina electric rate settlement strengthening sales modest margin help including from milston millstone continued expense management and tax timing that combined will help us to deliver solid second half results we continue to be very focused on extending our track record of achieving weather normal results at least equal to the midpoint of our guidance on both a quarterly and annual basis. Turning now to a couple of macro items. First, overall electric sales trends. In Virginia, weather normalized sales increased 1.2% year-over-year in the second quarter and 3.2% in South Carolina. In both states, increased usage from commercial and industrial segments overcame declines among residential users as the stay-at-home impact of COVID reigned. Some context on that. You'll recall that demand in DOM zone last year was, despite the pandemic, pretty resilient due to robust residential and data center demand. So it's not surprising to see South Carolina's relatively higher growth in Q2, given the larger toll COVID had on sales there last year. We're encouraged by the strong return of commercial and industrial volumes in South Carolina in the second quarter. And looking ahead, we expect electric sales growth in our Virginia and South Carolina service territories to continue to a run rate of 1% to 1.5% per year. So similar to what we were observing pre-pandemic. Next, let me discuss what we're seeing around input prices.