Dominion Energy, Inc.

Welcome to the Dominion Energy Third Quarter 2021 Earnings Conference Call. At this time, each of your lines 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 turn the call over to David McFarland, Director, Investor Relations.

Good morning, everyone, and thank you for joining the 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 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 of

jim chapman executive vice president chief financial officer and treasurer and other members of the executive management team i will now turn the call over to jim thank you david good morning everybody let me begin with a recap of our compelling investment proposition and highlight our focus on the consistent execution of our strategy we expect to grow our earnings per share by six and a half percent per year through at least 2025. growth that is driven by our $32 billion five-year growth capital plan. As outlined in our fourth quarter call in February, over 80% of that capital investment is emissions reduction enabling, and over 70% is rider recovery eligible. We offer a dividend yield of 3.5% 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. Our industry leading ESG positioning includes the largest regulated decarbonization investment opportunity in the nation. which, as you will hear in today's prepared remarks, is steadily transforming from opportunity to reality. We have quite a few exciting developments related to that transformation to discuss this morning, including the pending settlement of our triennial review and our offshore wind application in Virginia, in addition to other positive updates across our operating segments. Before handing it to Bob for those and other business updates, I'll discuss our third quarter results and related financial topics. First, our strong quarterly earnings. Our third quarter 2021 operating earnings, as shown on slide four, were $1.11 per share, which for this quarter represented normal weather in our utility service territories. These strong results were slightly above the top end of our quarterly guidance range. Positive factors as compared to last year include growth from regulated investment across electric and gas utility programs, higher electric sales due to increased usage from commercial and industrial segments, and the impact of the share repurchase completed late last year. Negative factors as compared to last year include higher depreciation expense and a return to normal weather. This is our 23rd consecutive quarter, so almost six years now. of delivering weather-normal quarterly results that meet or exceed the midpoint of our quarterly guidance ranges. Note that our third quarter and year-to-date gap in operating earnings together with comparative periods are adjusted to account for discontinued operations, including those associated with the sale of our gas, transmission, and storage assets. Third quarter gap earnings were 79 cents per share and reflect the non-cash mark-to-market impact of economic hedging activities unrealized changes in the value of our nuclear decommissioning trust fund the contribution from questar pipelines which we which will continue to be accounted for as discontinued operations until divested a year in and other adjustments a summary of all adjustments between operating and reporting results as usual included in schedule two of the earnings release kits turning out a guidance on slide five As usual, we're providing a quarterly guidance range, which is designed primarily to account for variations from normal weather. For the fourth quarter of 2021, we expect operating earnings to be between 85 cents and 95 cents per share. Positive drivers, as compared to last year, are expected to be normal course regulated rider growth, continued modest strengthening of sales from commercial and industrial segments, and slight margin help within contracted assets. Negative drivers as compared to last year are expected to be a slight catch up in COVID deferred O&M and tax timing. Given where we are in the year, we're narrowing our 2021 full year guidance range to $3.80 to $3.90 per share, preserving the same midpoint as our original guidance. Assuming normal weather for the remainder of the year, we expect operating earnings per share for 2021 to be in the upper half of this narrowed guidance range. We're also affirming long-term operating earnings and dividend growth guidance, no changes here from prior communications. We will, as usual, provide 2022 guidance on our fourth quarter call early in the new year, but we continue to expect the midpoint of our 2022 guidance range to be 6.5% higher than the midpoint of our 21 guidance range. We continue to be very focused on extending our track record of achieving weather normal results at or above the midpoint of our guidance on both a quarterly and annual basis. On slide six, we've summarized several important financial milestones achieved since our last call. First, We issued $1 billion in 10-year green bonds at our parent company at a cost of 2.25%. This follows right on the heels of the $6.9 billion in sustainability-linked credit facilities, which we announced on last quarter's call. So a lot of activity at Dominion on these types of innovative financings that support our ESG objectives. Thanks to all who participated in this important offering. And as a reminder, We'll have additional fixed income issuance at Dominion Energy Virginia, Dominion Energy South Carolina, and at our parent company during the remainder of this year. In October, we announced the sale of Questar pipelines to Southwest Gas Holdings. This all-cash transaction was valued at nearly $2 billion, including the assumption of about $430 million of existing debt. Proceeds from the sale will be used primarily to reduce parent-level debt. We very much expect to close by the end of this year, subject only to HSR approval. Obviously, there's quite a bit of press attention currently on some of the dynamics unfolding around various shareholders of Southwest Gas, but I would highlight that there is no early termination mechanism in our purchase and sale agreement. As a reminder, this transaction does not impact Dominion Energy's existing financial guidance this quarter or otherwise. Questar pipelines have been and will continue to be accounted for as discontinued operations excluded from our company's calculation of operating earnings. Next, as a result of our continuous focus on both our capital allocation process and on our corporate credit profile, We've elected to monetize additional value from our investment in Cove Point by financing our stake with an attractive non-recourse term loan. We've received binding commitments on a $2.5 billion non-recourse term loan, which is at the entity that holds our 50% non-controlling equity method investment in the Cove Point facility. Proceeds from this EPS neutral financing are being used to reduce parent level debt. Over the past few years, we've taken intentional and significant steps to effectuate fundamental change to lower our business risks, to maximize the recycling of capital into our attractive regulated utility businesses, and to improve our credit metrics. And this financing is another step along that same path. We expect this non-recourse recapitalization to be completed by year end. Bigger picture, this financing provides a good opportunity to take a quick look back on the capital flows from that asset, CodePoint. As you will recall, we invested approximately $4 billion in the construction of the CodePoint liquefaction project. And through the combination of prior stake sales and the project financing we're announcing today, we will have monetized well over $6 billion of capital to date, even before accounting for any distribution. Turning now to electric sales trends. Weather normalized sales increased 2.4% year-over-year in the third quarter in Virginia and 1% in South Carolina. In both states, consistent with the trends seen last quarter, we've observed increasing usage from commercial and industrial segments, overcoming declines among residential users as the stay-at-home impact of COVID waned. Looking ahead, we continue to expect electric sales growth in our Virginia and South Carolina service territories to continue at a run rate of 1% to 1.5% per year, similar to what we were observing pre-pandemic, so no changes there from prior communication. Next, let me discuss what we're seeing around rising natural gas prices. We're hearing a lot about this topic across the industry this quarter. We prioritize our customer rate affordability and implement price mitigation strategies across our businesses in a variety of ways to account for the impact of changes in gas prices. So across our electric and gas utilities, We have very clear-cut pass-through mechanisms for fuel costs. So this is less of an issue as to how the recent price increases may impact earnings if they're sustained, but rather how they'll impact our customers' bills, something we obviously care about and we watch very closely. So let me share a little bit of color on what measures we have in place to mitigate those kinds of impacts. In our gas distribution service territories, we expect the bill impact of rising fuel prices to be less pronounced than what some recent headlines suggest due to a few things. The proximity of gas resources, our widespread use of storage to offset peak day requirements, and the effectiveness of our gas supply hedging strategies. In our western states, our unique state regulated cost of service gas production also helps customers avoid price spikes in fact we estimate that our customers save over a hundred million dollars over just a seven day period during the winter storms experienced last february thanks to this regulatory structure in our electric service territories we also have long-standing risk mitigation strategies including hedging and storage with most fuel costs trued up to customer bills on on a delayed basis a structure which helps to smooth out the bill impact of commodity swings in summary we certainly don't want to see any increased costs for any of our electric and gas customers so we'll continue to employ these mitigation measures to keep any increases as muted as possible but for the avoidance of doubt We currently don't see any impact to our decarbonization-focused growth capital investment plan. In wrapping up, we'll plan to use our fourth quarter call early next year to provide a comprehensive update and roll forward of capital investment, financial outlook, and related disclosures akin to the format of our last fourth quarter earnings call, which we believe was well received. Investors should expect further evidence in support of several fundamental Dominion Energy themes, compelling earnings and dividend growth, combined with the largest regulated decarbonization opportunity in the industry, and an unyielding focus on extending our track record of successful project, regulatory, and financial performance. With that, I'll turn the call over to Bob.