Dominion Energy, Inc.

Welcome to the Dominion Energy first quarter earnings conference call. At this time, each of your line 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 conference call over to David McFarland, Director, Investor Relations.

Good morning, and thank you 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 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, Jim Chapman, Executive Vice President, Chief Financial Officer, and Diane Leopold, Executive Vice President and Chief Operating Officer. I will now turn the call over to Jim.

Thank you, David, and good morning. Before I begin, I'll remind everyone of the extensive disclosure package and growth capital roll forward we shared on last quarter's call. We're very focused on overall execution of those plans, including extending our track record of delivering results in line with our financial guidance, as we did again this quarter. I'll begin with a recap of our compelling investment proposition, and again, highlight our focus on the consistent execution of our strategy. We expect to grow our earnings per share by 6.5% per year through at least 2026, based largely on our continued execution of our $37 billion five-year growth capital program, as shown on slide three. As a reminder, over 85% of that capital investment is emissions reduction enabling and over 75% is rider recovery eligible. The resulting approximately 10% total shareholder return proposition is combined with an attractive pure place state regulated utility profile and an industry leading ESG profile. This utility profile is centered around five premier states as shown on slide four. All of these states share the philosophy that a common sense approach to energy policy and regulation puts a priority on safety, reliability, affordability, and sustainability, as Bob will touch on in his remarks in just a moment. Turning to slide five, we see up to $73 billion of green investment opportunity across our entire footprint through 2035, nearly all of which will qualify for regulated rider recovery. We believe we offer the largest, broadest in scope, longest in duration, and most visible regulated decarbonization opportunity among U.S. utilities, which, as you will hear in today's prepared remarks, is continuing to steadily transform into reality. The successful execution of this plan is already benefiting our customers, communities, the environment, and our investors. Before handing it to Bob for his business updates, I'll discuss our first quarter results and related financial topics. Our first quarter 2022 operating earnings, as shown on slide six, were $1.18 per share, which included one penny of help from better than normal weather in our utility service territories. Weather normalized results were at the midpoint of our quarterly guidance range, extending to 25 consecutive quarters our track record of delivering on our financial commitments to our investors. Positive factors, as compared to last year, include growth from regulated investment across electric and gas utility programs, interest expense, and modest margin help. Other factors, as compared to the prior year, include capacity expense and share dilution. First quarter gap earnings were 83 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, and other adjustments. A summary of all adjustments between operating and reported results is, as usual, included in Schedule 2 of the earnings release kit. Turning now to guidance on slide 7. As usual, we are providing a quarterly guidance range, which is designed primarily to account for variations from normal weather. For the second quarter of 2022, we expect operating earnings to be between 70 and 80 cents per share. Positive factors as compared to last year are expected to be normal course regulated rider growth, sales growth, and a return to normal weather. Other factors as compared to last year are expected to be a millstone planned outage, and some tax timing. We are affirming our existing full year and long-term operating earnings and dividend guidance as well. No changes here from prior guidance. Turning to slide eight, let me take a minute to recap our O&M management and highlight our strong performance relative to our guidance of keeping O&M flat, normalized for riders. Since our 2019 Investor Day, when we spent some time describing our flat normalized O&M target, we've created material value for our customers and shareholders by removing about $250 million in costs, a reduction of over 8% during that four-year period, something we view as quite an accomplishment. Looking forward, we're focused on keeping normalized O&M flat by driving down costs through improved processes, innovative use of technology, and other best practices for cost-cutting initiatives. It's a dynamic process. We very intentionally go through each of our segments, each of our assets, each of our locations to find opportunities to lean into technology, to improve business processes, and to improve in areas like smart buying across our platform. Finally, consistent with our current guidance, we expect to achieve flat normalized O&M through 2026. No changes here also from prior communications. Next, I'll touch on inflation, one of the more prevalent themes for this earnings season, it seems. While we don't have a crystal ball on where inflation rates are heading, how high and for how long, let me share some color on the way we think about the impact of inflation on our business. As I mentioned, a substantial portion of our existing rate base and over 75% of our growth capital is rider eligible, which allows for timely annual true-ups, including recovery of any changes to costs and interest rates, without the need to wait for less frequent base rate proceedings. So, how about inflationary impacts on our largest single rider project, regulated offshore wind? As discussed on our fourth quarter call, that project has been largely de-risked from inflationary impacts at this point. Our five major fixed cost agreements collectively represent about $7 billion of the total capital budget. Within those contracts, only about $800 million remain subject to steel and metals commodity indexing, and this component of the budget already reflects commodity cost increases observed in 2021 leading up to our filing date. So what about interest rates? Inflation is, of course, generally accompanied by a rise in rates. And we reflect market expectations, so increases, in our planning process and in guidance. We, of course, don't just model flat rates. About 80% of our balance sheet is fixed rate and is long in duration, over 13 years in average tenor. Looking at the future issuances of long-term debt, We manage that interest rate exposure through a variety of hedging and treasury activities, including through what is currently about $10 billion notional of pre-issuance interest rate hedges, which will help us keep future costs low. So what does that mean? That portfolio allows us to lock in treasury rates for issuances between now and 2026 at rates as low as almost 1%. This year, we've already issued $1 billion of long-term debt at Dominion Energy of Virginia at a weighted average cost of 2.6%, consistent with our 2022 financing plan guidance. As it relates to additional fixed income issuances remaining for the year, we will continue to monitor market conditions and look for opportunities to further de-risk our plan and create shareholder value. Finally, a reminder that economic growth, inflation, and higher interest rates are all part of the mix, when it comes to determining authorized ROEs across our utility businesses in our periodic rate proceedings. So in summary, the current inflation environment is, of course, dynamic, and we are monitoring it closely. At present, however, due in part to the factors I've just described, we're not currently forecasting a material earnings impact associated with inflation. I would also note the impact that the current inflation environment can have on our customer bill We, of course, prioritize customer affordability and implement various mitigation strategies, as Bob will discuss in a moment. And with that, I'll turn the call over to Bob.