10-QPeriod: Q3 FY2019

DOMINION ENERGY, INC Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 1, 2019For Securities:D

Summary

Dominion Energy, Inc. (D) reported a significant increase in operating revenue for the third quarter of 2019 compared to the same period in 2018, driven by the SCANA Combination and favorable weather conditions. However, net income attributable to Dominion Energy declined year-over-year for the nine-month period ending September 30, 2019. This decline was largely attributed to substantial charges related to the SCANA acquisition, including refunds for the NND Project, voluntary retirement programs, early retirement of generation facilities, and litigation costs. While the SCANA Combination expanded the company's regulated asset base and revenue, integration costs and specific charges significantly impacted profitability in the year-to-date period. The company continues to manage its energy portfolios through derivative instruments and maintain a strong liquidity position supported by its credit facility. Capital expenditures are ongoing for growth projects. Investors should monitor the impact of SCANA integration costs, ongoing regulatory matters, and the Atlantic Coast Pipeline project developments.

Financial Highlights

50 data points
Beta

Revenue

$3.78B

Net Income

$975.00M

25.8% Net Margin

EPS (Diluted)

$1.17

Total Assets

$102.36B

Cash & Equivalents

$378.00M

Free Cash Flow

$101.00M

Financial Statements
Beta
Revenue$3.78B
Operating Expenses$2.68B
Operating Income$1.10B
Net Income$975.00M
EPS (Basic)$1.19
EPS (Diluted)$1.17
Shares Outstanding (Basic)813.00M
Shares Outstanding (Diluted)813.00M

Key Highlights

  • 1Operating revenue increased by approximately 23% year-over-year for the third quarter and 17% for the nine months ended September 30, 2019, largely due to the SCANA Combination.
  • 2Net income attributable to Dominion Energy for the nine months ended September 30, 2019, decreased significantly to $349 million from $1,806 million in the prior year, heavily impacted by acquisition-related charges.
  • 3Diluted EPS decreased from $2.77 for the nine months ended September 30, 2018, to $0.39 for the same period in 2019.
  • 4The SCANA Combination, completed in January 2019, contributed significantly to revenue but also led to substantial charges, including $2.0 billion in customer refunds related to the NND Project and significant integration costs.
  • 5Virginia Power's net income increased by 16% for the third quarter but decreased by 31% year-to-date, reflecting similar impacts from charges and operational factors.
  • 6Dominion Energy Gas reported a decrease in net income for both the third quarter and year-to-date periods, mainly due to the absence of gains from shale development rights.
  • 7The company ended the period with $3.5 billion in unused capacity under its credit facility, indicating a strong liquidity position.

Frequently Asked Questions

The SCANA Combination, completed in January 2019, significantly increased Dominion Energy's operating revenue and expanded its regulated asset base. However, it also resulted in substantial charges, including customer refunds for the NND Project, integration costs, litigation expenses, and other charges related to acquired assets, which significantly reduced net income and diluted EPS for the nine-month period ending September 30, 2019.

The Atlantic Coast Pipeline project experienced delays due to judicial and regulatory actions, impacting its cost and schedule. Project cost estimates increased to $7.3 billion - $7.8 billion. While Dominion Energy recorded contributions to the pipeline, the ultimate impact on cash flows, financial position, and results of operations remains subject to uncertainty, including potential impairment charges. The Supreme Court's decision on the Appalachian Trail crossing is expected by June 2020.

Significant charges impacting net income for the nine months ended September 30, 2019, include approximately $1.0 billion for NND Project refunds to DESC electric customers, a $423 million charge related to a voluntary retirement program, a $369 million charge for early retirement of certain Virginia Power electric generation facilities, and substantial charges related to litigation and other asset impairments acquired in the SCANA Combination. These items, among others, led to a significant year-over-year decrease in net income and diluted EPS.