01—Abstract
Summary
Summary of the 8-K filed February 22, 2024. Cited figures are marked; the original filing is the authoritative source.
Dominion Energy reported preliminary unaudited fourth-quarter and full-year 2023 results on February 22, 2024.
GAAP net income was $273 milliona ($0.30 per share) for Q4 2023 versus $344 million ($0.39) a year earlier, and $1.994 billion ($2.29 per share) for full-year 2023 versus $1.321 billion ($1.49) in 2022. Operating earnings (non-GAAP), the company's primary performance measure, were $267 million ($0.29 per share) for Q4 2023 versus $652 million ($0.76) in Q4 2022, and $1.743 billion ($1.99 per share) for full-year 2023 versus $2.634 billion ($3.06). The steep year-over-year decline in operating earnings reflects lower contributions from Virginia and South Carolina utilities (weather, Virginia legislation impacts), Millstone nuclear outages, and higher interest expense, while the GAAP increase was driven by large non-operating items, chiefly discontinued operations gains from the Cove Point sale and gas distribution divestiture, plus nuclear decommissioning trust and hedging gains.
The headline strategic item is an agreement to sell a 50%b noncontrolling equity interest in the 2.6 GW Coastal Virginia Offshore Wind (CVOW) commercial project to Stonepeak, an infrastructure investment firm. Dominion will retain full operational control of construction and operations, and the transaction is expected to close by end-2024 subject to customary approvals. The company characterized the deal as highly credit positive with robust cost and risk-sharing, and affirmed that CVOW remains on time and on budget for completion in late 2026.
The company also scheduled a March 1, 2024 investor meeting to conclude its strategic business review and provide multi-year financial and capital investment guidance. Investors should view the business review outcome as the key near-term catalyst, since it will reset the strategic and financial outlook.
02—Key points
Key Highlights
- Q4 2023 operating earnings fell to $267 million ($0.29/share) from $652 million ($0.76/share) a year earlier, a decline of roughly 62%.
- Full-year 2023 operating earnings were $1.743 billion ($1.99/share), down from $2.634 billion ($3.06/share) in 2022, with Dominion Energy Virginia contributing $0.30/share less year over year.
- Full-year 2023 GAAP EPS of $2.29 was well above operating EPS of $1.99, driven by $1.7 billion of pre-tax items excluded from operating earnings, including about $1.1 billion from discontinued operations (Cove Point and gas distribution sale) and $1.2 billion of market gains from nuclear trusts and hedging.
- Agreement to sell a 50% noncontrolling interest in CVOW to Stonepeak, with Dominion retaining full operational control; closing expected by end-2024 subject to approvals.
- CVOW reaffirmed as on time and on budget, with completion targeted for late 2026 and a planned 176-turbine, 2.6 GW output sufficient for up to 660,000 homes.
- Corporate and Other segment reported a $417 million operating loss for 2023 (vs. $36 million income in 2022), largely reflecting higher interest expense of about $232 million and equity method investment losses.
- Investor business review meeting scheduled for March 1, 2024, where management will provide multi-year financial and capital investment guidance.
03—Questions
Frequently Asked Questions
Why did operating earnings fall so sharply while GAAP earnings were roughly stable?
Operating earnings exclude a large set of non-recurring and mark-to-market items. In 2023, GAAP results were lifted by about $1.7 billion of pre-tax gains, mainly from discontinued operations (the Cove Point sale and gas distribution divestiture) and nuclear decommissioning trust and hedging gains. Underlying operating performance weakened due to weather, Virginia legislation impacts, planned and unplanned Millstone outages, and higher interest expense.
What does the Stonepeak CVOW transaction mean for Dominion?
Dominion will sell a 50% noncontrolling equity stake in the 2.6 GW CVOW project to Stonepeak while keeping operational control. The company describes the deal as highly credit positive with shared cost and risk, which may reduce Dominion's capital exposure to the project. Closing is expected by the end of 2024, subject to customary regulatory and other approvals. The filing does not disclose the purchase price or valuation.
Is the CVOW offshore wind project still on schedule and budget?
Yes. Dominion affirmed that CVOW is on time and on budget, consistent with prior communications, and released a video with key suppliers including Siemens Gamesa, EEW, Bladt, DEME, Prysmian, and Seatrium. Full construction completion is targeted for late 2026. Investors should note that the company's own risk disclosures flag timeline and cost risks, including foreign-currency exposure on fixed-price European contracts.
What should investors expect from the March 1, 2024 investor meeting?
Management will conclude its strategic business review and present its overall strategy, along with comprehensive multi-year financial and capital investment guidance. This is expected to reset the company's strategic and financial outlook, making it a key event for valuation and for setting expectations for future operating earnings.
Why does the 2023 GAAP vs. operating earnings gap matter for investors?
Dominion states that operating earnings are its primary performance measure and better reflect fundamental earnings power, and they are also used for dividend targets and incentive compensation. Investors should focus on operating EPS of $1.99 for 2023 rather than GAAP EPS of $2.29, since the GAAP figure includes significant one-time and market-driven items that are unlikely to recur.
04—Continue