Q4 2019 Earnings Call
Ladies and gentlemen, good morning, and welcome to the Dominion Energy fourth quarter earnings Conference call.
This time each of your lines isn't to listen only mode. At the conclusion of today's presentation. We will open the floor for questions instructions will be given at that time for the procedure to follow up if you would like to ask a question I wouldn't want to turn the conference over to Mr., Stephen Rich Vice President Investor Relations. Please go ahead Sir.
Good morning welcome.
Earnings materials, including today's prepared remarks may contain forward looking statements in estimates that are subject to various risks and uncertainties. Please refer to where as you see filings, including our most recent annual reports on form 10-K in our quarterly reports on form 10-Q for discussion of factors that may cause results to differ from managements projections forecasts.
<unk> and expectations.
This morning, we will discuss some measures of our company's performance the different from those recognized by GAAP reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures, which we were able to calculate are contained in the earnings release kit.
I encourage you to visit our Investor Relations website through beauty earnings conference call materials, including the earnings release Kit Investor Relations team will be available after today's call to answer any questions.
Joining today's call, our Tom Farrell, Chairman, President and Chief Executive Officer, Jim Chapman Executive Vice President Chief Financial Officer, and Treasurer as well other members of the executive management team.
I'll now turn the call over to Jim.
Thank you David good morning.
[noise] you start by saying that we have a lot of grounded color on today's call, which reflects the exciting progress, we're making when our investment program.
Our financial targets and yes, chicharra efforts, including introduction of an enterprise wide net zero emissions initiative.
Over the last several years Dominion energy is transitioned into a larger more regulated and more predictable company and this is reflected in our ability to extend our track record of delivering financial performance.
[laughter] God.
I'm pleased to report on slide three that's a fourth quarter of 29, she was the 16th consecutive quarter of achieving operating earnings per share.
Adjusted for normal weather met or exceeded the midpoint of our guidance range.
Hopefully operator or quarterly operating earnings were $1.18 cents per share, which includes a benefit from better than normal weather of less than one set.
Even without adjusting for whether it was still 16th consecutive quarter results that aligns with our guidance range.
20, Nike full year operating earnings of $4. A 24 cents also exceeded the midpoint of our annual guidance range of $4, a 15 cents to $4.30 per share.
When adjusted for about two cents to help relative to normal weather. These operating earnings for the year met the midpoint of our annual guidance range and represents a 5.5% increase over 2018 weather normalized operating keep yes.
GAAP earnings for the quarter for the year, well $1.32 cents to $1.73 cents per share respectively.
Recall that full year reported results were materially impact during the first two quarters of yet.
Charges associated with the Scana merger.
Getting a substantial customer refunds as approved by the South Carolina Public Service Commission.
Adjusted for these merger and integration related costs are trailing three your aggregate gasoline or actually higher than our total operating earnings over the same period.
In summary of adjustments between operating in reported results are included in the appendix with a detailed reconciliation available on schedule two of the earnings release kit.
Turning now to slide four.
As usual our operating earnings guidance ranges, assuming normal weather variations from which could cause results to be toward the top well the bottom of these ranges.
We are initiating 2020 operating earnings guidance with a range of $4, a 25 to $4.60 per share.
The midpoint. This range represents a 5% increase over our weather normalized 2019 results, which aligns with the guidance we provided at our Investor Day last March.
So let drivers in 2020 as compared to 2019 include increased earnings from regulated investment growth across our electric and gas businesses.
Interest expense due to lower average debt balances and a lower rate environment.
The full year impact the millstone zero carbon contract.
And lower depreciation expense associated with an anticipated extension are useful life assumption well regulated nuclear plants in Virginia.
Negative drivers include increased minority interest expense associated with the equity recapitalization of Cook point.
Sure dilution slower new England capacity prices.
Double outage year at Millstone.
Note that the double outage here the double outage occurs every third year will therefore be a positive driver in 2021.
We are introducing first quarter consolidated operating earnings guidance of one dollar and five cents $1.25 cents per share.
We also were also affirming our post 2020 guidance of five plus percent annual operating EPS growth as well as our dividend per share growth rate.
2.5 per cent per annum subject as is customary to board approval.
We have successfully change the way we managed to report our businesses as shown on slide five.
Better reflect the larger and more regulated nature of our operation.
We expect that these realign segments will also make it easier to model and analyze our company.
On slide six we provide annual operating income guidance at the new segment level.
We take a moment highlight a few points.
Sure except for contracted generation, which all explained in the minute.
Each of our segments exhibit strong operating earnings growth trends, driven primarily by regulated investment and general cost discipline.
Contract situations earnings trend is negatively impacted by the sale of Manchester and Fairless at the end of 28 Gi.
And by the double outage year at Millstone and 2020.
As I mentioned previously double outage driver World will reverse the 2021.
Second we've adjusted the CAGR of the gas distribution segment to exclude the impact of the addition of P.S. didn't see 2019 to demonstrate the very strong core growth rate at the segment absent merger activity.
Third we are not showing a 2018 to 2020 CAGR for Dominion Energy stopped Carolina as the merger with Scana did not conclude until 2019.
Gross or 2020 is primarily driven by merger cost savings, which we expect to accrue to the benefit of our customers South Carolina as part of our upcoming electric rate case.
In other words this growth is good for both customers and shareholders.
Finally, these segment level operating income caters to of course don't reflect equity issuances the parent over that period shown.
Losing shares issued in exchange for Scana stock early last year, which actually produce a consolidated consolidated EPS growth rate. It was slightly below the segment level growth numbers shown here.
On slide seven we show expected 2020 operating EPS contribution by segment.
The speech underscores two of the key investment themes we've emphasized.
First it's a strategic progression of our company has resulted in having approximately 95% of our operating earnings derived from regulated and regulated like operations.
And second.
Around 70% of our operating earnings come from state regulated utility operations centered around five highly attractive states.
Putting Virginia.
It's Carolina, South Carolina, Ohio, and Utah.
Going forward, we plan to provide the segment level operating guidance annually.
We've also simplified or added to our existing disclosures, including with regards to weather impact [laughter] customer growth rate base estimates millstone hedging fixed income and other topics. We hope you find these changes which are included in our earnings release kit and in the appendix if today's presentation helpful.
Turning to slide eight.
To summarize our current capital structure.
We don't have distinct and aligned financing in steel related to our Dominion Energy Virginia.
We introduced South Carolina, and gas transmission and storage operating segments.
These financing vehicles are just store in addition to our parent level. Its do you actually see registrants and therefore will continue to filed 10-K's and 10-Q's.
For the gas distribution and the contracted generation segments, we show here that aggregate of existing financing balances across the individual opco entities, which primarily due to their smaller size are financed in the private markets.
Let me now address credit more generally.
I frequently remind our investors that we manage our balance sheet to target credit rating range and not just to one of the specific credit metrics.
Also that the cash coverage metrics, such as AFFO or CFO keep working capital to debt represents only a small waiting within the overall rating methodology employed.
Our credit rating agency.
Nonetheless, it's like nine we illustrate the meaningful improvement we have achieved in the cash coverage metric over the last four years, which we expect will continue to gradually improve over the next several years.
[noise] is included in the appendix additional detail on the calculation of this metric for 29 team.
Hello, ladies topic strong performance of our retirement plan assets combined with an earnings neutral fourth quarter contribution more than offset a year on year reduction in discount rates.
Resulting in increasing the overall funded balance of these plans by around seven percentage point.
This leads me to our 2020 Capex and financing plans.
Slide 10 provides our 2020 capital investment plan, which are broadly in line, so little higher in aggregate and forecast we provided at our Investor day do a handful of small positive revisions and timing deltas.
Slide 11 provides an overview of our 2020 external financing plan.
A couple of things to highlight to you.
First consistent with previous guidance, our common equity plans for the year include only around $300 million or drip program [laughter].
You may recall that we previously forecast 300 $500 million ATM issuance in 2020, but subsequently announced that we would use proceeds from the coke point equity recapitalization to reduce or eliminate that issuance.
Which is reflected here.
Next I'll point out that during 2020, we intend to issue up to $1.8 billion privately placed fixed income securities at Dominion East, Ohio.
Which as a result of the Dominion energy gas Holdings reorganization. We completed last November is currently levered only on the intercompany basis.
We currently expect this issuance mid year, and we use proceeds to retire current levels [laughter].
Finally, because of the norm. This annual financing plan does not reflect any opportunistic refinancing activities, which may arise during the year.
For example in 2019, we rebalanced the capital structure at Dominion Energy, South Carolina, we'd be a series of bond repurchases.
In the fourth quarter, we took advantage of an attractive financing environment to replace existing debt within equity credit preferred security the price at an all time industry low.
We will continue to monitor opportunities that similarly, strengthen our balance sheet and its earnings supportive manner.
[noise] turning out of the Atlantic Coast pipeline, which Tom will address in greater detail in a moment.
It's about a year ago, when we announced last material increase in our estimated total capital cost for ACB discussions have been ongoing between the project owners and the anchor shipper customers regarding equitable sure those increases within the contract parents.
Those negotiations have been productive and we expect to formalize that agreement in the coming weeks.
As part of those discussions the major project customers have confirmed their willingness to take on higher project rates given the strategic importance of ACB as an alternative pipeline option to the region.
As a reminder, fees are 20 year take or pay agreements with regulated utility customers and no commodity exposure.
[noise] this customer negotiation process progress allows us to provide guidance related to the project economic contribution after entering commercial service.
As shown on slide 12, we expect the 2022 [laughter] contribution to be between 20, and 25 cents per share which includes supply header assumes a full year of commercial in service.
This estimate also reflects the transition from after you do seek to contract based contract based cash earnings potential.
We expect this contribution to increase overtime as we expand the project to be a compression and laterals.
There's no change to our expected contribution this year of mid to high teens cents per share [noise].
[noise] related news, we're announcing today, we have agreed to acquire certain modestly sized gas transmission and storage assets from southern company subject to interest or regulatory approval.
The first is pivotal LNG, which liquefiers and delivers LNG as fuel for transportation in the southeast U.S., primarily from a new LNG production facility located in Jacksonville, Florida.
Tom will discuss I'll, just ask that together with good point support the expansion of our LNG strategy to include Maritime <unk> transportation.
Second I wasn't being acquired the southern company's 5% stake in the Atlantic Coast pipeline, which upon closing will bring the project ownership to 53% Dominion energy and 47% Duke energy.
Note that the governance arrangements for the project company remains such that it will continue to be recognized on an unconsolidated equity method face it faces dominion's financial statements.
Likewise, there's no change to southern company status as one of the anchor customers for the project through its Virginian natural gas local distribution company [noise].
The near term financial went back to back of the acquisition of these two assets positive so relatively small.
And the increased ATP ownership is reflected in the earnings contribution estimates I provided previously.
Total cash consideration for these acquisitions is around $175 million.
Turning to send to Cooper.
Our interest remains limited to a management proposal arrangement designed to cooperatively improved operational efficiency from our nearly co located utility footprint.
Consistent with our previous messaging on this topic well the potential financial impact if any such arrangement would not be a material near term financial driver for Dominion, We're glad to participate if selected by the department of administration.
South Carolina General Assembly.
Especially the collaborative approach, resulting cost savings that can be passed on to our and since you Cooper's customers in the state.
We will provide update as warranted as that process moves into the next phase.
Finally, let me offer just a brief comment on the recent FERC order lives that PJM capacity market structure, commonly referred to as low Brett.
We will continue to monitor that situation as it winds towards resolution.
The meantime, we do not see this that's a material financial risk for our company given to even balances declined to man [laughter] Energy Virginia.
Further if we determine it to be in the best interest of our customers. We have the option to make a fixed resource requirements for four or election.
This would require a notification to PJM and move it also notified the Virginia State Corporation Commission and the North Carolina Utilities Commission.
With that let me clear <unk>, let me conclude my remarks by reiterating the key investment themes I spoke to one or last quarterly call.
We are highly regulated we're highly regulated with about 95% of our companies operating where he is derived from regulated and regulated like operations.
70% of earnings are from utility operations centered around five attractive states.
Another 25% earnings are from FERC regulated transmission and storage operations, primarily serving utility customers under long term capacity contracts.
[noise] during 2019, we grew our regulated rate base by approximately 6% [noise].
We continue to expect five your rate base cagar of approximately 7% consistent with our expectations at Investor Day.
We are executing on our previously announced five year 26 billion dollar growth capital plan that will modernize strengthen and improve the sustainability the services, we offer to our customers.
And finally this customer focused approach also benefit our shareholders as demonstrated by our growing track record of meeting and affirming our financial guidance, including a 16th consecutive quarter of meeting or exceeding our guidance midpoint.
I'll now turn the call over to Tom.
Jim and good morning, first a reminder, that safety is our first core value on slide 14.
We have recast our historic safety results to incorporate our mergers with quest start Scana as you can see the overall trend reflects a continuous focus on employee health and welfare.
Pro forma for past mergers for a company wide Osha recordable incident rate decreased in 2019, Werent 11th time over the last 14 years [laughter].
Turning now to our consistent national leadership as it relates to environmental social and governance matters.
Over the course of the last year, we have intensified our efforts to reduce emissions of all types as shown on slide 15, we have already reduce carbon emissions by around 50% since 2005, which is nearly twice as much as the most recently reported industry average.
We are followed a similar path for methane emissions, which have fallen by around 25% since 2010.
A significant reduction driven by industry leading efforts.
[noise] further as shown on the next slide wherever it is coal fired generation its contribution to company wide electricity production by 80% from 52% in 2512% in 2019.
We estimate the coal fired generation today accounts for less than 8% of our total regulated investment base.
Turning to slide 17, I'm pleased to announce a new commitment to achieve net zero emissions by 2050.
The goal includes both carbon dioxide, yeah methane emissions.
Covers all of our businesses quoting electricity generation.
And gas infrastructure.
This route represents a significant expansion the company's previous greenhouse gas emission reduction goals.
Which included a commitment to cut methane emissions from our natural gas operations by 50% between 2010, 2030 and carbon emissions from our power generating facilities by 80% between 2005.
2050.
[noise], reducing emissions as fast as possible and achieving net zero emissions company wide requires immediate indirect action.
That's why the company continues to make meaningful steps to extend licenses affords zero carbon nuclear generation fleet.
<unk> customer energy efficiency programs invest heavily in wind and solar power.
Reduce the amount of coal fired generation on our system.
Enhance gas infrastructure leak detection systematically reprice legacy gas distribution lines and harvest agricultural methane emissions to be re purpose as renewable natural gas.
All these initiatives are included in our capital investments planned guidance through 2023.
Well extend well beyond that.
Over the long term achieving these goals will require supported legislative and regulatory policies and broader investments across the economy.
This includes support for the testing and deployment of technologies, such as large scale energy storage and carbon capture which though still early stage I have the potential to reduce greenhouse gas emissions significantly when deployed in conjunction with carbon free generation.
And we will never lose sight of our fundamental responsibility to customers revision of safe reliable and affordable energy.
We have issued a press release this morning that addresses the topic in additional detail and you should expect to hear more about our plans, including an upcoming climate in corporate social responsibility reports.
Certain approaches will undoubtedly up all over the coming decades to reflect the most up to date assumptions.
Our commitment to net zero emissions will not change.
I'm pleased to report that our work on reducing emissions and enhancing our yes. Jesus closures was recognized we thought leadership rating by CDP and influential nonprofit that monitors and measures environmental impact.
These ratings put dominion energy in the upper echelon of not just not just U.S. utility companies.
But all companies of all industries globally.
In addition, just capital an organization that promotes corporate responsibility in partnership with Forbes as rank Dominion among America's top 100 corporate citizens.
It is of course nice to received accolades like these are we're not declaring victory. In addition to minimizing our own operational environmental footprint in line with a carbon and methane goals I just described.
We're also embracing the notion of beyond Dominion energy as it relates to our ability to transform the emissions profiles of our customers and energy end users <unk>.
As shown on slide 19.
In the transfer tests in the transportation sector, which accounts for 29% of U.S. greenhouse gas emissions.
We are leading the way the development of the largest electric school bus program in the nation.
We are enhancing the resiliency and flexibility of our electric grid.
Unable to more rapid deployment of electric vehicle charging infrastructure has enabled in Virginia by the grid transformation security yet.
We're developing infrastructure that will make liquefied natural gas compressor renewable natural gas and potentially hydrogen fuels more available and more horrible for years and transportation applications.
Quoting maritime shipping vessels.
Agricultural sector, which accounts for 9% of U.S. greenhouse gas emissions.
Our partnering with the nations largest hawk and dairy producers to capture methane from farm operations.
These partnerships have already committed $700 million of shared investment to capture methane emissions and use our entry into sort of homes businesses and vehicle fleets.
These are large and ambitious multi decade plans that are consistent with the spirit of Dominion energy and it's nearly 20000 employees.
Many of these efforts are well underway, including our solar offshore wind.
Color re licensing and energy efficiency programs, others are important nascent stages, including our electric school bus orangeade and marine LNG programs.
Over the coming months and years, you should expect to hear more on these strategies as we work diligently to reduce the admissions profiles of our company.
And our customer.
I will address several days now.
Turning to slide 20.
Late last year, we announced plans to install over 2.6 Gigawatts of wind generation capacity, approximately 27 miles off the coast to Virginia.
A major milestone for project, we began developing.
In 2013.
Since that announcement, we have achieved several additional milestones, including selecting Siemens get Mesa as our preferred turban supplier.
And any entering into an agreement with three prominent trade unions support the onshore electric interconnection work.
We will begin Ocean survey work in April, which will help to support the submission of the construction and operations plan at the end up this year.
We expect to commence construction in 2024 upon timely completion of the ball permitting process was full in service by the end of 2026.
We will continue to work to refine the preliminary capital cost estimate of approximately $8 billion. The vast majority of which will occur in the 24 to 26 timeframe as major components are fabricated and installed.
Cost reductions as well as any tax benefits that we did she will accrue directly to the benefit of our customers.
[noise] Dominion energy, Virginia will be the sole equity owner of this regulated asset.
We will seek recovery <unk> right, Virginia State Corporation Commission.
While the existing GTS say provides a strong framework regulated cost recovery for offshore wind investments legislation, which was supported by the Governor's office in recent Legislative Committee meetings is working its way through the course, Virginia General Assembly session that it gets enacted we provide additional regulatory clarity.
A related 12 megawatt pilot project will begin turban installation in met and is expected to achieve commercial operation in late summer of this year.
The lessons learned on this project will be invaluable to the successful completion of ours full scale deployment.
The pilot is the first and only offshore wind project in federal waters.
We have completed the bomb permitting process, which included a cumulative impact analysis.
We expect to leverage the right of way and other work already performed one of the pilot project.
To facilitate routing export cable to shore and connecting to the onshore electric transmission system.
Also in Virginia, or weather normalized sales increased 1.4%.
Year over year, driven primarily by increased data center and residential demand.
We connected nearly 34000, new accounts about 10% more than last year, including 26 data centers were set another annual record.
Earlier this year PJM revised upwards their peak load assumptions for our service territory.
Like the among other things continued strong data center growth.
D.J.M. Stomp zones summer peak load growth is now expected to be 1.2% per year over the next 10 years.
1% annually over the next 15.
These rights are double the PJM system wide growth rates and rank ours as one of the fastest growing regions. Among the 13 states that comprise PJM.
Turning to slide 21.
Last month, the State Corporation Commission approved our U.S. for solar C.P.C.N. application the second such such approval in the last 12 months.
We expect subsequent writer approval in April.
Overall, we have now achieved 57%.
Of our commitment to Virginians to have 3000 megawatts of solar in development for an operation by the end or 2021.
Today, and inclusive of around $800 million of spending in 2019 alone.
Dominion Energy is enterprise wide total solar investment now stands at approximately $4 billion with an additional nearly $3 billion expected through 2023.
We anticipate continued solar investment for years to cost, which is why we expect to improve our current ranking of fourth among the largest utility owners of solar.
In the country.
Page two of our grid modernization program is before the commission.
Representing around $500 million of Capex. There are cost includes deployment of automated metering, a new customer information platform and investments in grid resiliency and telecommunications that are essential to delivering the products and services that our customers desire and wish provide for system more capable withstanding.
Climate related risks.
We're optimistic that we will receive approval next month.
Our other investment programs shown on slide 22, such as electric transmission.
Hillary licensing.
Distribution underground.
Pumped storage.
Renewable enabling quickstart generation.
And rural broadband.
Are tracking in line with our expectations.
Richard General Assembly has been a session for about five weeks and is scheduled to conclude in less than them up.
There are two proposals currently pending that I believe werent highlight one does relate offshore wind, which I previously addressed.
The other relates to our nation Lady initiative to replace diesel Electric School bus.
We have already selected a vendor and work with local school districts and our service territory to allocate and initial delivery of 50 school buses by yearend.
Pending legislation calls for replacing an additional 1500 buses by 2025.
Representing an estimated dominion capital investment of approximately $400 million, which would be eligible cost recovery subject to commission approval.
Ultimately, we wouldn't place all 13000 diesel school buses in our Virginia Service territory.
Not only will this effort dramatically improve the air quality for our students and their communities.
He will provide valuable real world experience with vehicle to grid battery technology.
As the first 1500 buses well idle represent up to 60 megawatts of effective battery storage.
[noise], we're monitoring other active pieces 11 legislation all of which we expect represent a reasonable and balanced approach to statewide energy policy priorities.
Turning now to South Carolina on Slide 23.
We're pleased with the work done by our team members to provide for smooth integration, while maintaining their historically excellent levels of reliability and customer service.
[noise] around midyear, we plan to file and electric rate case as stipulated in the merger agreement.
Most recent earned return was around 7.5%.
And our current authorized return is 10.25%.
The most significant driver of the under earnings is related to normal course safety customer growth and reliability utility investment over the last eight years, because it's not currently captured and raise.
We believe the case will conclude by end year end with an outcome.
That appropriately balances the interests of customers and shareholders.
Turning to gas distribution.
Recently, we have begun to hear of investor concerns that at least in some states.
Municipal level ordinances could limit overall demand growth for natural gas utility service.
Well that may be true elsewhere, we simply do not see any evidence of slowing customer or investment growth in the states in which we operate gas utilities, Utah.
Hello.
Let me.
Ohio.
West Virginia.
North Carolina, and South Carolina.
Compact it compounded annual customer growth across this segment.
It was 1.5%.
Over the last three years and aside 2.6%.
In Utah in North Carolina, with no signs of abating anytime soon.
For many of our customers the alternative for natural gas for home heating she's fuel or even what which have significantly higher carbon signatures.
In a certain communities within reach of our system, a lack of energy infrastructure is constraining growth and impacting everyday quality of life.
Further we are an industry leader in minimizing the emissions footprint of natural gas utility operations, including through promoting energy efficiency.
Innovative technologies.
Increasing access for our customers to renewable natural gas.
We also continue to invest hundreds of millions of dollars every year.
Modernising or distribution infrastructure, which improves safety reduces emissions and it's recoverable in the form of rider or trackers. They will continue over the course of at least the next decade.
Regulators continued to approve new investments like our on system, peaking storage facility in Utah that will improve system reliability for decades to calm.
Our gas distribution segment is focused on being part of the solution.
Sustainable future.
Finally, let me now discuss our gas transmission in storage pissed.
First orange shape.
We are the largest agricultural waste of energy investor in the United States with investments of $700 million across our partnerships.
Over the next 10 years these investments will grow as the off take market matures through these efforts, we capture otherwise fugitive methane from livestock and converted to pipeline quality natural gas for use in homes businesses in vehicles weights.
Every captured unit met thing is the equivalent of eliminating 25 units of carbon dioxide.
Demanding is uniquely positioned to leave the industry in this effort given the geography of our assets.
[noise] and Investor Day last year, we identified Marine Elegy is one of the many innovative ideas we were working to advance.
By way of background cruising cargo vessel, primarily consume diesel or fuel each of which is a major major contributor of greenhouse gas and other emissions.
The maritime industry is taking steps encouraged by recent global regulations to reduce its emissions footprint.
Which is expected to result in a material shipped to L. and G.
That's expected growth in LNG is a fuel source allows dominion an attractive opportunity.
To provide natural gas liquefaction.
<unk> distribution services throw a growing list of maritime customers.
As Jim mention where our acquiring an interest in existing Florida based operation that currently services marine vessels.
With an onshore liquefier.
Coupled with marine fuel delivery infrastructure.
Customer contract in this business or typically long term take her pay with no commodity exposure.
This initial acquisition will support a broader range LNG strategy that would include co point.
Where we are partnering with an existing export customer.
To redirect proportion of their liquefied natural gas inventory to provide allergy to constrain markets along the east coast.
And to provide fuel for marine vessels under zero commodity risk taker pay contracts.
Importantly.
Arrangement does not and will not.
Alter the existing 20 year tanker pay export contract revenues or terms.
But modest initially just market has the potential to support the significant decarbonization of the countries Marine industry. In addition to dramatically reducing pollution at our nation's portals.
Overall inclusive the acquisition Southern company, we expect to deploy approximately $200 million on his strategy over the next five years.
This isn't innovative element of our long term beyond the mean and energy effort to help our customers do adult.
Their emissions reduction targets.
Turning out to an update on activities related to the Atlantic Coast pipeline.
A slide 24.
Two weeks from yesterday, the Supreme Court will here for argument's related to the Appalachian Trail crossing aspects of our U.S. for service permit.
We remain optimistic that the court will issue in order reversing the four circuit in the May or June timeframe.
We continue to work with U.S. fish and wildlife served on a reissued biological opinion.
And our place that for re initiated formal consultation yesterday.
We apply the service for taking time to consider thoroughly feedback provided by the court during the prior judicial proceedings.
And we believe in updated biological opinion will be issued during the first half of this year.
[noise] upon receipt of the updated biological opinion, we intend to notify perk and anticipate thereafter, recommencement up construction across major portions of the pipeline.
We're also plays for the progress related projects nationwide 12 permit which was issued by and subsequently voluntary remand it to the U.S. Army Corps of Engineers last month, the core adopted re promulgated regulations that would allow for a C.P.C. reissuance the permit.
[noise] as it relates to the Buckingham County compressor station Air permit which was they Katie late last year I repeat my message from our last earnings call. We can deliver a very material amount of contracted volumes to customers on our existing schedule even at permit resolution delays in service state of the projects third compression.
Station.
We're working on a number of solutions, which we expect well resolved the issue during the second half of this year.
We believe that the options, we are evaluating will satisfy the courts concerns which centered on process.
Not the substance of the permit south.
Based on our expectation of the biological opinion being reissued during the first half of the year.
Confirming our project timeline that calls for construction completion by the end of next year.
Commissioning to be completed shortly thereafter.
Project costs of approximately $8 billion are in line with the high end of the judicial option range, we provided about a year ago.
This estimate incorporates the various potential approaches to permitting issues and construction plans and timing.
Including as relates to the Buckingham price of station, which are being contemplated in the customer discussion the gym described.
Also have noted we have agreed to acquire the 5% ownership in the project from Southern company further underscoring our confidence in the successful completion of the project.
Without I will summarize today's call as follows.
Our first values safety.
Cheap another year of record safety performance.
We introduced a net zero emissions by 2050 target that accounts for carbon in methane emissions across both electric and gas operations.
When she whether normalized operating earnings that exceeded the midpoint of our guidance range, where the 16th consecutive order.
We further improve their credit metrics and successfully completed the restructuring of our operating segments.
We introduce 2020 earnings guides that represents a 5% year over year increase consistent with previous messaging.
We confirmed the earnings per share gross expectations of five plus percent post 2020.
And we are making significant progress across our capital investment programs to the benefit of our customers.
We will now be happy to answer your question.
Thank you ladies and gentlemen at this time the floor is open for questions. If you would like to ask a question. Please press the star T. followed by the one key on your Touchtone phone now if at any time, you would like to remove yourself from the question Cube. Please press star to again to ask a question. Please press star one now when select.
Please limits your L. Cory to one question plus one a follow up.
Our first question comes from sharp Porretta with Guggenheim partners.
Take morning, guys.
Boring.
Thanks for the additional disclosures on the A.C.P. slides.
The F.B.D.C. rate versus returns once gas is flowing can you just elaborate if you're expecting any sort of step down there in your assumptions I guess what returns are you kind of assuming in your 20 to 25 cents per share contribution once the pipes and service you know post these contract negotiations and curious if <unk>.
<unk> built in any potential further cost increases.
[noise] jog morning, as Jim Thanks for [noise]. Thanks for that yeah. There there and then as as we we said in our and pretended mark quite substantial discussions with the anchor customers anchor shippers and those discussions don't really revolve around Arlene <unk> revolves around a race.
So what the guidance. We've given is is for the first full year of operation at that rate.
And that will of course, implying haraway, which don't seem to do the math on but it's reflective of the expected wait for the anchor shippers.
Now when you do calculate that our lead implied by that Matt.
You'll get to a number that is reflective of the first full year of operation only.
Leaning over time as.
That project expands through lonrho's or compression or whatever that's not reflected in that you won our lead but the now that we'll all flow from the input which is a.
Agreed upon a customer rate and cost.
Got in is there a point in time, Jim that you can sort of update us on on on laterals and compression or is there and then we're sort of your intentions are there at that point.
Oh, no well, we can say is that we are optimistic that there will be expansions overtime sign [laughter] family of phones <unk> right now focused on getting the based project in.
Okay Gotta guys. This was a terrific. Thanks so much.
Thanks Sharp like you.
Thank you weren't next question comes from Greg Gordon Evercore identify.
[noise] Thanks, good morning.
Learning <unk>.
Dot Com I may have you you covered a lot and you've made a ton of progress. So congratulations I don't recall, if you mentioned, whether you think there'll be any substantial legislative activity in Virginia. This year and if so what should we should be <unk>.
Thanks, Greg [noise].
We we mentioned two things in particular.
The the the legislation that would allow for up to 1500 diesel school buses to be converted to electric between now and 2025 and there are bills about the house and Senate, they're working their way through today is what we call crossover day in Virginia, where each of the houses has to finish work on its own bills.
So the house has to finish work on all house bills and then they everything goes over to the Senate and they can no longer work on house bills After Tonight.
The same a strip of the Senate so their bills. It on the electorate school bus in both house.
And their bills related to providing.
Even further regulatory clarity around or.
2.6 gigawatt offshore wind farm.
Other than that Greg there's been a.
Large amount of legislative activity. Some bills are no longer Bible, others are and we just are monitoring all those working on them.
Well they work their way through the legislative process, it's really it's premature to comment on them.
Great and what I'm, what would be what's your expected.
Reword this what what would be the the outcome that you did you would expect coming from ER legislation with regard to auction <unk>. If it does pass and what type of regulatory framework would that Intel.
Well I again, Greg I, just the bills are there pending and I think they speak for themselves they have language in them that.
Increase regulatory clarity.
Okay. Thank you all go take a read appreciate it take care.
Okay.
Thank you were next question comes from Michael Weinstein with Credit Suisse.
[noise] I got.
Worn Academy.
Corny what impact is the front <unk> have on Virginia, the offshore wind projects and what is your I guess your decision process and I go versus sign up our Tara.
Hey, Michael's Jim Let me, let me start there yeah, we had mentioned, but we we don't expect that that <unk> has proposed we'll have really any financial impact on on Dominion.
<unk>.
And as you know, our our capacity and load in Virginia, Dominion Energy, Virginia is pretty well balanced.
No near term impact.
And if we for saw that some change with Moberg P.G.M. rules would mean that we would not be potentially receiving capacity payments on new bill generation.
We could very easily and interests about customer.
What was your budgeting it just elect that F.R.F.R.R. option.
Which we think is pretty pretty straightforward, it's a already exist for another utility in Virginia regulatory framework. So we just don't see how far off the <unk> in general being an impact to our business one way or the other.
[noise], except for now man I guess later on you might make you might make an election does impact [noise].
And for the auction see often away.
Correct.
Oh Wow, that's a question.
X. rays, C.P.U. haul hiring considering the high into the rationale what are some of the factors and oppression and I'm just went to high end of the ranch Rockingham issue or something else.
Oh, Hi, this is Diane Leopold again, so we've run a lot of scenarios, incorporating where we are with permitting issues and based on the timing of that construction scenarios, certainly, including Buckingham compressor station options and all of those have been taken into account.
The customer negotiations, they're factoring into revised rate.
Really that's like total T.V. $8 billion, which is in line or just about the high end and that unconditional option range.
Thank you very much.
<unk>.
Thank you. This does conclude this morning's conference call you may disconnect your lines and enjoy your day. Thank you.
[noise].