Q4 2021 Dominion Energy Inc Earnings Call
Welcome to the Dominion energy fourth quarter and full year 2021 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 good.
For the procedure to follow if you would like to ask a question.
I would now like to turn the 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 Treasurer and other members of the executive management team I will now turn the call over to Bob.
Thank you David and good morning, everyone I'll start by outlining Dominion Energy's compelling shareholder return proposition, we expect to grow our earnings per share by six 5% per year through at least 2026 supported by our updated $37 billion five year growth capital program, resulting in an approximately 10% total return.
That's all underpinned by dominion's industry, leading ESG profile, which includes the largest regulated de carbonization of investment opportunity in the country, which as you will hear in today's prepared remarks is steadily transforming from opportunity to reality.
Our strategy is anchored on a pure play state regulated utility operating profile that centers around five premier states as shown on slide four all share the philosophy that a common sense approach to energy policy and regulation put some priority on safety reliability affordability and sustainability.
Next I want to highlight what a successful year 2021 was and the continuing execution of our strategy. For example, we continue to provide safe reliable service to our customers ensuring that safety remains our top priority when it comes to our employees our customers and our communities we reported our 24th consecutive quarterly.
Financial result that normalized for weather meets or exceeds the midpoint of our guidance range a reflection of our focus on continuing to provide consistent and predictable financial results. We successfully concluded substantial rate cases in Virginia, South Carolina, and North Carolina, and each case, demonstrating our ability to deliver.
Structured regulatory results for both our customers and our shareholders in these fast growing premier and business friendly states and we significantly advanced our clean energy growth plans on a number of fronts. For instance, we received our notice of intent from Boeing for our regulated offshore wind project in July as planned and filed.
Our rider application with the Virginia State Corporation Commission on schedule in November and we proposed new solar and energy storage projects in our second annual clean energy filing in Virginia, the largest such group ever proposed looking ahead, we've rolled forward our five year growth capital plan to capture the years 2022 through 2020.
We now expect to invest $37 billion on behalf of our customers. The investment programs are highlighted on slide five with over 85% focus on de carbonization.
As meaningful as these near term plans are consider on slide six how they compare to the long term scope and duration of our overall de carbonization opportunity.
Our initiatives extend well beyond our five year plan, we now project $73 billion of Green investment opportunity through 2035, nearly all of which will qualify for regulated cost of service recovery. This is as far as we can tell the largest regulated de carbonization investment opportunity in the industry.
With that I'll turn it over to Jim to walk through our financial results and guidance before I provide further business updates on the execution of our plan.
Thank you Bob and good morning.
Our fourth quarter 2021 operating earnings as shown on slide seven we're 90 per share which included a <unk> heard from worst than normal weather in our utility service territory territories for the quarter.
Weather normalized results were again above the midpoint 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 higher margins at contracted assets.
Other factors as compared to the prior year include a slight catch up in Covid deferred O&M and weather.
As Bob mentioned this is our 24th consecutive quarter. So six years now.
Of delivering whether normal quarterly results that meet or exceed the midpoint of our guidance ranges.
We believe this historic consistency across our results is worth highlighting.
And has a track record we are proud of and one which we are absolutely focused on extending.
Full year 2021 operating earnings per share were $3 86.
Above the midpoint of our guidance range, even in the face of a five cent hurt from weather for the year.
Has the details on schedule two of our earnings release Kit 2021, GAAP earnings of $3 98 per share were <unk> 12 cents higher than operating earnings for the year.
Turning now to guidance on slide nine as usual, we're providing an annual guidance range, which <unk>, which is designed primarily to account for variations from normal weather.
We're initiating 2022 operating EPS guidance of $3 95 to $4 25 per share.
The midpoint of this range is in line with prior annual EPS growth guidance of six 5% in 2022 when measured midpoint to midpoint.
As I think its been expected as part of our roll forward to a new five year forecast period, we are once again, extending our long term growth rate by one more year.
We now expect operating EPS to grow at six 5% per year through at least 2026.
Finally, we expect first quarter 2022 operating earnings per share to be between $1 10, and $1 25.
Positive drivers for the quarter as compared to last year are expected to be normal course regulated rider growth continued modest strengthening of sales and return to normal weather.
Other drivers as compared to last year are expected to be O&M and tax timing.
We expect our 2022 full year dividend to be $2 67.
Reflecting our target payout ratio of approximately 65%.
We're also extending the long term dividend per share growth rate of 6% per year through 2026.
Yes.
Slide 10 provides a breakdown of five year growth capital plan.
Bob introduced.
For more detail on all of this I would point to the very comprehensive comprehensive appendix materials.
But just a couple of items I'll note here, we continue to forecast a total five year rate base CAGR of 9% broken out here by segment a major driver.
And over 75% of this planned growth Capex is eligible for rider recovery.
Of course capital invested in our underwriters allows for timely recovery of prudently incurred investments and costs.
Turning to slide 11, we've updated our financing plan.
Which reflects a combination of internally generated cash flow and debt issuances to fund the majority of our growth and maintenance Capex.
Our plan assumes we issue programmatic equity.
Just one to one 5% of our current market cap annually through our existing drip and ATM equity programs.
In line with prior guidance.
No change to our 2022 equity issuance plans and no block are marketed equity as contemplated.
We view this level of steady equity issuance under existing programs is prudent.
EPS accretive.
And in the context of our sizeable growth capital spending program appropriate to keep our consolidated credit metrics within the guidelines for our strong credit ratings category.
To that point.
As shown on slide 12.
Our consolidated credit metrics have remained steady.
And our pension plans has increased their funded status.
We're very proud of these results.
We continue to target high Triple B range credit ratings for our parent company and single a range ratings for our regulated operating companies.
Our longstanding focus on achieving and maintaining these ratings is important for our ability to continue to secure low cost capital for our customers.
As is the norm.
Our financing plan reflects our ongoing efforts to efficiently redeploy capital towards a robust regulated growth programs.
As I've mentioned in the past as part of our capital allocation process. We undertake constant analysis to find the most efficient sources of capital to fund our attractive utility growth programs in our key states.
All while maintaining our operating EPS growth and credit profiles.
Given that focus as announced this morning, we've agreed to sell our West Virginia natural gas utility hope gas to you Luca for gross proceeds of approximately $690 million.
The transaction is expected to close late this year subject to customary closing conditions, including clearance under HSR and approval from the West Virginia Public Service Commission.
Proceeds will be used to reduce parent level debt.
The transaction value achieved through a competitive sale process.
<unk> represents approximately 26 times 2021, net income and two times rate base.
As a reminder, hope gas operates only in West Virginia and serves about 110000 customers.
Bob will address this transaction a bit more in a moment.
Turning now to electric sales trends.
Fourth quarter weather normalized sales increased one 4% year over year in Virginia.
And two 3% in South Carolina.
In both states consistent with the trends seen last quarter, we've observed increased usage from commercial and industrial segments overcoming declines among residential users as the stay at home impact of Covid wanes.
Full year 2021 weather normalized sales increased one 4% year over year in Virginia, and one 6% year over year and South Carolina.
Looking ahead, we expect electric sales growth in our Virginia, and South Carolina service territories to continue at a run rate of one to one 5% per year.
No changes from our prior communications.
Next let me discuss what we're seeing around input prices.
As discussed on prior calls, we're continuing to monitor raw material costs.
And it seems to be the case across a number of industries right now we're observing higher prices.
Although we've seen a moderation in the upward pressure over the last few quarters.
As it relates to our regulated offshore wind project, we remain confident in our ability to deliver the project in line with our budget is.
As outlined in our filing to the FCC in November also no changes here from prior communications.
As was disclosed at that time in November we've entered into five major fixed cost agreements, which collectively represent around $7 billion of the total capital budget.
Within those contracts.
Only about $800 million.
Remains subject to commodity indexing most of its steel.
And this component of the budget already reflects commodity cost increases we all observed in 2021, leading up to our filing date in November .
And our capital budget of course includes contingency.
On the solar side, we're seeing what other people what others seem to be seeing.
Supply is tight.
Prices for certain components are up.
But our 2021 projects were completed with no material impacts to cost or schedule and our 22 projects remain on track.
Beyond 'twenty two we've been generally successful in contracting et cetera, but it's still early so again, we're watching but no material financial impacts of share at this time.
So to summarize we.
We reported fourth quarter and full year 2021, operating EPS, which was above the midpoint of our guidance ranges.
<unk>, our track record to six years of meeting or exceeding the quarterly mid point on a weather normal basis.
We initiated 2022 full year operating EPS guidance that represents a six 5% annual increase midpoint to midpoint.
We affirmed the same 65% operating EPS growth guidance.
<unk> through 2026.
We introduced a $37 billion high quality decarbonization focused five year growth Capex plan that drives an approximately 9% rate base growth.
We continue to expect the vast majority of our spending across our segments to be in rider form.
And finally, our balance sheet and credit profile remained in very good health and.
And with that I'll turn it back over to you Bob Thanks, Jim.
Starting with safety Dominion Energy finished 2021 with its second best performance ever. Additionally, the company was the top performer in the 2021 southeastern Electric exchange ranking we take pride in our relentless focus on safety and it's the first of our company's core values, while our safety performance relative to industry is.
Every good our goal has been and continues to be that none of our colleagues get hurt ever.
Our customers' highest priorities reliability, they expect their power will come on when they need it period in the past year, our customers in our electric service areas in Virginia, South Carolina, and North Carolina had power at 99, 9% of the time, excluding major storms were major storms approach, we stage equipment and people to be ready so cruise can swing into action.
As soon as it is safe to do so as we did for the first winter storm of 2022, the dumped wet heavy snow on most of the northern central and Western regions of Virginia, Interrupting service to over 400000 customers over 87% of those customers had service restored after two days of restoration and 96% with them.
Four days, our crews worked around the clock and frigid temperatures and treacherous IC travel conditions to safely restore service to our communities.
Our gas distribution business knows that safe and reliable service is the priority, especially when exigent circumstances exist. When an emergency notification is received we typically have a crew onsite twice as quickly as the industry expect a response time last month, we had the highest ever flow of gas at our Utah system and the highest <unk>.
Daily throughput across our Ohio system higher even than the polar vortex of 2019.
And in both cases, our service never missed a beat and our customers would never have known we were setting all time records I'm proud, though not surprised at the way in which our Dominion energy team members have responded on behalf of our customers.
Now I'll turn to updates around the execution of our growth plan.
In Virginia, the FCC approved the comprehensive settlement agreement for our first Triennial review in November we're very pleased to be extending our track record of constructive regulatory outcomes on top of that we are incredibly excited about what Dominion energy is working to accomplish specifically our green capital investment programs on behalf of.
Our customers in Virginia.
Which I will touch on in a few minutes nearly all of which will grow earnings under regulated rider mechanisms.
Since the Virginia rider investment programs are reviewed and freed up annually. They are not included in the Virginia Triennial review process.
Based on these trends the Virginia base investment balance as a percentage of total Dominion energy declines to about 13% by 2026 and is expected to continue to decline as a percentage in the future.
Turning to offshore wind the country's only fully regulated offshore wind project is very much on track as it relates to the FCC rider application. We're currently in the discovery phase and to date. This process very much conforms with what we typically expect during a rider preceding of this type.
Major project milestones are listed on slide 15, we expect to receive a final order from the FCC in August this year a.
A few items to reiterate here first this project will provide a boost to virginia's growing green economy by creating hundreds of jobs hundreds of millions of dollars of economic output and millions of dollars of tax revenue for the state and localities. It will also propel Virginia closer to achieving its goal to become a major hub for the burgeoning off.
Sure when value chain up and down the country's east coast.
And unlike any other such project in North America. This investment is 100% regulated and eligible for rider recovery in Virginia.
Finally, the VCA provides very specific requirements on the presumption of prudency for investment in the project, which we are confident that we have already met our Jones Act compliant wind turbine installation vessel is being constructed and is on track for delivery in late 2023 as originally scheduled the project is currently about 43.
Percent complete we expect the vessel will be in a central resource city EV as well as to the overall domestic offshore wind industry and will be entering service with plenty of time to support the 'twenty 'twenty four turbine installation season.
Our other clean energy filings in Virginia are also progressing well last month, we were very pleased to see the FCC approved phase two of our grid transformation plan for projects that we plan to deploy in 2022 and 2023. These projects will facilitate the expected increase in distributed energy resources like small scale solar and <unk>.
Spanned electric vehicle infrastructure as well as enhance grid resiliency and security.
Our clean energy and nuclear rider rider filings remain on track final orders are expected later this year as outlined on page 18.
Through 2020, we have successfully reduced our enterprise wide C O two equivalent emissions by 42%.
That's great progress, but its not enough by 2035, we expect to improve that reduction to between 70 and 80% versus baseline on our way to meet net zero by 2050.
As shown on the right side of slide 19, the transition to a clean energy future means reduced reliance on coal fired generation.
Back in 2005 more than half of our company's power production was from coal fired generation by 2035, we project that to be less than 1%.
We show our timeline for transitioning out of coal on slide 20 by the end of the decade as part of our ongoing resource planning, we expect to be coal free in South Carolina and have only two remaining facilities at Dominion energy, Virginia for reliability and energy security considerations, while our Rfps are informational filings and do not provide.
Approval or disapproval for any specific capital projects, we look forward to continuing to work with stakeholders, including the commission to drive towards an increasingly low carbon future.
From an investment base from an investment base perspective, which is a rough approximation of earnings contribution you can see on slide 21, the diminished role coal fired generation plays in our financial performance driven by facility retirements and non coal investment.
We're mindful that this shift has the potential to be disruptive to employees and communities and we are being purposeful in our efforts to ameliorate any such negative consequences, we believe and adjust transition we have and will continue to consider the needs of impacted communities and our entire workforce. During this clean energy transition if.
You'll also note that zero carbon generation grows significantly such that by 2026 over 65% of our investment base will consist of electric wires and zero carbon generation.
Moving onto South Carolina.
As part of our ongoing resource planning Dominion Energy South Carolina is planning to replace several of our older generation, peaking turbines with modern more efficient units these peaking units, which often operate seasonally during certain times of day when the demand for energy is at is at its highest play an important role in our generation fleet with their ability.
You go from idle to producing energy quickly modernizing this equipment will lower fuel cost to customers improve environmental performance and provide reliability and efficiency benefits. These will become even more important as additional intermittent fluctuating resources such as solar are added to our system last quarter. The public service Commission of South.
Carolina approved a settlement, allowing the company to move forward with two of the proposed sites and we will hold an RFP for a third.
Turning to gas distribution in North Carolina. The Commission approved our comprehensive settlement last month for our gas operations with rates based on a nine 6% Roe.
As a reminder, being agreement included three new clean energy programs, a new hydrogen blending pilot a new option to allow our customers to purchase RMG attributes and a new and expanded energy efficiency programs. This is a prime example of the role that supportive regulation can play in meeting our de carbonization objectives.
We now address this mornings announcement regarding the sale of our West Virginia natural gas utility to ULA coat.
Gas is a valuable business with tremendous people at the same time compared to the other larger state regulated utilities across our five Premier States hope gas is relatively small standalone operation our talented employees have consistently delivered safe reliable and affordable energy to hopes customers. We're pleased that these.
Best in class employees are now joining another excellent organization in the form of ULA co who has agreed to provide significant protection for employees and honor existing union commitments ULA coast operating expertise and financial resources. We will also ensure that hopes customers will continue to receive the high level of service to which.
They have grown accustomed.
Slide 24 provides a summary of several important steps we took in 2021 that enhanced our industry, leading ESG profile.
A couple of items I'll highlight here.
In July we published our updated climate report, which included disclosure of scope, one two and three emissions and important step as it relates to our net zero commitment as I will expand on in a minute.
In November we issued our inaugural diversity equity and inclusion report, which highlights our progress towards building a more diverse and inclusive workforce as part of that report. We also published our E. One data this enhanced external reporting builds upon our commitment to increase our total workforce diversity by 1% each year.
Here with a goal of reaching at least 40% by year end 2026, we're very much on track to meet that goal. These.
These and other ESG oriented efforts have been recognized by leading third party assessment services as shown on slide 25.
By each measure our performance exceeds the sector average.
We've been recognized as part of the leadership band by CDP for our climate and water disclosure for the second year in a row.
As trendsetters the highest categorization for the fourth consecutive year by the CPA Zealand report on political accountability and transparency and most recently MSCI increased our rating from a to double E, which designates us a leader in the field.
Turning to slide 26, I am pleased to announce an expansion of our net zero commitments.
In addition to our current commitment to achieve enterprise wide net zero scope, one carbon and methane emissions by 2050, we now aim to achieve net zero by 2050 for all scope two emissions and for scope three emissions associated with three major sources LDC customer end use emissions upstream.
<unk> and purchase power these new commitments formalize our continued focus on helping our customers and suppliers decarbonize.
Reducing emissions as fast as possible and achieving net zero emissions companywide requires immediate indirect action.
That's why the company continues to take meaningful steps to address scope three emissions, we formalized our support for federal methane regulation and we're working towards procurement practices that encourage enhanced disclosures by upstream counterparties on their emissions and methane reduction programs further we incurred suppliers to adopt a net zero <unk>.
And we started to receive quotes for responsibly sourced gas, which are evaluated consistent with our reliability service and cost criteria for natural gas supply.
For downstream emissions, we expect to increase our annual spend on energy efficiency over the next five years at our L. D. CS by nearly 50% and to provide our customers with access to a carbon calculator and carbon offsets for example, in both Utah and North Carolina, We offer Green Therm, a voluntary program that provides customers.
With access to renewable natural gas, while initially being offered on a voluntary basis, we are working with policymakers and regulators to increase access to RMG for our customers.
And finally, we continue to pursue innovative hydrogen use cases, including our blending pilot in Utah, which based on early assessment confirms the ability to blend at least 5% and potentially up to 10% without adverse impact to appliance performance leak survey system safety or secondary emissions.
Over the long term achieving these goals will require supportive legislative and regulatory policies and broader investments across the economy. This includes support for the testing and deployment of technologies. For example, we support efforts to research and develop new technologies through collaborations such as the low carbon resource initiatives.
Of which we're a founding sponsor.
And we will never lose sight of our fundamental responsibility to customers, providing safe reliable affordable and sustainable energy.
Let me summarize our remarks on slide 27.
Our safety performance was our second best ever we reported our 24th consecutive quarterly result that normalized for weather meets or exceeds the midpoint of our guidance range.
We affirmed the same six 5% operating EPS growth guidance through 2026 and affirmed our existing dividend growth guidance through 2026, we're focused on executing project construction and achieving regulatory outcomes that serve our customers well and we're aggressively pursuing our vision to be the most sustainable regulated energy company in.
The country, we're now ready to take your questions.
Thank you Sir at this time, we will open the floor for questions. If you would like to ask a question. Please press the star key followed by the one that is star one on your Touchtone phone now is that any time, you would like to remove yourself from the question in queue. Please press star two.
To ask a question. Please press star one now.
Thank you our first question will come from Jeremy Tonet with J P. Morgan.
Just wanted to start off here, if you could walk us from the prior plan capex to todays and the impact on targeted equity included the expected LDC sale proceeds and just wondering are there any other noncore assets in the portfolio you might.
Look to sell an asset such as millstone for equity source.
Hey, Jeremy it's Bob I'll start and then I'll turn it over to Jim to I'll take the second part turn it over to Jim to walk through the first part.
Our announcement related to hope was about scale you know as we think about as we mentioned in our remarks.
Hope gas great company, but in terms of customers. It's a quarter of the size of our next smallest L. D C and so as we thought about capital allocation.
It made sense to us.
To think about.
Divesting that great company and I think.
The power colleagues, who work there are also going to our great company.
As to the sort of broader question, we like the mix of assets that we have and we think they support our growth.
Growth rate and allow us to continue to execute which is what we're most focused on is executing on that.
Strategy regulated pure play now like every company, we obviously regularly evaluate assets to see what makes sense with respect to.
Our credit earnings are.
Accretion all those kinds of things.
But we're very comfortable that the asset mix that we have today supports the growth rate that we've outlined and we're just focused on executing on that and I'll get Jim to talk a little bit about sort of tying that capital plans and equity.
Yes, Jeremy good morning, as I mentioned.
In prepared remarks, we we provided a lot of detail on our on our growth plans and capital spending in the appendix. So wouldn't expect anyone to digested all that yet, but I would draw attention to page 34.
Which is a bridge from our prior five year capital growth plan to the new 132 billion to 37 billion.
And let me just quickly tick through some of the changes.
The most material single change is simply moving from one five year period to the next drop 2021 checked that box and 2026.
And just in doing that Youre also incidentally, including the full timeframe for offshore wind spend.
Then if you look at budget changes for some of our capital programs.
For example, the budget we discussed in November on offshore wind.
It's actually fully neutralized in our five year capital spend plan.
By postponement.
For further evaluation as we talked about in November .
Our pump storage project in our Virginia, Cts, which are further out in time outside the five year period, so that that nets to zero.
And then you'll see some other drivers there just true ups of our capital spending across gas distribution R&D and all of our other de carbonization investment programs.
So that that's what bridges the prior plan to new.
And then Jeremy you asked a lot of sub parts of that question. You also asked about equity. So let me say a few things about that we.
I observed that.
We're one of few companies that actually gives detailed guidance on an equity issuance I'm happy it's it's noticed.
There's no change in our equity guidance for 'twenty two.
There's some very modest tweaks $100 million in some years 200 and others thereafter.
Keeping in mind that spending is up.
So equity is up cash flows up that's up a little bit.
So how could that change.
It spending and our five year plan as we move forward goes up which would be good.
Equity amounts could trend up slightly as well.
Conversely, if it goes down which we don't expect they go down a little bit, but we think this level of constant equity through our existing programs as I mentioned, one to one 5% of our current market cap is I mean, it's accretive it's it's modest and it is appropriate to keep us in the right spot from a credit rating metrics perspective.
Got it Thats all very helpful. There. Thank you for that.
Just another one if I could here are the inclusion of scope two and three emissions in the net zero commitment is a big step forward there.
What are the impacts I guess that that drives in your long term capex and the plant just wondering if any of the Capex plan is attributable to that and then specifically can you provide an update on your R&D plans in light of these commitments.
Yeah, Let me, let me start and then I'll turn it over to Diane to talk a little bit more specifically about RMG.
As we described.
In our opening remarks Jeremy.
Scope, two and three emissions reductions.
By 2050 are going to require technology and supportive regulatory environment.
So a lot of this that we would be thinking about or sort of longer term, it's hard for us to put as much definition around it as we can.
Virginia, particularly Virginia regulated rider investments in some of the others that youre seeing in that 15 year chart obviously.
Nothing in the five year plan, what we think would move the needle there but.
But lots of opportunities we believe and.
And we think it's important that's what our customers are looking for us to do it's what our shareholders are looking for us to do so we will have opportunities to flesh that out there is as we mentioned.
We've already got a fair amount going in a big chunk of that right now is our investment in R&D and I'll ask Diana to talk a little bit more detail about that.
Okay. Good morning, So our R&D program, our capital program has really increased over this last year. So we now have 10 projects under construction at <unk>.
One in service, but two of those under construction, both dairy and it will be in service in the coming days and weeks.
We expect six projects to come into service. This year. So we're really kind of ramping up even though it's very small right now, but we see that pace continuing of new projects entering the constructions stream and more coming online in these next few years. So we do see this what we've said before is.
About $2 billion of capital investment through 2035 through our main platforms of the dairy and the swine with our partnerships with align and vanguard.
So that's on the development side.
The LDC side, specifically as it relates to scope three we really see that program eventually moving towards a long term strategy of having RMG directly into our regulated gas customers. So we already have that on a voluntary.
In Utah, and it's been very well received there and just got approval in North Carolina, and looking to work with stakeholders to increase the amount of R&D blending into our local gas distribution companies so whether.
We build it or not whether its part of our program are not we're.
Really looking to see more R&D access for our customers in our L. D C program.
Got it Thats all very helpful. Thank you.
Thank you. Our next question comes from Steve Fleishman with Wolfe Research.
Yeah, Hi, good morning.
Steve just a hey, hey, so Bob just you know there was a lot of focus.
Late last year on the Virginia election, a new governor and the like and maybe you could just talk a little bit about.
How how things have been going with <unk>.
Ration and if there's any.
You know kind of maybe specifically the.
The political support Youre seeing.
We're not for the offshore wind projects.
Yes, Steve.
So the things have been going well with the new administration and the General Assembly.
Obviously the <unk>.
Session, and Virginia is less than a little less than halfway over but Virginia session moves pretty quickly. It's really energy just has not been a big focus.
As we discussed I think on the last call that campaign was focused on education and taxes and that's what the General Assembly has been focused on not surprisingly and so energy has not been a huge part of the equation.
So will you know obviously you.
You make predictions about the legislative process at your apparel, but we're participating and finding that we continue to work well with both Republicans and Democrats as we have four.
Quite a long time.
As regards offshore wind there continues to be very strong support for offshore wind as we discussed.
On.
Our opening remarks.
There is a great opportunity for Virginia.
With respect to new jobs in new industry and.
Our project is recognized as one that can bring a lot of benefits to the state. So.
Still seeing great support for offshore wind.
Okay and then one other question on offshore wind just.
Or is that a week or two ago talk to.
Cost pressures, but.
I think it sounds like things that you had already may be reflected in your your budget, but one of the things. They specifically pointing to was vessel costs for like non not the Jones act vessels, but.
Other you know things like the foundations and the like just could you just talk to is that part of the mix of what you have locked up already.
Yes in fact.
Diane and I met with the.
Executives at Prisma, and Demi who are handling you know we talk about these large packages there that transport and install so there they're doing the cable and.
And installing the mono piles, we just met with them earlier this week and things are very much on track with them. So.
Our and as regards our own vessel the installation vessel you know the steel.
For that for example has been on site for quite some time so.
I think the premise where you started the question, saying that.
The pressures that you may have heard about were factored into our.
Contracting is exactly right.
We entered into these contracts late last year.
With Counterparties, who are very experienced every single one of them is very experienced in this industry.
So we still feel very good about that project, both in terms of schedule and budget.
Great and one quick follow up on hope gas.
Just curious.
Ben the debate about the.
The future of L. D C. As you know it looks like you've got a.
Good price here for Ed just could you give us some sense of.
The competitive dynamic of of that process and or and just what youre kind of what do you think it means for kind of.
Thinking about the value of your remaining L. D CS.
We feel very good about the value of our remaining L. D. CS as we have for some time as I mentioned this was a decision that we made related to scale as it pertains to our LDC businesses.
They are growing.
They're in.
What we describe as premium states very pro business state strong customer bases.
Supportive of natural gas and with customers, who want natural gas for cooking and heating their homes. So.
This this was not from our perspective, a reflection on our thinking about the LDC business going forward.
That being said, we had a lot of interest obviously.
In this process and we feel very good about the price.
And equally important about the quality of the counterparty. So I think it was.
Have a good outcome.
And one that we think will be very well received but we expect to.
Continue operating our LDC as well.
Great. Thank you very much.
Thank you. Our next question will come from Ross Sandler with UBS.
Good morning, Bob Hope you and the team are well.
So I just wanted morning.
Wanted to work.
Slide 11, one more time to make sure I understand very clearly what you said.
So.
We know what our Capex is up play into plant based.
Basically if you're adding 2006, and taking 20 went away and what you're saying is there's no change here to 'twenty two equity.
Mall increase to equity and 23 forward.
I hope proceeds are really going to be used to repay debt.
That capacity turns around to be available for regulated capex.
Framed it correctly is that is that what I heard you say on the call.
That's that's exactly right.
On the equity sources and uses.
The overall sources eases I should say so to simplify it a little bit what are we doing here with the proceeds from the small sale.
After tax proceeds we're paying down parent level debt.
And then in coming years, we will use that debt capacity well modest as.
As we invest in our spending programs across our key regulated states.
Oh, that's perfect. Thank you and then and then.
On your comments on solar on their call. So.
You've noted that costs are up and prices are tight here, but that you've done.
There are a lot of 'twenty two procurement already.
That is on track and on 23 year, you're on track, but you're watching it how much of 23 have you already procured and how much is maybe still out there that may be a swing factor for for maybe pushing projects to 'twenty four.
Right. So this is Diane Leopold thanks for that question. So for 2023 as Bob talked about we are seeing some shortages of panels and other items, but we are actively in the stages now.
Working out the contracting for these projects, we are well along the way in that process and project by project getting access to the modules, we need so while I won't say, it's simple and not without some additional cost we're managing it and I'd, just say that we're well along the way.
Alright, great. Thank you very much.
Thank you. Our next question comes from their guests Chopra with Evercore ISI.
Hey, good morning team. Thank you for taking my question.
Good morning.
Good morning, Bob just Jim.
Quick clarification, you mentioned $800 million, if I heard that correctly.
The offshore Capex that was indexed is that 800 million part of the 7 billion locked or is that 800 million out of the total roughly $10 billion project trajectory project costs.
Yeah, Hey, guys. Good morning that that $800 million as part of the $7 billion locked across those five project components that we announced in November .
The remaining amounts as Youll recall is the onshore transmission and contingency.
Got it perfect and $7 billion of roughly 10 million locked in 800 millions as a component of that and then just maybe just quickly Jim I just wanted to understand the rate base.
Growth disclosures and then on slide 10 for Virginia, I would have expected the rate base CAGR to be hard given the higher spending versus the last year plan is that sort of a starting point issue because if I compare Q4 last year to Q4 this year.
The rate base CAGR is actually lower with the spend actually materially higher.
Yeah drew gas or happy to connect we have as I mentioned a lot of detailed backup in the appendix, but what youre mentioning there is just a timing issue from the starting point there is not a material change to the programs or the overall pace, that's just a timing quarter to quarter.
Understood. Thank you and and really appreciate all the all the disclosure in the appendix. Thank you for continuing to provide that I appreciate it. Thanks.
Thank you.
Thank you. This does conclude this morning's conference call you may now disconnect your lines and enjoy your day.
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