Q4 2023 Dominion Energy Inc Earnings Call

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Operator: BF-WATCH TV 2021 www.globalonenessproject.org 2014 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services,... Welcome to the Dominion Energy fourth quarter earnings conference call. At this time, each of your lines is in a listen-only mode.

Welcome to the Dominion Energy fourth quarter earnings Conference call.

At this time each of your lines is in a listen only mode.

Operator: At the conclusion of today's presentation, we will open the floor for questions. Instructions will be given for the procedure to follow if you would like to ask a question. I would now like to turn the call over to David McFarland, Vice President, Investor Relations and Trade. Good morning, and thank you for joining today's call. Earnings materials, including today's prepared remarks, 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, is contained in the Earnings Release Kit.

At the conclusion of today's presentation, we will open the floor for questions instructions will be given for the procedure to follow if you would like to ask a question.

I'd now like to turn the call over to David Mcfarland, Vice President Investor Relations and Treasurer.

Good morning, and thank you for joining today's call earnings materials, including today's prepared remarks 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.

David McFarland: I encourage you to visit our Investor Relations website to review the webcast slides as well as the Earnings Release Kit. Joining today's call are Bob Blue, Chairman, President, and Chief Executive Officer; Steven Ridge, Executive Vice President and Chief Financial Officer; and Diane Leopold, Executive Vice President and Chief Operating Officer. I will now turn the call over to Bob. Thank you, David.

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, Steven Ridge, Executive Vice President and Chief Financial Officer, and Diane Leopold Executive Vice President and Chief Operating Officer, I will now turn the call over to Bob. Thank you David and good morning, everyone as always let me begin with safety.

Robert M. Blue: As always, let me begin with safety, as shown on slide three. In 2023, our employee OSHA recordable incident rate was 0.45, a significant improvement over our already strong historical performance. We also achieved a record low lost-time restricted-duty injury rate.

As shown on slide three in 2023, our employee Osha recordable incident rate was <unk> four five significant improvements already strong historical performance.

We also achieved a record low lost time restricted duty injury rate, we're pleased but not satisfied with these results I strongly believe that exemplary safety performance unlocks our ability to execute optimally across the three pillars of our mission as shown on slide four.

Robert M. Blue: We're pleased but not satisfied with these results. I strongly believe that exemplary safety performance unlocks our ability to execute optimally across the three pillars of our mission, as shown on slide four. We maintained outstanding reliability in 2023, as our electric customers in Virginia and South Carolina had power 99.9% of the time, excluding major storms. Our residential rates continue to be well below the national and regional averages.

We maintained outstanding reliability in 2023 is our electric customers in Virginia, and South Carolina had power 99, 9% of the time, excluding major storms, our residential rates continue to be well below the national and regional averages from 2005 through 2022, we've reduced scope one carbon emissions from our.

Robert M. Blue: From 2005 through 2022, we've reduced Scope 1 carbon emissions from our electric operations by nearly 50 percent, even as annual energy generated over that period has increased 9 percent. Going forward, you'll continue to hear how we're executing against our mission because an exceptional customer experience positions our company to deliver the best results for our shareholders. I'm very pleased to share several important updates with you this morning as it relates to our business review and the Coastal Virginia Offshore Wind Project. Let me begin by reiterating my previous commentary regarding the review.

Electric operations by nearly 50% even as annual energy generated over that period has increased 9%.

Going forward, you'll continue to hear how we're executing against our mission because an exceptional customer experience positions our company to deliver the best results for our shareholders.

I'm very pleased to share several important updates with you. This morning as it relates to our business review and the coastal Virginia offshore Wind project. Let me begin by reiterating my previous commentary regarding our review our guiding priorities and commitments are unchanged as is my conviction around both the decision to undertake the review and the quality of the result, I expect us to.

Robert M. Blue: Our guiding priorities and commitments are unchanged, as is my conviction around both the decision to undertake the review and the quality of the result I expect us to deliver. The review will comprehensively and finely address foundational concerns that have eroded investor confidence in our company over the last several years. We will not pursue a series of partial solutions that leave key elements and risks unaddressed.

Deliver the review will comprehensively and finally address foundational concerns that if eroded investor confidence in our company over the last several years, we will not pursue a series of parcel solutions that we have key elements and risks unaddressed. Instead, we'll deliver a comprehensive result that will provide a durable.

Robert M. Blue: Instead, we will deliver a comprehensive result that will provide a durable and high-quality strategic and financial profile that optimally positions Dominion Energy to provide compelling long-term value for shareholders, customers, and employees. This morning, we announced a key part of that result with the execution of an agreement to add a non-controlling equity partner to the Coastal Virginia Offshore Wind Project. This arrangement with Stone Peak, a global leader in infrastructure investing, represents the final strategic step in the business review and delivers an exciting result for our customers and our shareholders. Before I walk through the transaction specifics, let me update you on the continued successful development of the project across all phases. The project is proceeding on time and on budget, consistent with the timelines and estimates previously provided.

<unk> and high quality strategic and financial profile that optimally positions Dominion energy to provide compelling long term value for shareholders customers and employees. This morning, we announced a key part of that result, with the execution of an agreement to add a noncontrolling equity partner in the coastal Virginia offshore wind.

This arrangement was stone peak, a global leader in infrastructure investing represents the final strategic step in the business review and delivers an exciting result for our customers and our shareholders before I walk through the transaction specifics, let me update you on the continued successful development of the project across all phases.

The project is proceeding on time and on budget consistent with the timelines and estimates previously provided we continued to achieve significant project milestones as shown on slide five.

Robert M. Blue: We continue to achieve significant project milestones, as shown on slide 5, in the area of permitting. Last month, BOEM provided final approval of our construction and operation plan, which allows us to begin offshore construction in the second quarter. And the Army Corps of Engineers issued its permit, which has allowed us to ramp up onshore construction. Materials and Equipment. We're on track and making excellent progress. One of the keys to our success has been that, from the beginning of the project, we insisted that our equipment be sourced from mature facilities under dedicated production allocations that are specific to our components. We've received 24 monopiles from our supplier, EEW, at the Portsmouth Marine Terminal, with more on the way in the coming weeks.

Permitting last month bone provided final approval of our construction and operation plan, which allows us to begin offshore construction in the second quarter and the Army Corps of engineers issued its permit which has allowed us to ramp up onshore construction.

Materials and equipment, we're on track and making excellent progress one of the keys to our success has been up from the beginning of the project, we insisted that our equipment be sourced from mature facilities under dedicated production allocations that are specific to our components. We've received 24 monetize from our supplier E. W.

At the Portsmouth Breen terminal with more on the way in the coming weeks. These mono piles will begin to be installed by del Mar during the second quarter recall that we've scheduled mono pilot installation across two seasons, 2024, and 2025, which allows us to better mitigate any potential delays or disruptions without impacting final schedule.

Robert M. Blue: These monopiles will begin to be installed by DEME during the second quarter. Recall that we've scheduled monopile installation across two seasons, 2024 and 2025, which allows us to better mitigate any potential delays or disruptions without impacting final scheduling. The first of three offshore substation topside structures is complete and has been delivered to Blatt Simcoe to be outfitted. We expect the first delivery of transition pieces to Virginia during the second quarter. All 161 miles of onshore underground cable have been manufactured, and approximately 200 out of 600 miles of offshore cable have been produced.

The first of three offshore substation topside structures is complete and has been delivered to black some code to be outfit. It. We expect first delivery of transition pieces to Virginia during the second quarter or 161 miles of onshore underground cable has been manufactured and approximately 200 out of 600 miles of offshore cable has been.

Produced.

Robert M. Blue: The schedule for the manufacturing of our turbines remains on track. It's worth noting that even though we won't begin turbine installation until 2025, per our schedule, DMA is currently supporting an installation campaign for a project off the coast of Scotland that's using the same Siemens Gamesa wind turbine model that CVAL will use. The lessons learned from that project will benefit our project installation in the future. Moving onshore, construction activities have begun, including civil work, horizontal directional drills, and the bores where the export cables come ashore.

Schedule for the manufacturing of our turbines remains on track, it's worth noting that even though we won't begin turbine installation until 2025 per our schedule. DMA is currently supporting an installation campaign for a project off the coast of Scotland. That's using the same Siemens Gamesa wind turbine model that CEVA will use the lessons.

Learn from that project will benefit our project installation in the future.

Moving onshore construction activities have begun including civil work horizontal directional drills in the bores, where the export cables come ashore on.

Robert M. Blue: On regulatory, last November, we made our 2023 Rider filing, representing $486 million in annual revenue. We're currently in the testimony phase and expect a final order by August. Turning to slide 6, there have been no changes to the project's expected LCOE of $77 per megawatt hour. We have again provided sensitivities to show how the average lifetime cost to our customers is impacted by capital costs, capacity factor, and interest rates. We remain well below the legislative prudence cap on this matter.

On regulatory last November we made our 2023 rider filing representing $486 million of annual revenue. We're currently in the testimony phase and expect a final order by August.

Turning to slide six there'd been no changes to the project's expected L. Coa of $77 per megawatt hour. We've again provided sensitivities to show how the average lifetime cost to our customers is impacted by capital cost capacity factor and interest rates, we remain well below the legislative prudency cap on this metric.

Robert M. Blue: Project-to-date, we've invested approximately $3 billion, and we expect to spend an additional $3 billion by year-end 2024. As a result, a little more than 92 percent of project costs are now fixed. We'll gradually increase that percentage over the remainder of the project construction time. At this stage of project completion, the current unused contingency, at $351 million, benchmarks competitively as a percentage of total budgeted costs when compared to other large infrastructure projects we've studied. It also compares favorably to the current level of unfixed costs.

Project to date, we've invested approximately $3 billion and we expect to spend an additional 3 billion by year end 2024, although more than 92% of project costs are now fixed will gradually increase that percentage over the remainder of the project construction timeline.

At this stage of project completion, the current unused contingency at $351 million benchmarks competitively as a percentage of total budgeted cost when compared to other large infrastructure projects. We've studied it also compares favorably to the current level of Unfixed costs, we've been very clear with our team.

Robert M. Blue: We've been very clear with our team and with our suppliers and partners that delivery of an on-budget project is the expectation. Along those lines, this morning we posted an important video update to our Investor Relations website that features representatives from the senior executive management teams of all of our primary CVAU commercial partners, including Siemens Gamesa Renewable Energy, EEW, Blatt Industries, Simcoe Maritime, Deme, and Prismian, as well as the CEO of Cetrium, the constructor of our Jones Act-compliant installation vessel. I strongly encourage our investors, government and regulatory partners, employees, and other stakeholders to watch this short video. You'll hear in their own words a chorus of unwavering enthusiasm for and commitment to an on-time and on-budget delivery of the project. We're fortunate to enjoy such extraordinary support from our key suppliers, and together, we will deliver this exciting project. Moving to slide 8, a couple of final points on Charybdis.

And with our suppliers and partners that delivery of an on budget project is the expectation.

Along those lines. This morning, we posted an important video update to our Investor Relations website.

Teachers Representatives from the senior Executive management teams of all of our primary feed out commercial partners, including Siemens Gamesa renewable energy EW flat industries, Semco Maritime DMA in prison as well as the CEO of Ctrip. The constructor of our Jones Act compliant installation vessel.

I strongly encourage our investors government and regulatory partners employees and other stakeholders to watch the short video Youll hear in their own words, a course of unwavering enthusiasm for and commitment to an on time and on budget in service for the project, we're fortunate to enjoy such extra.

Ordinary support from our key suppliers and together, we will deliver this exciting project moving.

Moving to slide eight a couple of final points here on Charybdis. The vessel is currently 82% complete up from 77% as of our last update.

Robert M. Blue: The vessel is currently 82% complete, up from 77% as of our last update. No change to our expected delivery timeframe of late 2024 or early 2025. Here are a few highlights.

No change to our expected delivery timeframe of late 2024 or early 2025.

Few highlights labor levels have increased to over 200 and are continuing to be augmented as compared to approximately 1000 last October and 800 last August recent construction milestones have been met including installation of the remaining jackup legs Jackup system commissioning is underway all major sub components are on site.

Robert M. Blue: Labor levels have increased to over 1,200 and are continuing to be augmented as compared to approximately 1,000 last October and 800 last August. Recent construction milestones have been met, including installation of the remaining jackup legs. Jackup system commissioning is underway. All major subcomponents are on-site and awaiting installation. We expect the vessel to be floated in the coming weeks. And there's been no change to project costs of $625 million, including financing costs

And awaiting installation, we expect the vessel to be floated in coming weeks and there's been no change to project cost of $625 million, including financing costs. In summary, there is no change to the vessels expected availability to support the currency of our construction schedule, including its availability to support it.

Robert M. Blue: In summary, there is no change to the vessel's expected availability to support the current CVAL construction schedule, including its availability to support any third-party charter agreements in 2025. As you can see, we feel very good about the progress we're making with the support of our project partners towards an on-time and on-budget completion of this very important project. Throughout our robust and competitive offshore wind process, we had multiple high-quality strategic and financial potential partners deploy significant operational, regulatory, commercial, financial, and legal resources to thoroughly diligence every aspect of the project. The consensus independent feedback was that the Coastal Virginia Offshore Wind Project is optimally positioned to be delivered on time and on budget and is supported by enthusiastic and committed suppliers and partners.

The third part or third party charter agreements in 2025.

As you can see we feel very good about the progress, we're making with the support of our project partners towards an on time and on budget completion of this very important project.

Throughout our robust and competitive offshore wind process, we had multiple high quality strategic and financial potential partners deploy significant operational regulatory commercial financial and legal resources to thoroughly diligence every aspect of the project and the consensus independent feedback was.

The coastal Virginia offshore wind project is optimally positioned to be delivered on time and on budget and is supported by enthusiastic and committed suppliers and partners.

Robert M. Blue: With that, let me walk you through the CIVAO transaction, starting with slide 9. We're excited to be partnering with StonePeak, one of the world's largest energy infrastructure investors with over $61 billion in assets under management. Stone Peak has a track record of investment in large and complex energy infrastructure projects, including offshore wind. Their significant financial participation will benefit both our project and our customers on Transaction Structure. Stone Peak will invest in a newly formed subsidiary of Dominion Energy Virginia.

With that let me walk through the <unk> transaction, starting with slide nine we're excited to be partnering with stone Pete one of the world's largest energy infrastructure investors with over $61 billion in assets under management.

Peak has a track record of investment in large and complex energy infrastructure projects, including offshore wind there are significant financial participation will benefit both our project and our customers.

On transaction structure stone, Pete will invest in a newly formed subsidiary of Dominion Energy, Virginia, It will be a public utility in Virginia and be entitled to recover its prudently incurred cost of constructing and operating the project under the existing offshore wind rider in Virginia.

Robert M. Blue: It will be a public utility in Virginia and be entitled to recover its prudently incurred costs of constructing and operating the project under the existing offshore wind rider in Virginia. Dominion Energy will retain full operational control of the construction and operations of CVAL, and as a result, we expect to consolidate the partnership for accounting purposes. Stone Peak will own a non-controlling equity interest and will have customary minority interest rights on cost sharing. The agreement provides for robust cost sharing that significantly improves the company's credit profile and provides meaningful protection from any unforeseen project cost increases. Mandatory capital contributions, including an initial reimbursement, will be used to fund expenditures up to $11.3 billion on a 50-50 pro rata basis. This represents cost sharing up to 15% or nearly $1.5 billion higher than the project's current budget, including unused contingency, and up to 20% or nearly $2 billion higher than the project's current pre-contingency budget.

Dominion energy will retain full operational control of the construction and operations of C. Val and as a result, we expect to consolidate the partnership for accounting purposes stone people own a noncontrolling equity interests and will have customary minority interest rates our cost sharing the agreement provides for a robust cost sharing that.

Significantly improves the company's credit profile and provides meaningful protection from any unforeseen project cost increases.

Mandatory capital contributions, including an initial reimbursement will be used to fund expenditures up to 11 $3 billion on a 50 50 pro rata basis. This.

This represents 50 50 cost sharing up to 15% or nearly one $5 billion higher than the projects current budget, including unused contingency and up to 20% or nearly $2 billion higher than the projects pre contingency budget.

Robert M. Blue: The agreement also provides for additional sharing of project costs, if any, between $11.3 billion and $13.7 billion. In that hypothetical case, Stone Peak would continue to share in project costs through a gradually increasing spectrum of dilution to Dominion's share of project ownership. Slide 10 shows how Dominion and Stone Peak will share project funding and ownership under a variety of hypothetical cost scenarios. And I stress hypothetical because we fully expect to deliver this project on time and on budget. Turning to slide 11, at closing, Stone Peak will make a cash payment to Dominion to reimburse 50% of the capital spent to date, less $145 million. This nearly $3 billion project cost reimbursement will be used to reduce parent-level debt.

The agreement also provides for additional sharing of project costs, if any between 11 3 billion and $13 $7 billion in that hypothetical case stone peak would continue to share in project costs through a gradually increasing spectrum of dilution to dominion share of project ownership.

Slide 10 shows had Dominion and stone people share project funding and ownership under a variety of hypothetical cost scenarios and I stress hypothetical because we fully expect to deliver this project on time and on budget.

Turning to slide 11 at closing stone people make a cash payment to dominion to reimburse 50% of the capital spent to date less $145 million. This nearly $3 billion project cost reimbursement will be used to reduce parent level debt thereafter stone peak will fund their pro rata share of capital calls.

Robert M. Blue: Thereafter, Stone Peak will fund its pro rata share of capital calls during construction, consistent with the schedule included in the appendix of today's material. At commercial operation, Stone Peak will make a payment to Dominion Energy, the amount of which will depend on the final construction cost, as shown on the slide. The transaction requires approvals from the Virginia SEC and the North Carolina Utilities Commission, as well as certain consents from BOEM and other regulatory agencies regarding the assignment of certain contracts and permits needed for the partnership post-closing. We expect to obtain all necessary approvals and consents by the end of 2024. Continuing on to slide 12.

<unk> during construction consistent with the schedule included in the appendix of todays materials.

Our commercial operation stone people make a payment to dominion energy the amount of which will depend on the final construction cost as shown on the slide.

The transaction requires approvals from the Virginia, SCC in North Carolina Utilities Commission as well as certain consents from Belgium, and other regulatory agencies regarding the assignment of certain contracts and permits needed for the partnership post closing.

We expect to obtain all necessary approvals and consents by the end of 2024.

Continuing to slide 12.

Robert M. Blue: I'm confident that this partnership is in the long-term best interest of our customers and our shareholders. The transaction achieves several key objectives. First,

I am confident that this partnership is in the long term best interest of our customers and our shareholders. The transaction achieved several key objectives first.

Robert M. Blue: It adds an attractive, well-capitalized, and high-quality partner who brings a track record of investment in large and complex infrastructure projects, including offshore wind, that will further de-risk what is already a significantly de-risked and well-developed project. Second, it provides for robust cost sharing and provides meaningful protection from any unforeseen project cost increases. And third, it improves our quantitative and qualitative business risk profile via a highly credit-positive partnership. The transaction will improve our credit profile, reduce project concentration risk, and lower our financing needs during construction. Further, the transaction is expected to improve our estimated 2024 consolidated FFO to debt by approximately 1%. Importantly... We reviewed the transaction with our credit rating agencies in advance of signing. And based on their feedback, we expect the transaction to be viewed as unambiguously credit positive, and that is a very key benefit for our customers. A financially healthy utility with a strong balance sheet is optimally positioned to attract the capital it needs to provide an exceptional customer experience and support the state's economic and environmental goals.

It adds an attractive well capitalized and high quality partner, who brings a track record of investment in large and complex infrastructure projects, including offshore wind that will further derisk what is already a significantly de risked and well developed project.

Second it provides for robust cost sharing and provides meaningful protection from any unforeseen project cost increases and third it improves our quantitative and qualitative business risk profile by a highly credit positive partnership the transaction will improve our credit profile reduced project.

Concentration risk and lower our financing needs. During construction further the transaction is expected to improve our estimated 2024 consolidated <unk> to debt by approximately 1% importantly.

Importantly.

We reviewed the transaction with our credit rating agencies in advance of signing and based on their feedback we expect the transaction to be viewed as unambiguously credit positive.

That is a very key benefit for our customers are financially healthy utility with a strong balance sheet is optimally positioned to attract the capital it needs to provide an exceptional customer experience and support the state's economic and environmental goals in other words. This partnership will reduce our company's business and financial risk.

Robert M. Blue: In other words, this partnership will reduce our company's business and financial risk profile, which benefits our customers. Let me provide a few final updates on the business review to conclude my prepared remarks. Turning to slide 13.

Profile, which benefits our customers.

Let me provide a few final updates on the business review to conclude my prepared remarks, turning to slide 13.

Robert M. Blue: We're working methodically towards regulatory approvals and timely closings for the sale of our gas utilities. There are no changes to our original expectations in any of these cases. We look forward to continuing to work with involved parties and expect regulatory proceedings to conclude and staggered transaction closings to occur during 2024. We intend to apply 100% of the estimated after-tax proceeds of nearly $9 billion to reduce parent-level debt, which, based on current rates, will result in the reduction of around $500 million of pre-tax interest expense annually. Next, the Virginia regulation.

Working methodically towards regulatory approvals and timely closings for the sale of our gas utilities no changes to our original expectations in any of these cases, we look forward to continuing to work with involved parties and expect regulatory proceedings to conclude and staggered transaction closings to occur during 2024, we.

Intend to apply a 100% of the estimated after tax proceeds of nearly $9 billion to reduce parent level debt, which based on current rates will result in a reduction of around $500 million of pretax interest expense annually.

Next Virginia regulations as.

Robert M. Blue: As part of the business review, we supported reasonable regulatory reform that positions Dominion Energy Virginia to serve customers, support the state's goals, and compete for investor capital in support of our customer-beneficial investors. Last November, Dominion Energy Virginia, State Corporation Commission staff, the Office of the Attorney General, and other key parties reached a comprehensive settlement in the current biennial review. No parties to the case opposed the settlement, and last month, these same key parties reiterated their support for the original comprehensive agreement. We expect a final order in early March. On a related topic, last month the General Assembly unanimously elected Sam Tao and Kelsey Baggett to serve as members of the State Corporation Commission, filling the two outstanding vacancies on the commission.

As part of the business review, we supported reasonable regulatory reform that positions Dominion energy, Virginia to serve customers support the state's goals and compete for Investor capital in support of our customer beneficial investments last November Dominion Energy, Virginia State Corporation Commission staff the office of the attorney.

<unk> and other key parties reached a comprehensive settlement in the current biannual review.

No parties to the case oppose the settlement and last month the same key parties reiterated their support for the original comprehensive agreement, we expect a final order in early March.

On a related topic last month, the general Assembly unanimously elected Sam Tau and Kelsey bag. It to serve as members of the State Corporation Commission filling the two outstanding vacancies on the commission. They have extensive experience in both government and the private sector and we look forward to working cooperatively with these well qualified new members.

Robert M. Blue: They have extensive experience in both government and the private sector, and we look forward to working cooperatively with these well-qualified new members. Turning now to slide 14, there have been no changes to our original business review commitments and priorities. First, for the avoidance of doubt, we have been and continue to be 100% committed to our current dividend. Earnings growth combined with a period of low to no dividend growth will restore our payout ratio to a peer-appropriate range over time. Second, last year, the board, in direct response to investor feedback, modified my compensation structure for 2023 to align my economic incentives more closely with the financial interests of our shareholders. As a result, 100% of my 2023 long-term incentive compensation was performance-based. Last month, the board approved my 2024 long-term compensation plan that, like last year, is 100 percent performance-based. Sixty-five percent is premised solely on three-year relative total shareholder return, with a sixty-fifth percentile relative performance required to achieve a 100 percent payout.

Turning now to slide 14, there've been no changes to our original business review commitments and priorities.

First for the avoidance of doubt we have been and continue to be 100% committed to our current dividend earnings growth combined with a period of low to no dividend growth will restore our payout ratio to a peer appropriate range over time.

Last year the board in direct response to Investor feedback modified my compensation structure for 2023 to ally my economic incentives more closely with the financial interests of our shareholders. As a result, 100% of my 2023 long term incentive compensation was performance based last month the board approved.

By 2020 for long term compensation plan. The like last year is 100% performance based 65% is premise solely on three year relative total shareholder return with a 65th percentile relative performance required to achieve a 100% payout.

Robert M. Blue: This represents a high bar relative to industry practice, but I believe it appropriately aligns my financial interests with those of our shareholders. Additional details around the increasing alignment of my compensation with our owners' interests will be available in our proxy statement, which will be published in March. Certainly, this has been a difficult time for our investors, and I want them to understand how seriously I take them. Third, we've continued to focus on costs and identify incremental savings, particularly in the area of corporate overhead. We are, have been, and will continue to be one of the most efficient and most reliable electric utility companies in the country.

This represents a high bar relative to industry practice, but I believe it appropriately aligns my financial interest with those of our shareholders.

Additional details around the increasing alignment of my compensation with our owners' interest will be available in our proxy statement, which will be published in March.

This has been a difficult time for our investors and I want them to understand how seriously I take that.

Third we've continued to focus on costs and identify incremental savings, particularly in the area of corporate overhead.

We are have been and will continue to be one of the most efficient and most reliable electric utility companies in the country.

Robert M. Blue: And finally, we've been focused on evaluating investor feedback around perceived earnings quality and plan risk. In his prepared remarks, Stephen will provide an update on our treatment of unregulated investment tax credits and assumptions around our retirement benefits. Turning to slide 15, today's announcement of an offshore wind partner marks the final strategic step of the business review. We are in the process of finalizing our financial plan, which will allow us to conclude the review. We've scheduled an investor meeting on March 1st, at which time we will provide a comprehensive strategic and financial update for the company and participate in a question and answer session. We encourage our investors and other stakeholders to participate virtually as their schedule allows.

Finally, we've been focused on evaluating investor feedback around perceived earnings quality and plan risks in his prepared remarks, Stephen will provide an update on our treatment of unregulated investment tax credits and assumptions around our retirement benefit plans.

Turning to slide 15, todays announcement of an offshore wind partner marks the final strategic step of the business review, we're in the process of finalizing our financial plan, which will allow us to conclude the review we have scheduled an investor meeting on March 1st at which time, we will provide a comprehensive strategic and financial update for the company and.

Participate in a question and answer session, we encourage our investors and other stakeholders to participate virtually as their schedule allows following the event we plan to initiate a comprehensive investor engagement effort to meet with our existing and prospective investors.

Robert M. Blue: Following the event, we plan to initiate a comprehensive investor engagement effort to meet with our existing and prospective investors. As we prepare to conclude the review, I am more optimistic than I have ever been about the future of our company. We recognize that we must consistently execute against the financial targets we provide at the conclusion of the review. As is always the case, I am accountable for, and my entire leadership team has embraced, our commitment to consistently deliver high-quality earnings growth that meets that plan. With that, I'll turn the call over to Steve. Thank you, Bob, and good morning.

As we prepare to conclude the review I am more optimistic than I have ever been about the future of our company. We recognize that we must consistently execute against the financial targets. We provided at the conclusion of the review as is always the case I am accountable for and my entire leadership team has embraced our commitment to consistently deliver.

Our high quality earnings growth that meets that plan with.

With that I'll turn the call over to Steven.

Thank you Bob and good morning.

Steve: Our fourth quarter 2023 operating earnings were $0.29 per share. Full year 2023 operating earnings were $1.99 per share, and full year gap net income was $2.29 per share. A summary of all adjustments between operating and reported results is included in Schedule 2 of the Earnings Release Kit. As shown on slide 16, we've provided a reconciliation of actual operating earnings relative to the guidance we provided on the last earnings call. There were three key drivers for the variance to guidance. First, during the fourth quarter, we experienced two cents of worse-than-normal weather in our utility service territories. Second, we incurred three cents of hurt related to certain outages at Millstone.

Our fourth quarter 2023 operating earnings were <unk> 29 per share full year 2023 operating earnings were $1.99 per share.

Full year GAAP net income was $2 29 per share.

The summary of all adjustments between operated operating and reported results is included in schedule two of the earnings release kit.

As shown on slide 16, we've provided a reconciliation of actual operating earnings relative to the guidance. We provided on the last earnings call. There were three key drivers for the variance to guidance first during the fourth quarter, we experienced two cents of worse than normal weather in our utility service territories second we incurred three cents.

That hurt related to certain outages at millstone.

Steve: Third, as part of the business review, and after we had given earnings guidance in November, we elected to change our accounting methodology for the way we recognize investment tax credits in earnings. This resulted in a $0.02 quarterly and $0.07 annual negative variance to guidance. I'll expand more on this accounting methodology change in a moment. A summary of all drivers for earnings relative to the prior year period is included in Schedule 4 of the Earnings Release Kit.

Third as part of the business review and after we had given earnings guidance in November we elected to change our accounting methodology for the way we recognize investment tax credits in earnings. This resulted in a <unk> quarterly and seven cent annual negative variance to guidance I'll expand more on this accounting methodology change in a moment.

The summary of all drivers for earnings relative to the prior year period is included in schedule four of the earnings release kit.

Steve: As we mentioned on our last earnings call, we view 2023 as a transition year for the company due to the pending results of actions we've taken as part of the business review to support our long-term objectives. With that in mind, let me refresh our housekeeping around the 2023 results. In 2023, our operating earnings per share were $1.99. Similar to last quarter, we believe it warrants highlighting many of the same adjustments that investors may consider to more accurately assess our 2023 results. First, we experienced historically mild weather during 2023, representing 18 cents of full-year earnings headswinds, including 2 cents in the fourth quarter. Recall that the second quarter was the mildest quarter relative to the 15-year normal in the last 50 years. We don't expect weather to deviate from its historical normal in this manner going forward.

As we mentioned on our last earnings call. We view 2023 is a transition year for the company due to the pending results of actions we've taken as part of the business review to support our long term objectives with that in mind, let me refresh our housekeeping around 2023 results and.

In 2023, our operating earnings per share were $1.99 similar to last quarter. We believe it warrants highlighting many of the same adjustments that investors may consider to more accurately assess 2023 results first we experienced historically mild weather during 2023, representing 18 cents of full year earnings headwinds, including <unk> in the fourth.

<unk> recall that the second quarter was the mildest quarter relative to 15 year normal in the last 50 years, we don't expect weather to deviate from historical normal in this manner going forward second we continue to expect approximately 50 cents of annualized interest savings from parent level debt repayment driven by the sales of Cove point and the gas utilities.

Steve: Second, we continue to expect approximately 50 cents of annualized interest savings from parent-level debt repayment driven by the sales of Cove Point and the gas utilities. Remember, the way discontinued operations are reflected in our 2023 results, 100% of the earnings from these assets are removed, but the benefit from the use of sale proceeds is not captured. Third, 2023 results include approximately $0.11 of unexpected and unlikely-to-repeat hurt from extended plant or unplanned outages at Millstote, including $0.03 in the fourth quarter. We've continued to follow through on the steps discussed in previous earnings calls to ensure the plant performs consistent with its strong operating history. Note also that 2023 was a standard double-fueling outage year, which is an additional around $0.10 hurt in 2023 that we won't see in the next two years, as double-plant outages occur once every three years.

Remember the way discontinued operations is reflected in our 2023 results 100% of the earnings from these assets are removed, but the benefit from use of sale proceeds is not captured.

Third 2023 results include approximately 11 cents of unexpected and unlikely to repeat hurt from extended planned or unplanned outages at millstone, including <unk> in the fourth quarter. We've continued to follow through on the steps discussed in previous earnings calls to ensure the plant performance consistent with its strong operating history. Note also that 2023 was a standard.

[noise] double fueling outage year, which is an additional around 10 cent hurt in 2023 that we won't see in the next two years is double plant outages occur once every three years.

Steve: Fourth, we expect approximately $0.15 of improvement as a result of the anticipated inclusion of market-based revenues from certain customers in the annual fuel factor, as well as a lower interest expense due to the securitization of $1.3 billion of deferred fuel balances that we financed with short-term debt during 2023. We closed on the fuel securitization transaction last week. The transaction was met with very strong demand, which allowed us to deliver a great result for our customers. Finally, and in the opposite direction, we expect approximately $0.18 of additional HERT related to the $350 million annual Virginia Rider revenue reduction at DEV, given that the rate reduction did not impact first half 2023 results. Taken together, these adjustments would result in an illustrative 2023 operating earnings per share of around $2.85. As we said last quarter, some of the transition we experienced in 2023 will continue into 2024, which is why we continue to view 2025 as the foundational year for the company's post-review financial performance. As part of the investor meeting, we will provide a comprehensive strategic and financial outlook that will run through 2029 and include operating...

Fourth we expect approximately 15 cents of improvement as a result of the anticipated inclusion of market based revenues from certain customers in the annual fuel factor as well as lower interest expense due to the securitization of $1 $3 billion of deferred fuel balances that we financed with short term debt. During 2023, we closed on the fuel securitization transaction last week.

The transaction was met with very strong demand, which allowed us to deliver a great result for our customers finally and in the opposite direction. We expect approximately 18 cents of additional hurt related to the $350 million annual Virginia rider revenue reduction that D V. Given that rate reduction did not impact first half 2023 results.

Taken together these adjustments would result in an illustrative 2023 operating earnings per share of around $2 85.

As we said last quarter some of the transition we experienced in 2023 will continue into 2024, which is why we continue to view 2025 as a foundational year for the Companys Post review financial performance.

As part of the Investor meeting, we will provide a comprehensive strategic and financial outlook that will run through 2029 and include operating earnings per share EPS growth credit dividend Capex and financing guidance as well as other relevant financial information. We believe that this presentation will provide reference information and insights that will help investors to better understand.

Dominion Energy's updated profile as well as the key value drivers of each of our business segments by way of reminder, the comments I made in the last call about drivers of 2025 earnings are unchanged and replicated on slide 17.

I'll turn now to the referenced Bob made in his prepared remarks regarding our evaluation of investor feedback around perceived earnings quality and planned risks.

By way of background over the last several months, we've engaged directly and extensively with our shareholders and received valuable feedback much of which has affirmed our business review commitments and priorities.

One consistent theme, we have heard is dissatisfaction with past earnings quality and plan assumption risk levels, and we've taken that feedback seriously.

We've made specific commitments around not pursuing unregulated solar investments for the purposes of generating upfront operating earnings from tax credits or reflecting gains from certain asset sales and operating earnings those commitments are unchanged.

Today, we're taking two additional steps first.

In December we formally elected to change our accounting methodology for the way, we recognize investment tax credits in earnings.

Let me walk through the background and rationale for this accounting methodology change.

Historically Dominion energy used what's called the flow through accounting method under which 100% of the income associated with Nonregulated investment tax credits was recognized immediately upon the project entering service.

Our past use of the flow through method led to some very substantial operating earnings volatility associated with credits generated by unregulated solar investments.

As a result of the inflation reduction act, our previously committed investments in dairy and swine renewable natural gas projects are now eligible for investment tax credits.

Absent a change in accounting method. These R&D credits would create operating operating earnings volatility identical to past unregulated solar credits. Therefore, we've made a change from the flow through method to the deferral method under the deferral method investment tax credit income is recognized over the.

Expected life of the asset, which in the case of renewable natural gas projects is 30 years.

Switching to the deferral method reduces ITC related earnings volatility. In addition, the deferral method is considered the preferred method under GAAP and is the predominant practice amongst peer utility companies.

This change in accounting method also aligns the treatment of our nonregulated itc's with the treatment of our regulated itc's, thereby creating additional consistency.

Speaker Change: So what does this change to a more preferable counting method mean for past present and future results.

Dominion energy will recast as reflected in the earnings materials released today.

Speaker Change: Its financial results to apply the deferral method to ITC income that was historically recognized under the flow through method a summary of the affected line items will be presented in our upcoming Form 10-K, which we expect to file tomorrow.

Speaker Change: I've explained the impact on 2023 results. Our November guidance was based on the flow through methodology.

Speaker Change: The adoption of the deferral method combined with changes in R&D project completion dates impacted actual results versus guidance.

Speaker Change: Number of projects that were originally expected to be completed in 2023 are now expected to achieve substantial completion in 2024.

Speaker Change: ITC income from those projects will now be recognized gradually over their estimated 30 year useful lives.

As we look forward through 2029, we expect ITC income, including renewable natural gas generated credits to account on average for approximately three to four cents of annual operating earnings per share for.

Speaker Change: For the avoidance of doubt there is no change the underlying economics of R&D investments because there is no change in the underlying cash flows while this change in accounting methodology impacts when an investment tax credit is recognized and book income the cash value of the tax credits are the same under either methodology.

Speaker Change: Now, let me share a few comments on our retirement benefit plans as shown on slide 19.

Speaker Change: We are evaluating a rebalancing of plan assets from return seeking towards lower risk classes. This is expected to reduce future funding risk and overall plan asset variability. This value evaluation will take place during 2024 with the final reallocation of assets occur.

Speaker Change: In early 2025.

Speaker Change: Let me address what I expect may be some questions related to this decision.

Speaker Change: First the background.

Speaker Change: Dominion Energy was later than many other companies to move away from offering traditional defined benefit pension plans to new employees and as a result still has several thousand employees that are accruing final average pay retirement benefits under traditional pension plans.

Speaker Change: This results in a relatively long liability duration, which we estimate to be in the 75th percentile relative to a large sample of corporate plan sponsors.

Speaker Change: Dominion Energy's current expected return on assets or your ROA assumption is based on an asset allocation, which reflects the long dated nature of our liabilities.

Speaker Change: Next why now.

Speaker Change: Given the robust funding levels across our retirement benefit plans, specifically, 117% in aggregate at year end. We believe that now is the time to evaluate ways to de risk plan assets by rebalancing towards lower risk asset classes that reduce volatility and increase the portfolio is implied implied hedge ratio.

Speaker Change: Finally, what's the impact to our financial plan. The determination of Euro is subject to many factors, including equity returns and interest rates and we cannot at this time predict precisely what our future assumptions will be however for illustrative purposes. We believe a rebalancing could result in a 100 basis point reduction in our your ROA, which would put our assumption rough.

Speaker Change: In line with peers.

Speaker Change: Such a reduction in your ROA would reduce operating earnings each year by eight to 10 cents per share.

Speaker Change: Further under a 100 basis point your ROE a reduction scenario, we expect retirement plan related operating earnings per share to account on average between 20 and 25% in 2029 for around 20 cents per share.

Speaker Change: With that let me summarize our remarks on slide 20.

Speaker Change: Our annual safety performance was the second best in our company's history, we continue to make the necessary investments to provide the reliable affordable and increasingly clean energy that powers our customers' everyday.

Speaker Change: Our offshore wind project is on time and on budget, we have taken significant steps to achieve the objectives of the business review, including adding a noncontrolling equity financing partner perceive out we are moving with urgency and care to complete the review.

Speaker Change: We recognize the importance of delivering a compelling result, and executing flawlessly thereafter.

And we look forward to concluding the review and discussing our strategic and financial update at our March 1st Investor meeting with that we're ready for your questions.

Speaker Change: Thank you.

Speaker Change: 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 key on your Touchtone phone now.

Speaker Change: Is that any time, you would like to remove yourself from the question queue. Please press star two.

Again to ask a question at this time, please press star one now.

Speaker Change: We will pause for a moment to allow questions to queue.

Speaker Change: And we will take our first question from the line of Shar.

Shar: With Guggenheim Partners. Please go ahead.

Speaker Change: Yeah.

Shar: Can you hear me Bob.

Speaker Change: Yes.

Speaker Change: Excellent excellent.

Speaker Change: Just obviously congrats on the sale and getting the review to this point just on the process itself can you just maybe speak a little bit more in depth of the bidding interest and why you settled on the sharing structure in the agreement and just to confirm this is a true sort of 50 50 pro rata sharing through the 11 3 billion right. So the 1%.

Speaker Change: Friends in Slide 10. This is just tied to the potential movement of the withholding amount is that correct you have that exactly right shar.

Speaker Change: So it is 50 50 through 11, three and then there is the there is the adjustment that we described so on the process.

Speaker Change: We attracted quite a bit of interest from financial.

Speaker Change: And strategic Counterparties, we talked a little bit about that on the last call that we were in.

Late stages with several attractive parties.

Speaker Change: And they diligence this project extensively they came in with their own.

Speaker Change: Experts in offshore wind obviously.

Speaker Change: Teams are related to regulation Finney.

Speaker Change: Finance and so forth.

Speaker Change: And what was really encouraging to me.

Speaker Change: Was to hear unanimously from parties who participated.

Speaker Change: How well this project is going.

Speaker Change: There that was.

Speaker Change: There was nobody who got in diligence who was concerned about the project at all and that was really helpful. So then as we thought about how we were going to.

Speaker Change: Choose a partner.

Speaker Change: If you refer back to some of the things that we've said before.

Speaker Change: On the last call. We noted the importance of having pro rata sharing of costs and we've achieved that here and we feel very good about that.

Speaker Change: We said that we needed a transaction that made sense for our customers and our shareholders and that was in keeping with the objectives that we set out in terms of the business review and we believe this transaction with stone peak meets that extremely well.

Speaker Change: The cost sharing.

Speaker Change: With protection from any hypothetical or unforeseen project cost increases.

Speaker Change: But having a half.

Speaker Change: Having a well capitalized partner to help US there was critical and.

Speaker Change: And improving our credit profile means that this is going to be extraordinarily beneficial for our customers and our capital providers. So this is a very good deal.

Speaker Change: We're very pleased with it we're pleased with the way the process works.

Speaker Change: And then sorry, Bob do you have an option do you have an option to farm down our stake again in any sort of succeeding offshore wind projects.

Speaker Change: <unk>.

Bob: This legislation that are permitted this partnership structure I think it was designed for this project and so we're focused very heavily on on time on budget on offshore wind right now and we've got a very good partner to work with to do that.

Speaker Change: Got it and then just lastly, not to get too far ahead of next week.

Speaker Change: Obviously sought to minimize external equity through this whole process I guess, how does this announcement today inform your views around this especially as we're thinking about an ATM versus a block and are there sort of any other efficient sources remaining we should be aware of thinking, particularly around the vessel here with <unk>.

Speaker Change: And she may be off the table. Thanks.

Speaker Change: Thanks short, Steve I'll take it.

Speaker Change: So what we've said is that the offshore wind is the final strategic step in our process and that next week, we look forward to sharing our comprehensive strategic and financial plan, we're not going to comment today on any specifics with regard to financing plan.

Speaker Change: Reiterate what we've shared since the beginning of the review that we're seeking to.

Speaker Change: Meet and exceed our downgrade thresholds, while seeking also to minimize the amount of external equity need and we think that the transactions we've announced to date have been very supportive of our objective but.

Speaker Change: But we'll provide a fulsome plan next week and I think we're going to hold off on giving pieces and parts until we get there.

Speaker Change: Asked the guys Congrats and we'll chat next week thanks, Sir.

Speaker Change: And we'll take our next question from the line of Nick Campanella with Barclays. Please go ahead.

Nick Campanella: Hey, good morning, everyone. Thanks for taking my questions and good morning.

Today, so yes congrats.

Nick Campanella: Hey, So I guess just you.

Nick Campanella: You had this view.

Nick Campanella: In the slide out on 2025 considerations on the third quarter call and the drivers are largely the same but you've also kind of introduced that pension and ITC disclosure. So I guess, just as you kind of think through the eight to 10, a detriment and then from pension and then the three to four cents of ITC is that kind of.

Nick Campanella: Mental to that 2025.

Yeah. Nick this is Steve so just to be clear, we haven't we've never given 2025 guidance.

Steve: And we've been very careful not to do that in on the last call.

Steve: We talked about sharing that list to emphasize the fact that in order to.

Steve: Create a view on 2025 as the external party you need to be thoughtful about a variety of factors many of which we haven't given any information on and we went through that list just to highlight what some of those could be.

Steve: We don't have insight into what folks have assumed around ITC or your ROA in any of their internal models. Our estimate so it's very difficult for us to be in a position to sort of describe how they ought to.

Steve: Consider our updated information on those topics today in their in their view.

Speaker Change: We're going to hold off from sort of providing anything like that but what I can say is and we look forward again to sharing what we think will be a very compelling result next week.

Speaker Change: And we've tried to be thorough and helping folks understand again, what some of those drivers that they ought to be considering should be.

Speaker Change: Okay I appreciate that thank you very much.

Speaker Change: I guess, just it's great to hear the agency feedback does seem like it was positive and Youre highlighting 100 basis points increased depth in this transaction.

Speaker Change: I guess just from a numeric perspective versus where the agencies want you to be out of this review where does that kind of put you holistically.

Speaker Change: Yes, I think again, we're not we're not going to disclose kind of where our pro forma credit metrics are going to be we'll provide that next week certainly from a qualitative and quantitative perspective, the agencies have been publicly.

Speaker Change: Publicly forthcoming with regard to there.

Speaker Change: Support of the steps we've been taking in the review.

Speaker Change: So we'll again, we'll not trying to be coy, but trying to be consistent with how we've approached the review for the last 15 months, we're not going to give you a sort of pro forma credit view.

Speaker Change: We'll provide that next week.

Speaker Change: Understood understood looking forward to next week and congrats again, thank you.

Speaker Change: Thanks, Nick.

Speaker Change: And we will take our next question from the line of.

Speaker Change: Jeremy Tonet with J P. Morgan. Please go ahead.

Speaker Change: One moment please.

Jeremy Bryan Tonet: Please go ahead Jeremy.

Jeremy Bryan Tonet: Hi, good morning good.

Jeremy Bryan Tonet: Good morning, Jeremy.

Jeremy Bryan Tonet: Hi, Jim.

Just wanted to kind of follow up on that last line of questioning a bit and appreciate.

Jeremy Bryan Tonet: There's some things that won't be said today, we said next week.

Jeremy Bryan Tonet: But.

Jeremy Bryan Tonet: Some of the agency communications that we had seen said that current.

Jeremy Bryan Tonet: With this type of arrangement would look very strong, but then over the construction cycle.

Jeremy Bryan Tonet: That would that would soften and put pressure there and was just wondering if you have any anything you can share there as far as.

Jeremy Bryan Tonet: Thoughts on.

Jeremy Bryan Tonet: How that stacks up if the agencies have previewed this.

Jeremy Bryan Tonet: Transaction or just any other thoughts in general I guess over the time period, the pressures that the cash drag this project.

Speaker Change: Yeah. Thanks, Jeremy.

Speaker Change: So what I would say on that topic is.

Speaker Change: Generally I think we agree with.

Speaker Change: Actually how the agencies were describing it which was some pre funding of some very heavy capital plans that we have in our in our plan, which we've talked about in previous calls we havent given specific numbers tomorrow. When the K comes out you'll see our capital investment. This year is $10 billion, which is relative to our average of 6 billion for our company.

Speaker Change: And so there was some effectively some pre funding from asset sales.

Speaker Change: And I think that's what they were signaling just generally on our relationship with the agencies. We just we don't speak for them.

Speaker Change: And.

Speaker Change: I will say that we have been very deliberate.

Speaker Change: Throughout the process and making sure that they understood in some detail some confidential detail.

Speaker Change: And how we were thinking about the review.

Speaker Change: And gathering their perspectives as it related to.

How they think about our company.

Speaker Change: And that has extended some.

Speaker Change: Sure it's extended to some formal engagements with rating agencies that have allowed us to make sure that we have a good sense of where they are relative to how we're thinking about our plan and our business risk profile.

Speaker Change: And with regard to this transaction, specifically as I mentioned and as we typically will do.

Speaker Change: We walked them through and some.

Speaker Change: Fairly detailed manner. The the terms of the offshore wind partnership transaction before we signed and.

Speaker Change: Made sure that we were comfortable indicating in our script today that we think that they'll viewed is unambiguous credit positive.

Speaker Change: Yes.

Speaker Change: Got it.

Speaker Change: Very helpful. Thank you for that and.

Speaker Change: Just wanted to pivot a little bit.

Speaker Change: Maybe I might have missed it here, but language around the dividend dividend outlook here is there any new messaging.

Speaker Change: We should take away or should we just be waiting for next week.

Speaker Change: There is no new messaging, it's the same as it has been since we started which is we are 100% committed to the current dividend and Jeremy I'll go out on a limb and suggest that you won't hear something different next week either on the dividend.

Speaker Change: Sort of beat that like a drum this whole time period. So I don't want people to think that we're saying that today and we will change our two next week.

Speaker Change: We're obviously aware of.

Speaker Change: Trends in the space around payout ratios, we're aware of that but no no change.

Speaker Change: And you shouldn't expect to change next week from what we've said publicly around our dividend and where we see the dividend going over time.

Speaker Change: Got it that's very helpful. I'll leave it there thanks, Thanks Jeremy.

Speaker Change: And so.

Speaker Change: And if you would like to ask a question. Please press star one at this time again, Please press star one.

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Speaker Change: Okay.

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Speaker Change: Once again, ladies and gentlemen, if you have a question. Please press star one at this time.

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Speaker Change: Operator.

It sounds like there is a technical issue I know there were some other folks in the queue before that we apologize of course.

Speaker Change: Ricky.

Speaker Change: <unk>.

Speaker Change: Alright. Thanks.

Speaker Change: Okay.

Speaker Change: Take the question from Jeremy Tonet next one moment please.

Speaker Change: Please go ahead, Jeremy with JP Morgan.

Jeremy Bryan Tonet: Hi, good morning, I figured I would take another shot here if there is room.

Jeremy Bryan Tonet: And.

Jeremy Bryan Tonet: Just realizing all the news today is very fresh, but maybe if you can provide any more color with regards to.

Jeremy Bryan Tonet: Stakeholder feedback at this point or from the regulators I guess, just how youre expecting this.

Jeremy Bryan Tonet: Transaction to move forward.

Speaker Change: Yes, Jeremy.

Speaker Change: We.

Speaker Change: Just talk to the regulatory staff. This morning after the announcement went out.

Jeremy Bryan Tonet: Let me just talk sort of generally about how we expect this to be receive so just start with the process.

We need to get approval from the State Corporation Commission in Virginia, The North Carolina Utilities Commission, we need some administrative approvals from <unk>, but the primary approvals are at.

Jeremy Bryan Tonet: At the state level and as.

Jeremy Bryan Tonet: I mentioned earlier and as I believe you know.

Jeremy Bryan Tonet: <unk> that was passed unanimously in Virginia last year enabled this partnership structure that we've put together. So it has to be approved by the FCC under the utility affiliates and transfers Act.

Jeremy Bryan Tonet: Standard there is adequate service at reasonable rates have to be maintained and that the arrangements or otherwise in the public interest and then we need affiliates Act approval in North Carolina as well in Virginia that affiliates Act approval has a statutory timeline of 90 days the other.

Jeremy Bryan Tonet: Our regulatory approvals don't have.

Jeremy Bryan Tonet: Particular timelines on that but we think it's reasonable to assume we'd get approval by the end of the year. So that's the process, but if you sort of step back for a moment.

Both Virginia, and North Carolina policymakers, both understand the value of a strong balance sheet. If you look at Virginia as general obligation bonds, they've been rated AAA by Moody's since $19 38 by S&P since $19 62, and by Fitch since 1991, and I can tell you that when you talk to Paul.

Jeremy Bryan Tonet: She makers in Virginia about the AAA bond rating, they usually use the adjective coveted.

Jeremy Bryan Tonet: And that's because they realize that a strong balance sheet for the state allows them to provide the best service to their constituents and the same is true for our company.

Jeremy Bryan Tonet: We have a healthy balance sheet, we're going to provide the best customer experience, we're going to be able to invest to meet the state's goals that is a very compelling reason for regulators to approve this transaction and I'm highly confident that they will see the benefits and approve it.

Speaker Change: Got it.

Speaker Change: Very helpful. Thanks.

Speaker Change: Maybe if you might be able to talk a little bit more I guess on the emerging PJM transmission opportunity.

Speaker Change: With PJM recently increased from the 10 year local load growth CAGR.

Speaker Change: It means the ability to capitalize on that.

Speaker Change: Diane will talk a little bit about that and Jeremy we're quite impressed with your ability to navigate the technical issues here. So.

Diane: Yes, good morning, Jeremy.

Speaker Change: Yes.

Jeremy Bryan Tonet: Absolutely right. The latest PJM forecast was somewhat higher than last year. So worried about five 5% a year end zone.

Speaker Change: Some of that is with our neighboring co ops that are within our zone, we continue to see.

Speaker Change: Lot of transmission investment opportunities and the.

Speaker Change: Last PJM open window, there were about $2 $5 billion of additional projects that were awarded to us.

Speaker Change: Much of that supports growth in the data centers and we fully expect there will be additional projects in future years to keep pace with that demand growth.

Speaker Change: Got it that's helpful. I'll leave it there thank you very much.

Speaker Change: Jeremy.

And our next question. Please state your name and company name before asking your question.

Speaker Change: Please go ahead.

Speaker Change: Alright.

Steve Fleishman: Steve Fleishman.

Speaker Change: <unk>.

Speaker Change: Yes, Hey, Steve we can hear you.

Speaker Change: Okay, Steve Thank you for hanging in there.

Steve Fleishman: Yes, my pleasure.

Steve Fleishman: Sure.

Steve Fleishman: That was interesting.

Steve Fleishman: The.

Steve Fleishman: The I guess just I assume can you you can't really comment on.

Steve Fleishman: We're the <unk> to debt.

Steve Fleishman: Playing out overall, but.

Steve Fleishman: Should we assume based on kind of the downgrade thresholds that we've seen in the past are likely to stay the same by the agencies from from this review.

Steve Fleishman: Yes.

Speaker Change: Okay. That's helpful.

Speaker Change: And also just.

Speaker Change: My question on.

Speaker Change: It was a quiet legislative session. This year as far as I can tell I just want to make sure there was nothing.

Speaker Change: Going on in the legislative session that we should be aware of.

Speaker Change: Steve Your characterization is accurate.

Speaker Change: Issues. The General Assembly was dealing with didn't have much to do with energy. They obviously elected.

Steve Fleishman: FCC judges and there were legislative proposals.

Steve Fleishman: Related to energy, but there are none that are still active in the general Assembly at this point.

Steve Fleishman: Okay.

Speaker Change: I'll leave it there thank you.

Speaker Change: And we'll take our next question from the line of Ross Sandler with UBS. Please go ahead.

Ross Sandler: Good morning.

Ross Sandler: Good morning Ross.

Ross Sandler: <unk> avoided good morning so.

Ross Sandler: A couple of questions.

Ross Sandler: Commercial loan growth was up almost 9% in 2023.

Ross Sandler: And I think you guys talked a little bit about data centers, but.

Ross Sandler: If I remember correctly, there were a lot of constraints and sort of putting data centers into northern Virginia because of transmission. How do you. How do you think about that growth.

Ross Sandler: Going forward into 2024.

Is there a constraint that limits that in 2024 should I be thinking about something of the same scale over the coming year.

Ross Sandler: So.

Speaker Change: When you say northern Virginia. It was one area of Loudoun County, Virginia, which is where there are a heavy concentration of data centers and.

Speaker Change: And we did have some transmission constraints, we've undertaken several shorter term projects that were we've either completed or about to complete.

Speaker Change: And then we have ultimately to transmission line 500 kv transmission line projects one of which.

Speaker Change: Is underway and the other is in the regulatory process. Those frankly that first one of those two 500 lines will relieve the constraint and loud and we've been able to start up.

Speaker Change: Connect on data centers, we had a brief period, where we took a pause to make sure we understood exactly what we were doing but we restarted.

Speaker Change: Broader question.

Speaker Change: Is we will absolutely be able to serve the data center growth that we expect is coming.

Speaker Change: It will require investment and transmission Diane just talked about that out of the most recent PJM open window.

Speaker Change: We've had.

Speaker Change: A lot of data center growth.

Speaker Change: In our company and our service territory for some years, we have very good relationships with the data centers.

Speaker Change: And we expect to see that growth continue and we expect to be able to serve it.

Speaker Change: That's great Bob. Thank you for that update and then one more if I may I. Appreciate you can't answer a lot of questions around a lot of things today until we get to the analyst day next week, but hopefully when you can.

Speaker Change: Discuss.

Speaker Change: Fixed costs are now I think at 92, just north of 92% on this and there is about 700, just south of $750 million on fixed costs how.

Speaker Change: How are you thinking about your capabilities and timeline to lock more of that on fixed costs.

Speaker Change: On this project yet it will come in sort of gradually as we move closer to the end of the project.

Speaker Change: The way it worked earlier, we would lock in a contract and you might get a pretty big chunk at one time or another from here on out it's some onshore transmission its fuel for vessels that will be doing the offshore construction and thats, just going to sort of come down over time.

Speaker Change: And the only other is miscellaneous project management costs, just our own.

Speaker Change: <unk> management through time, so those are the largest factors.

Speaker Change: Okay perfect. Thank you I'll leave it there.

Speaker Change: And we'll take our last question from the line of <unk> Chopra with Evercore ISI. Please go ahead.

Chopra: Yes, good morning, I made it.

Chopra: Two quick questions, sorry, I, just want to be absolutely clear.

Chopra: The.

Deepak Chopra: With the announced.

Deepak Chopra: Offshore sale. This is the last.

Deepak Chopra: Asset sale that we should be expecting or other.

Deepak Chopra: Portfolio optimizations, we should be expecting heading into the Investor Day next week.

Speaker Change: Correct. That's the last one as we signaled on the last call.

Speaker Change: The potential for an offshore wind equity partner was last strategic step we've taken that step.

Speaker Change: Got it and then just one small net.

Speaker Change: Maybe this is for Steve.

Speaker Change: When we talk about the ITC accounting change and then the pension accounting change Steve can you just remind us what is embedded in your 2003.

Steve Fleishman: Representative number their EPS number there.

What is what is currently baked into that number.

Steve Fleishman: Yes.

Steve Fleishman: In 2023, you'll see in footnote 22 of the 10-K Tomorrow you can you can actually calculate it we disclose all of this you.

Steve Fleishman: You'll see that in 2023 will have generated about 40 cents of earnings associated with pension related income.

Steve Fleishman: And so going forward, we've talked a little bit about.

Steve Fleishman: Your ROA.

Steve Fleishman: There's other there's another driver.

Steve Fleishman: Then I'll talk just briefly about that would be.

Steve Fleishman: Bring us from 40 closer that average of 20.

We like the majority of.

Steve Fleishman: Corporate sponsors of pension plans we.

Steve Fleishman: We calculate one of those key numbers are expected return, which like interest cost and service cost as a component of the net income or expense for pension.

Steve Fleishman: We effectively smooth the actual asset returns over a four year period and apply our expected return on asset to that sort of smooth.

Steve Fleishman: Our asset value and that's not only permissible that standard.

Steve Fleishman: Some people smoother I think over five years, we've moved over four years again, that's pretty standard.

Steve Fleishman: And because of 2020 twos performance at least in our portfolio, where we experienced a very significant loss to value across to be honest, both the equity and fixed income portions of our portfolio, which again I don't think is unusual for for folks.

What youll see between 'twenty three 'twenty four 'twenty, five and 26 as you see that.

Steve Fleishman: Smoothing occur such that the impact of that loss is fully recognized by 2026 now it's not just as simple as saying 22 was down and I'm going to take.

Steve Fleishman: Portion of that each year every year, we do that so you effectively have the stacked excel spreadsheet, where each year you are adding a little more of that the prior year and some years are dropping off that schedule. So it kind of.

Steve Fleishman: It's a net look of your of your asset value with this smoothing construct.

Steve Fleishman: Hopefully I'm just confused here, but but as a result of 2020 twos hurt flowing through that that will be a driver if youre asking if you're at 40 today and youre, telling us that needs to be closer to 20 and you've given us.

Steve Fleishman: Sensitivity around 100 basis points, how would you get to the next.

Steve Fleishman: That's a big driver of that the remaining amount.

Steve Fleishman: For ITC in.

Steve Fleishman: In 2023 as a result of the record that switch to deferral method I think we'll end up with something like <unk> in our 2023 results and again what that is from is.

Steve Fleishman: The recast of our historical.

Steve Fleishman: Historical results, we go back and we say hey, if we had not accounted.

Steve Fleishman: Accounted for this as a flow through if we accounted for the deferral some of that value is over that 30 year period. So as I mentioned three to four cents of of expected operating EPS from ITC.

Steve Fleishman: Credit going forward and that's about where we would be in 2023 as well.

Speaker Change: Perfect and Steve just to be clear I apologize this into the weeds, but so if I'm thinking about perspective.

Speaker Change: EPS net net we should be versus 23, 285% and 23.

Speaker Change: Should be 20, <unk> lowered net net right ITC being this kind of the same.

Speaker Change: Pension being 'twenty slower.

Speaker Change: Yes, it's not probably quite so precise we're using we're giving you 20 census, the average over 25% to 29 and there is some fluctuation in that.

Speaker Change: But generically.

Speaker Change: Versus 2023.

Speaker Change: <unk> 40 would would be moving something to closer to 20.

Over the 25 to 2009 period. Thank.

Speaker Change: Thank you Steve.

Speaker Change: Thank you. This does conclude this morning's conference call you may disconnect your lines and enjoy your day. Thank you.

Speaker Change: Okay.

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