Q4 2024 Dominion Energy Inc Earnings Call
Welcome to the Dominion Energy fourth quarter 2024 earnings conference call at this time each of your lines is in a listen only mode. At the conclusion of today's presentation, we will open the floor for questions.
<unk> will be given for the procedure to follow if you would like to ask a question.
Speaker Change: I'd now like to turn the call over to David Mcfarland, Vice President Investor Relations and Treasurer.
Speaker Change: Good morning, and thank you for joining Dominion Energy's fourth quarter 2024 earnings call earnings materials, including today's prepared remarks contain forward looking statements and estimates that are subject to various risks and uncertainties.
Speaker Change: Refer to our SEC filings, including our most recent annual report 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.
Speaker Change: One 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.
Dave: 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 Thanks, Dave and good morning.
Dave: Almost a year ago, we concluded the comprehensive business review and described five key tenets upon which the reposition dominion energy would be premise strategic simplicity consistent long term financial execution balance sheet conservatism dividends security and the delivery of an exceptional customer.
Dave: <unk> that would enable us to advocate for and achieve balanced policy construct and reasonable regulatory outcomes you heard from me and directly from members of the board that we would collectively be accountable for the company's future performance. Finally, we committed to being 100% focused on successfully executing.
Dave: Against our updated plan.
Dave: Now a year on none of that has changed those commitments are as equally fundamental to our company today as they were 12 months ago, we know that to rebuild your trust, we must deliver consistently over the long run.
Dave: While we're still relatively early in this new chapter of our company, we're off to a positive start.
Dave: Looking back at 2024, we accomplished operating earnings per share in the top half of our guidance range despite weather headwinds.
Dave: Remarkable storm restoration effort in South Carolina in the aftermath of Hurricane Helene one of the region's most destructive storms ever.
Dave: Tori outcomes in South Carolina, and North Carolina base rate cases, as well as a number of Virginia rider cases that demonstrate our ability to work cooperatively with regulators and stakeholders to deliver results that benefit both customers and shareholders.
Dave: And significant derisking of the coastal Virginia offshore wind project through both the continued on time achievement of major milestones as well as the closing of a 50% noncontrolling equity financing through which we've materially reduce project risk for our shareholders I'll share more perspective on <unk> a little later in our prepared remarks.
Dave: We did all of this while achieving a near record setting employee safety performance and advancing our all of the above strategy to reliably and affordably meet our customers' rapidly expanding energy demand, which includes the largest data center cluster in the world.
Dave: Let me now turn it over to Stephen to provide a financial update before I walk through additional updates on the execution of our plan.
Stephen: Thank you Bob and thanks to everyone for joining today's call.
Stephen: As shown on slide five full year 2024 operating earnings were $2.77 per share in the top half of our guidance range. Despite three cents of worse than normal weather full year 2024, GAAP earnings were $2 44 per share.
Stephen: Our fourth quarter operating earnings were 58 cents per share, which for this quarter represented normal weather in our utility service areas fourth quarter GAAP earnings were <unk> 15 cents per share as always a summary of all drivers for earnings relative to the prior period is included in schedule four of the earnings release kit and a summary of all adjustments between operating and GAAP results.
Stephen: Included in schedule too.
Stephen: Next on earnings guidance, we've narrowed 2025 operating earnings per share guidance to $3.28 to $3 52 per share inclusive of <unk> 45 is the credit income while preserving the original midpoint of $3.40. We provide a range to primarily account for variation from normal weather.
Stephen: Were reaffirming annual operating earnings growth guidance of 5% to 7% through 2029, after 2025 midpoint of $3.30, which excludes the impact of RMG forty-five Z credit income due to the legislative Sunset of that credit at the end of 2027 as a reminder.
Stephen: We continue to expect to see variation within that range as a result of the millstone refueling cadence, which requires a second planned outage. Once every third year. We're also reaffirming our previous guidance related to the dividend we expect to maintain the current dividend level of $2 67 per share annually until such time as we achieve a.
Stephen: The industry aligned to payout ratio.
Stephen: Turning now to capital investment we've updated our five year capital forecast from 2025 through 2000 $29 billion to $50 billion, an increase of 16% from our prior guidance, we're seeing the need for incremental investment across distribution transmission and generation to ensure reliable reliably.
Stephen: Reliability amid continuing growing demand in our service areas.
Stephen: Consistent with our increased focus on transparency, we've provided comprehensive and detailed disclosure in the appendix of todays materials. So I'll just hit two takeaways here first approximately 80% of the capital increase is at Dominion Energy, Virginia, driven by higher transmission distribution and nuclear subsequent license renewal spend.
Stephen: And second 60% of the updated capital spend will be eligible for recovery subject to regulatory approval under rider mechanisms.
Stephen: This is an exciting update and we're confident in our ability to execute for the benefit of our customers outs.
Stephen: Outside of today's forecast, we continue to see opportunities for additional investment across the value chain bias towards the end of the decade and beyond we will include those opportunities in future updates as warranted by their development status.
Stephen: Before I discuss our financing plan update all affirm our commitment to balance sheet conservatism as demonstrated on slide seven through the five year plan, we expect our parent leverage to be consistently below 30% and our episode of debt to be approximately 15%.
Stephen: Finally, we target mid Triple B range credit ratings for our parent company and single a range ratings for our regulated operating companies no change there our long standing focus on achieving and maintaining these ratings is important for our ability to continue to secure a low cost of capital for our customers now.
Stephen: Now turning to the financing plan on slide eight we're providing a five year look at sources and uses meaningful operating cash flows combined with a balanced mix of external financings satisfy our capital investment and dividend forecast since the last update we are modestly increasing external financing across debt hybrid and equity issuance.
Stephen: On equity you'll note on slide nine and increase in 2025 as of today, we've already sold $600 million through forward settled sales under our existing ATM program expect to issue 200 million throughout the year through drip programs and expect to satisfy the balance of the approximately $300 million need through the ATM beyond.
Stephen: 2025, there'd been no changes to our common equity issuance guidance, we view this level of steady equity issuance under existing programs in the context of our sizeable growth capital spending program as appropriate to keep our consolidated credit metrics within the guidelines for our strong credit ratings category.
Stephen: Before I hand, it back to Bob I'll note that we're pleased with our 2020 for financial performance, but it's really all about how we execute going forward.
Stephen: Since the March 1st meeting, we've seen tailwind like increased regulated capital investment opportunities and we've seen headwinds like higher interest rates, but.
Stephen: But what hasn't changed is our confidence in the plan, which has been built to be appropriately, but also not unreasonably conservative and with that I'll turn it back to Bob.
Turning to safety performance and affordability on slide 10, we achieved near record setting safety performance in 2024 as measured by our employee Osha injury recordable rate.
Stephen: On affordability, our rates continue to be lower than national and regional averages. We're intently focused on ensuring our service isn't just reliable, but it but that it remains appropriately affordable as well next on our coastal Virginia offshore wind project. We provided several updates last week, but I'd like to start with a few project highly.
Stephen: On slide 11.
Stephen: First the project is 50% complete and on schedule for completion in 2026 second Steve out is supported by Virginia Law and approved by the State Corporation Commission and federal agencies.
Stephen: Third <unk> will provide much needed new generation to support America's AI and cyber preeminence in the largest data center market in the world. Additionally, the project represents the fastest and most economical way to deliver to six gigawatts of supply to Virginia's grid.
Stephen: And finally see valleys created approximately 2000 direct and indirect American jobs and generated $2 billion in American economic activity. In addition to having the robust bipartisan support of Virginia State and federal elected leaders.
Stephen: In summary, this project is consistent with the goal of securing American energy dominance and as part of a comprehensive all of the above energy strategy to affordably meet growing energy needs.
Stephen: Nexon recent construction progress and milestones in 2024, we completed a very successful first mono pilot installation season and work has continued this winter on export cable way as well as transition pieces and in the coming days offshore substation installation.
Stephen: As shown on slide 12, we began installation of transition pieces on December 31, and have since completed installation of 20 in total the first offshore substation jacket and topside were delivered to Port Smith at the end of January and we'll begin installation later this month.
Stephen: Remaining two offshore substations are on track to be delivered this summer and installed in the fall after completion of mono policies in October.
Stephen: Our materials and equipment, thus far of 130 mono piles have been loaded out with 116 successfully delivered in 14 more in transit to Virginia presently.
Stephen: Approximately 75% of the project's monetize are either installed or awaiting installation.
Stephen: Our partner E. W continues to make strong progress and we expect deliveries to continue steadily in the coming weeks.
Stephen: Out of the project's 176 transition pieces all have been rolled off. These 152 have been successfully steel welded and of these 91 have been completed representing over 50% of the total we expect the final transition piece to be completed in October.
Stephen: Additionally, the schedule for the manufacturing of our turbines remains on track as a reminder, Siemens gamesa. The projects wind turbine supplier is manufacturing the same turbine model foresee Val as has been successfully fabricated installed and is now operating at the Moray West offshore wind project eight towers have been completed with.
Stephen: An additional 31 in progress blade fabrication is now underway and we expect the self production to begin next month.
Stephen: Turning to regulatory we made our quarterly offshore wind construction update filing on February 3rd accompanied by a detailed explanation of the change in project costs from $9 8 billion to $10 $7 billion.
Stephen: Let me share a few thoughts here first as you would expect the cost increase is disappointing we take great pride as an organization and delivering on time and on budget.
Stephen: Since the original cost submission 40 months ago, we have spared no effort institutionally maintained fidelity to our original estimate.
Stephen: Ultimately, despite having about $300 million budgeted for network upgrades, which was more than sufficient based on Pjm's. Initial estimates that estimate has proved too low new electric generation resources constructed within PJM, regardless of their generation tight or sign costs by PJM that are deemed necessary to effectively.
Stephen: We integrate these resources and ensure the reliability and stability of the electric grid.
Stephen: Higher network upgrade cost estimates by PJM reflect the significant increase in demand growth that requires incremental generation transmission resources across the system.
Stephen: I think it warrants, noting that the aggregate cost for other project inputs, including offshore scope have remained in line with the original budget.
Stephen: Second network upgrades do not impact project construction or timeline and represented the largest unfixed project cost by far we now have a much clearer, though not final view of those costs further we've refreshed contingency to represent 5% of remaining project costs.
Stephen: Third cost sharing and risk sharing is working as intended to protect customers and shareholders.
Stephen: As a result of the cost sharing settlement approved by Virginia regulators. The project cost update is expected to increase residential customer bills by an average of 43 cents per month over the life of the project and.
Stephen: And the updated L. See OE continues to benchmark very favorably with new generation alternatives, including solar battery and gas fired generation <unk> remains one of the most affordable sources of energy for our customers of.
Stephen: Of the $900 million cost increase 80% or 700 million is expected to be recovered via a rider and added to rate base subject to regulatory approval.
Stephen: 50% of the non recoverable portion of the increase will be borne by stone peak, rather than Dominion energy shareholders find.
Stephen: Finally, I know investors are very focused on the probability of future cost increases I recognize the critical importance of executing against any guidance offered.
Stephen: The project is on time, and we're committed to delivering it in line with the now updated cost estimate.
Stephen: We don't have perfect insight into the information that PJM will use to finalized cost by mid year, but we've done a significant amount of analysis around the most recent estimate which informs our updated cost estimate.
Stephen: I'm confident in our updated estimate and believe that if there is a revision up or down with respect to PJM network upgrades come July it would not be of a similar magnitude.
Stephen: Finally, a few updates on charybdis as shown on slide 16, the vessel is 96% complete up from 93% as of our last earnings call and sea trials are underway. What we're showing there is a picture of the 30000 ton vessel fully Jack to its full height of almost 400 feet.
Stephen: We continue to expect charybdis to complete sea trials in early 2025, consistent with our previous schedule and be delivered to <unk> in the third quarter. There's also no change to the vessels cost of $715 million.
Stephen: Turning now to data centers, we continue to see exciting developments here. So let me share a few updates.
Stephen: First where things stand today.
Stephen: Virginia hosts the largest datacenter concentration in the world by far since we started tracking we've connected approximately 450 data centers, representing nearly nine gigawatts of capacity.
Stephen: Data center sales today represent about 26% of total sales for D E V.
Data centers are attracted to Virginia by connections to World class fiber networks, Virginia is attractive business climate availability of a trained workforce and access to our affordable reliable and increasingly clean energy.
Stephen: In recent years to address this demand we've advanced electric transmission projects to bring both new and upgraded infrastructure to enable continued connection and expansion of data center customers in Eastern Loudoun County, Virginia.
Stephen: This work has included re conductor ing lines, expanding substation infrastructure as well as building a 500 kv transmission line that we expect to complete on schedule by the end of 2025.
Stephen: Further just last week the FCC approved another 500 kv line in Eastern Loudoun County that we expect to be in service by year end 2027.
Stephen: That will allow us to stay ahead of the regions rapidly growing electricity needs.
Stephen: Second where do we go from here.
Stephen: The PJM Dom zone is experiencing unprecedented load growth. This growth is accelerating and orders of magnitude driven by one the number of data centers requesting to be connected onto our system to the size of each facility and three the acceleration of each facility's ramp scheduled to reach full capacity.
Stephen: For some context as shown on slide 17, PJM recently updated its Dom zone forecast that now projects peak summer load growth of approximately six 3% per year for the next 10 years to put that into perspective, the resulting peak load projected for 2034 has increased from 26 one gigawatts.
Stephen: As of the 2022 P. J M estimate to 41 five gigawatts as of this year's estimate an increase of nearly 60% last year, we implemented changes to our process on how we handle new delivery point requests on our system. This change will allow us to organize load request into batches and serve them any order they are received.
Stephen: <unk> since we began communicating these changes we've seen an increase in demand from customers as shown on slide 18, we've updated our datacenter contracted capacity. We now have approximately 40 gigawatts in various stages of contracting as of December 2024, which compares to around 21 Gigawatts as of July 2024.
Stephen: An increase of 19 Gigawatts are 88%.
Stephen: As a reminder, these contracts are broken into one substation engineering letters of authorization to construction letters of authorization and three electrical service agreements as customers move from one to three the cost commitment and obligation by the customer increases.
Stephen: We're currently studying over 26 gigawatts of datacenter demand within the substation engineering letters of authorization stage, which means a customer has requested the company to begin the necessary engineering for new infrastructure required to serve the customer.
Stephen: This compares to approximately eight gigawatts as of July 2024, and represents a remarkable 245% increase.
Stephen: We've analyzed the data several ways and certainly we believe some of this growth is attributable to the new batch system, which naturally and since customers to get into the process early but what's undeniable is that data center growth in Virginia is not slowing down in fact, it is accelerating and we're taking every step to meet this opportunity.
Stephen: There are also about five gigawatts of data center demand that have executed construction letters of authorization, which are contracts that enable construction of the required distribution and substation electric infrastructure to begin should.
Stephen: Should a customer in this stage elect to discontinue a project, they're obligated to reimburse the company for its investment to date.
Stephen: Finally, the nearly nine Gigawatts included an electrical service agreements or Esa represent contracts for electric service between Dominion energy in a customer. This is an increase by nearly eight gigawatts since July of 2020 for each contract is structured for an individual account by signing an Esa the customer is committing to consume a certain level of.
Stephen: Christy annually, often with ramp schedules, where the contracted usage grows over time.
Stephen mentioned this is all evidence of opportunities for additional investment across the value chain for many years to come.
Speaker Change: Turning to slide 19, let me highlight a couple of additional business updates first an update on our transmission business and the joint planning agreement with AEP and Firstenergy.
Speaker Change: A package of our own and jointly proposed projects has been shortlisted by PJM and they are open window process, which is ongoing with final approvals expected this month.
Speaker Change: Dominion share of the joint planning agreement will lead to approximately $1 billion of incremental capital spend in the five year plan.
Speaker Change: When combined with our other Dv transmission projects. This will result in annual transmission capital spend up greater than $2 $8 billion beginning in 2027 above the $2 5 billion. We are wed previously forecasted.
Speaker Change: Next in South Carolina policymakers are in session and continue to evaluate potential energy legislation. We're appreciative of the significant time spent to date by the legislature on this important topic as we've indicated in the past we're committed to supporting South Carolinas growing economy. However, as we've testified the regulatory framework for.
Speaker Change: <unk> creates regulatory lag that makes it practically impossible to earn our allowed return, especially as compared to neighboring south eastern regulated jurisdictions, including Virginia.
Speaker Change: Finally on Millstone the facility provides over 90% of Connecticut's carbon free electricity and 55% of its output is under a fixed price contract through late 2029.
Speaker Change: The remaining output continues to be significantly de risked by our hedging program, which we've updated in the appendix of todays materials during.
Speaker Change: During 2020 for Millstone performed well and achieved a capacity factor of 92% aligning with our expectations of exemplary performance and reflecting our unwavering commitment to safety and best in class operations.
Speaker Change: Many of you are aware theres been recent legislative activity in new England and in Massachusetts, specifically aimed at authorizing future additional procurements of nuclear power and we've continued to engage with multiple parties there to find the best value for Millstone.
Speaker Change: In addition to state sponsored procurement, we continue to evaluate the prospect of supporting incremental data center activity as well, we feel strongly that any datacenter option needs to be pursued in a collaborative fashion with stakeholders in Connecticut. At this point, we don't have a timeline for potential announcements, we remain focused and will continue to provide updates as things do.
Speaker Change: Hello.
Speaker Change: Let me summarize our remarks on slide 20.
Speaker Change: We achieved near record setting safety performance this year.
Speaker Change: We reaffirmed our long term operating earnings per share growth rate credit and dividend guidance for March one and narrowed our 2025 operating earnings guidance range, Steve out remains on schedule with robust cost sharing that protects customers and shareholders.
Speaker Change: In collaboration with our policymakers regulators and stakeholders, we continue to make the necessary investments to provide the reliable affordable and increasingly clean energy that powers our customers' everyday.
Speaker Change: And we're 100% focus on execution, we know we must continue to deliver and we will with that we're ready to take your questions.
Speaker Change: Okay.
Speaker Change: At this time, we will open the floor for questions if you'd like to ask a question. Please press the Starkey followed by the one key on your Touchtone phone now.
Speaker Change: If at any time, you would like to remove yourself from the question queue. Please press star two.
Speaker Change: Again to ask a question at this time, please press star one now.
Speaker Change: We will take our first question from Shar <unk> of Guggenheim partners.
Speaker Change: Hey, guys good morning.
Speaker Change: Morningstar.
Speaker Change: Good morning, Bob Bob just on <unk>, just I guess in light of the updates earlier. This month, maybe can you just elaborate on the remaining variability in the projects. If there were delays in supplier component deliveries how flexible the schedule how would the standby costs be recovered with suppliers pay and any new color.
Speaker Change: On how youre thinking about incremental wind projects in light of your experience on <unk> to date and the prospects for policy and tariff headwinds from D. C.
Speaker Change: Yes, Shar you are you've got a lot in there.
Speaker Change: One question. So let me let me see if I can work my way through the various pieces and I'll ask Diane to talk a little bit about sort of where we are in the project.
Speaker Change: And Derisking.
Diane: So we're in a very good position with this project and.
Diane: And we feel very confident about the estimates that we just gave understanding theirs.
Diane: More data to come from PJM on network upgrades, but we've done a lot of work with the best data that we can so far the data that we've used seems to be consistent with what PJM is looking at and we think it puts us in a pretty good position.
Diane: Let me talk a little bit about tariffs because you mentioned that and then I'll turn it over to Diane to just talk about overall sort of de risking on the project.
It's really too early to say how potential tariffs might affect this project I can I can tell you that.
Diane: Remaining spend outside of the United States is about $2 $5 billion, a majority of that from Europe, only a portion of that for components that would include steel or aluminum.
Diane: With respect to potential steel and aluminum tariffs in particular.
Diane: Generally these types of tariffs are not intended to apply to most finished products. We would consider the sea of our components to be finished products that said, we don't have the annexes to accompany the executive order, we can't know what if.
Diane: If any of our remaining spend would be potentially subject to tariffs.
Diane: These are finished products that include some steel some other materials. So it's not as simple as just taking our contract value and applying a percentage for example, the cells have thousands of components in them blades.
Diane: As most people know don't have steel or aluminum in them.
Diane: If the steel and aluminum tariffs end up taking effect that won't be before March 12, So we should get some better insight before then.
The past may not be a predictor of the future, but if these tariffs follow the form of those imposed in 2018.
Diane: Largely wouldn't apply to see how it all and then finally and Diane will talk sort of about how we're doing on Derisking the project, but it's worth remembering.
Speaker Change: We have $200 million of contingency within the current project budget of 10, 7%.
Up to 11, 350% of costs are recoverable from customers.
Speaker Change: And costs are shared 50 50 with stone Pete.
Speaker Change: Dan do you want to talk a little bit about where we are in the development sure. Good morning Shar.
Speaker Change: So when.
Speaker Change: When I think about the risk first I kind of look at where we are all of our permits are in hand, all of the materials have been purchased we have fixed price contracts for all the major equipment fabrication is doing very well all the deliveries of that fabricated equipment.
Speaker Change: Is right on time and the installation activities have been moving forward on track. So when I kind of look at the performance of the suppliers as we're progressing now that we're a 50% complete risks are naturally continuing to decrease.
Speaker Change: So just take as an example.
Speaker Change: With the vessel in installation logistics as we saw on the first piling seasonally kind of got better and better and got to twenty-five mono piles of months kind of as a run rate and as we've seen this winter and the transition piece installation in the cable installation is just going right on track.
Speaker Change: So when I look at what costs are still on fixed we've talked about the final estimate that we're feeling good about on PJM. There is fuel for all the vessels and there is project management.
Speaker Change: So you know we need to complete fabrication, that's going very well, we need normal weather and so we're feeling really comfortable where we are and where the suppliers of them performing.
Speaker Change: Sure I'll jump back.
Speaker Change: Projects I don't think it'll surprise to you that we are very focused on this project.
Speaker Change: And bringing it in.
Speaker Change: Consistent with the schedule and budget that we've been talking about we've got a couple of other leases we have no capital in the plan associated with those leases.
Speaker Change: And we'll just sort of see where things go in the future, but our focus is on this project.
Speaker Change: Did we get all the pieces and parts yet in their sharp is there anything we missed.
Speaker Change: That was fantastic actually I'll leave it at that with my 20 part question I. Appreciate it guys. Thanks. Thank you.
Speaker Change: We'll take our next question from Nicholas Campanella of Barclays.
Nicholas Campanella: Hey, Thanks for taking my questions good morning.
Speaker Change: Hi, good morning.
Speaker Change: So the.
Speaker Change: The updated gigawatts on the datacenter side, it's just a really large number and I'm just kind of curious I. Just wanted to first confirm this is incremental to what PJM has kind of put out here in the beginning of the year and then secondly, just how do you kind of think about the timeline to kind of wrap some of that into the plan and the current decade and is there like a sensitivity we shouldn't be.
Speaker Change: Thinking about for every gigawatt of new datacenter hookup is there an amount of capex, whether it's transmission or generation that would be required for that thanks.
Speaker Change: Yeah, Nick on the sort of is that in PJM.
Speaker Change:
Speaker Change: Gigawatts that are in the substation engineering phase those are not in the PJM forecast there is no sort of rule of thumb on.
Speaker Change: Any particular.
Speaker Change: The amount of Gigawatts in sort of the capital plan and so forth.
Speaker Change: I think it's just important for everyone to understand that the data center demand in Virginia.
Speaker Change: In Northern Virginia, and in Loudoun County.
Speaker Change: Continues to be very significant you see that in the numbers. There just to give you a sense I know there are some folks who may have some misunderstanding about loudoun in particular.
Speaker Change: About how much more capacity is available there. If you just look at the transmission projects that were working on including the two 500 kv lines that we mentioned in our prepared remarks, that's an additional six gigawatts of capacity in eastern Loudoun alone.
Speaker Change: So theres room in eastern Loudoun on the system.
Speaker Change: And the data centers continued to expand as well sort of outward from Loudoun County, particularly into neighboring counties coming down Interstate 95, There's also data center expansion happening.
Speaker Change: In the Richmond Metro area pretty substantially.
Speaker Change: So that demand just keeps coming.
Speaker Change: We're very focused on making sure we can serve it.
Speaker Change: And we want to do that in a way that's consistent with our mission of reliable affordable increasingly clean energy.
Speaker Change: Hey, I appreciate that and then.
Speaker Change: Just kind of expanding on your comments from millstone in the prospects for any type of incremental large customer for that remaining non fixed portion.
Speaker Change: There seems to be a lot of focus on additionality. It comes with co location in any forum and just maybe you can kind of comment on whether that's something that you think you would need to.
Speaker Change: Forward.
Speaker Change: With a contract opportunity there what's the next kind of catalysts, we should be kind of watching for.
Speaker Change: I know that this is potentially going in the right direction.
Speaker Change: You can't give you a catalyst for what you should be looking for as we've said there's not a timeline on this.
Speaker Change: From that potential.
Speaker Change: A large user customers, we've talked to additionality is not essential.
Speaker Change: They certainly talk about it but they don't that's not our gating item.
Speaker Change: So we're going to keep talking to potential data center co locator customers to the states of Massachusetts, and Connecticut, others in New England.
Speaker Change: And we're going to continue to stick with what we said pretty clearly is.
Speaker Change: We need to make sure we're taking into account the interests of stakeholders in Connecticut, as we think about this very valuable asset.
Speaker Change: Great. Thanks, a lot.
Speaker Change: We'll take our next question from Jeremy Tonet of JP Morgan.
Jeremy Tonet: Hi, good morning.
Speaker Change: Hey, Jeremy.
Nicholas Campanella: I just wanted to dive into the Virginia data center opportunity a little bit more in.
Speaker Change: And quite a step up as you outlined.
Speaker Change: Outlined there.
Speaker Change: Just wondering if you could touch a bit more on reactions from stakeholders and really just thinking about.
Speaker Change: This low driving incremental bill pressure and thoughts about I guess bill headroom in general here.
Speaker Change: Yeah great.
Jeremy Tonet: Great question Jeremy.
Jeremy Tonet: Policymakers in Virginia are very focused on.
Jeremy Tonet: Data center build out because they see the economic benefits of it and you.
Jeremy Tonet: You can see it in localities, where there already is a substantial amount of.
Jeremy Tonet: Data center load the tax bills property tax bills, and say Loudoun County are substantially lower.
Jeremy Tonet: Then they would have to be without the tax revenue that's coming in from data centers and so that part of the economy, and making Virginia attack hub.
Jeremy Tonet: Is really important to stakeholders in Virginia, particularly to governor young can he talks about that quite a bit. So there is an interest in continuing to see.
Jeremy Tonet: Data center expansion.
Jeremy Tonet: As there are more megawatt hours sold to Datacenters, then that spreads the total costs out.
Jeremy Tonet: Over a larger group of customers and can actually help with customer Bill headroom.
Jeremy Tonet: And I know there is often a discussion about sort of our data centers paying their fair share.
Jeremy Tonet: Our other customer classes subsidizing data centers. These kinds of debates about one customer class subsidizing another customer class.
Jeremy Tonet: Been going on since the beginning of utility regulation.
Jeremy Tonet: There are ways always to address that in Virginia, particularly with biennial reviews. So I.
Jeremy Tonet: I suspect that in the biennial that we'll file in March.
Jeremy Tonet: This issue will be considered by the commission.
Jeremy Tonet: And I am confident that they will make a decision that ensures we can continue.
Jeremy Tonet: Data center growth in Virginia in a way that is that works for all customers of Virginia. This is just good for the economy of Virginia, and it's important to keep it going.
Speaker Change: Got it that's helpful. There and want to continue with the biannual if we could just wondering on overall engagement.
Speaker Change: With stakeholders, there and besides affordability as you outlined there are any key issues to hash out here just trying to think about how we should be thinking about Virginia regulatory sausage, making at this point.
Speaker Change: We're going to focus on just filing a pretty straightforward rate case in Virginia.
Speaker Change: As a I expect many people know.
Speaker Change: And the last biennial there was sort of prescribed ROE that is not the case in this one.
Speaker Change: Got a couple of new judges on the FCC realm.
Speaker Change: Relatively new they are little less than a year they've been on the on the bench.
Speaker Change: But when we think about our positioning in a rate case, we start with our reliability and our affordability and they are both incredibly strong in Virginia, we are well recognized amongst stakeholders as being a very reliable provider of electricity.
And our rates as we mentioned in our prepared remarks continue to be below regional and national averages. So we're in a strong position.
Speaker Change: The sort of general environment going into the case I think is very constructive.
Speaker Change: And we will have a result by the end of November, but I would not there is nothing particularly exotic.
Speaker Change: And this upcoming biannual.
Speaker Change: Yeah.
Speaker Change: Got it makes sense. Thank you for that.
Speaker Change: We'll take our next question from David Arcaro of Morgan Stanley.
David Arcaro: Alright, Thanks, good morning good.
Speaker Change: Good morning, David.
Let me see I had a question on the offshore wind side of things with the.
Speaker Change: Earlier this year, the executive order around offshore wind and the secretary of the interior reviewing existing project I was just wondering your interpretation and viewpoints on what that could mean for existing leases like Eos eval.
Speaker Change: Yes, we don't think theres going to be impact to see Val from the executive order. If you think about it it's got all the permits that needs.
Speaker Change: Including all of its federal permits it's consistent with some very important energy objectives that the administration has articulated it's an important part of all of the above strategy to deliver more power to a growing economy and Virginia, It's certainly the fastest and most economic.
Speaker Change: Way to deliver to six gigawatts of the grid stopping it would be the most inflationary action that could be taken with respect to energy in Virginia. It's homegrown. It helps promote American energy dominance, it's needed to power that growing datacenter market, we've been talking about.
Speaker Change: Critical to continuing U S superiority in AI and technology, it's creating American jobs 2000 at last count it specifically authorized.
Speaker Change: Virginia law. It has robust bipartisan support of leaders in Virginia worth, noting that in his confirmation hearing Secretary Bergen said projects that makes sense and are already in law will continue in <unk>.
Speaker Change: <unk> definitely fits that bill.
Speaker Change: Okay excellent I appreciate that commentary.
Speaker Change: Commentary.
Speaker Change: And then I was also curious on the on the data center side of things just to dig in a little bit more obviously your pipeline has grown a huge amount over the last six months and then when we look at the PJM forecast.
Speaker Change: 2034 forecast, they've only gone up a little bit.
Speaker Change: Do those numbers have to rise from here or are there constraints in and actually connecting all of these data centers or something else.
Speaker Change: Making you think that not all of these are actually going to crystallize and come to your system.
Speaker Change: Well I think if you look at what we're planning for what we've got capital for we're highly confident.
Speaker Change: The data centers are going to show up in our system, maybe you think about it we've been serving datacenter customers longer than anybody else are.
We understand.
Speaker Change: <unk> than other companies I believe.
Speaker Change: The way they build the way they ramp up.
Speaker Change: And we understand extremely well sort of a confidence level.
Speaker Change: Their arrival so.
Speaker Change: You know that new batch system.
Speaker Change: It may have had some effect on the number of customers who.
Speaker Change: Have sort of jumped into that substation engineering letters of authorization group, but the bottom line is.
Speaker Change: There is a lot of growth coming and data centers in Virginia, and we're building the infrastructure in order to serve them.
David: David I'd just add.
David: On slide 17, where you see that PJM forecast 2030 for summer peak of 41.5.
David: We would suggest that the increase we've seen in our Q is not fully reflected in that PJM update that there's a little bit backward looking and to Bob's point and to your question will all of the amount that we're seeing in that first phase ultimately convert we don't know for sure many of them do in the past and as we've moved further from.
David: Down the down the column, we've seen increasing conversion rates up to a 100% from the second to the third bucket. So.
David: Again, I think it's a sign a bullish sign will all of it ultimately convert we don't know we think a lot of it will and that to US is a bullish sign of the ability to continue to invest across the value chain in support of those customers in a low risk regulated environment.
David: Got it okay, great. Thanks, very much I appreciate it.
Anthony Crowl: Thank you, we'll move next to Anthony crowd L of Mizuho.
Anthony Crowl: Hey, Good morning, just Super quick one question following David when I look at the column on page 18 is there just a rule of thumb of how long. It takes a project to transition from one category to the next as it works itself down the chain.
Anthony Crowl: Well, we gave some updated guidance to our customers as you recall, we've talked about which was moving from a serial to more of a cluster or batch approach and when we did that we gave indications that from the time you sort of started the process to the potential time, where you're signing the Esa and taking delivery of power.
Anthony Crowl: That period would be extended by somewhere between 12, and 36 months, which puts us at speed to market of between four to seven years.
Anthony Crowl: 26, Gigawatts, that's all in very very different phases, and probably timelines don't have specific guidance for you as to how to translate the 26 into the.
Anthony Crowl: The CLO box or the Esa box, but again from the very beginning of the process typically to the very end of the process think of four to seven years with this much demand could that probably possibly pressure that it's all going to sort of depend on where the specific project wants to be cited in where we have existing delivery points, so not not really.
Don't have a real specific guidance for you Anthony I apologize, but it's all pretty bespoke depending on where the need is.
No that's perfect and thanks, so much for the update I appreciate it. Thank you.
Anthony Crowl: Thanks.
David Paz: Our next question is from David Paz of Wolfe.
David Paz: Hey, good morning.
David Paz: Morning, David.
David Paz: Yes. Thanks for the time just quickly on the on your assumption for earned returns.
David Paz: In your outlook are you projecting any lag over the period and maybe how much of how much lag. If you can break it down by Virginia, and South Carolina that'd be great.
David Paz: Yes, David we haven't given that sort of a specific level of guidance.
David Paz: And as we go into periodic rate cases, and we engage with stakeholders.
David Paz: But I think what we've said in the past has been that D. E V. In particular, where we've got a fairly significant amount of the investment in riders, which generally earn at their allowed we see pretty good.
David Paz: Ability to achieve allowed returns and in 2023, our annual information filing if you adjust for a handful of items, whether some amortization of fossil retirements that we needed to take we were we were hitting on the base side of the business at pretty close to our allowed and expect that to sort of continue.
David Paz: And then in South Carolina, I think what we've indicated in testimony is that under the existing rate case process that by the time new rates go into effect given it's backward looking nature, we could be anywhere between 80 and 90 basis points is under earning.
Speaker Change: Mediately when rates going to into effect and we've quantified I think of 100 to 200 basis points on average of under earning during the rate case cycle and as Bob mentioned in his prepared remarks, we've made that a point of focus in.
Speaker Change: In our discussions with stakeholders in South Carolina, and our excitement about supporting the needs of the growth of our needs for growth in the state, but also a discussion about the ability for us to earn a return that's closer to our allowed so obviously there is work being done on that now.
Speaker Change: Good to be appropriately conservative in our assumptions in the plan as it relates to both where the allows are set as well as where the earns just earned are set we certainly have assumed that we have the ability to do somewhat better than what we've done in the past.
Speaker Change: Through some mechanism, whether it's legislation or the potential for more frequent rate cases in south Carolina, but I'd, rather not get into sort of a specific assumption. We've made I think we've tried to be reasonable.
Speaker Change: Reasonably conservative but appropriately so.
Okay now that makes sense and just maybe quickly the four plus billion of new Capex does any of that include any incremental spend on your interest in summer two or three.
Speaker Change: No no. It doesn't we've indicated that we're not participating or interested in that project and I think he meant I think you're referring to 7 billion total capital increase but yet none of that is related to.
Speaker Change: V C summer.
Speaker Change: Okay. Thank you.
Speaker Change: This concludes our question and answer session. So I will turn it back to Bob Blue for closing remarks.
Speaker Change: Thanks, everyone for taking the time to join the call today enjoy the rest of your day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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