Dominion Energy Announces Third-quarter 2018 Earnings, Additional Non-core Asset Sale; Provides Atlantic Coast Pipeline & Supply Header Updates

Source Press Release
Company First Reserve CorporationDominion Energy, Inc. 
Tags Corporate Deals, Deals, LNG & Gas Storage/Processing
Date November 01, 2018

- Third-quarter 2018 reported earnings of $1.30 per share; operating earnings of $1.15 per share

- Narrows full-year 2018 operating earnings guidance to $3.95 to $4.10 per share

- Executed agreement to divest interest in Blue Racer Midstream for consideration of up to $1.5 billion

- Atlantic Coast Pipeline and Supply Header cost, schedule modifications

Dominion Energy (NYSE: D) today announced unaudited reported earnings determined in accordance with Generally Accepted Accounting Principles (reported earnings) for the three months ended Sept. 30, 2018 of $854 million ($1.30 per share) compared with earnings of $665 million ($1.03 per share) for the same period in 2017.

Operating earnings for the three months ended Sept. 30, 2018, were $758 million ($1.15 per share), compared with operating earnings of $672 million ($1.04 per share) for the same period in 2017.  Operating earnings are defined as reported earnings adjusted for certain items.  The principal difference between operating and reported earnings for the quarter was a gain on nuclear decommissioning trust funds.

Thomas F. Farrell, II, chairman, president and chief executive officer, said:

"Our third-quarter results were at the top end of our guidance range of $0.95 to $1.15 representing another quarter of very strong results.  We are narrowing our 2018 full year operating earnings per share guidance range to $3.95 to $4.10per share which preserves the same midpoint as our original guidance.  Assuming normal weather, we continue to expect operating earnings per share for 2018 to be above the midpoint of this narrowed guidance range."

We continue to achieve important milestones for growth investments in solar and offshore wind generation, strategic electric distribution undergrounding, electric grid modernization, electric transmission, nuclear generation relicensing, and gas distribution pipeline replacement.  These programs will provide meaningful benefits to our customers and will support earnings growth well into the next decade."

Additional non-core asset sale
Dominion Energy also announced today that it has executed a definitive agreement to divest its 50% interest in the Blue Racer Midstream joint venture to First Reserve and affiliated investment funds for total consideration of up to $1.5 billion including $1.2 billion of cash consideration and up to $300 million in earn-out payments that would be payable from 2019 through 2021 based on Blue Racer Midstream's performance.

The transaction is expected to close by year-end 2018 and initial proceeds will be used to reduce parent-level debt.  Goldman Sachs & Co acted as financial advisor to Dominion Energy and Troutman Sanders as legal counsel.

"Blue Racer Midstream is a high-quality business with an extremely capable management team.  However, this investment has become non-core to Dominion Energy as we continue to focus on regulated energy infrastructure," said Farrell.  "We have consistently indicated that a sale of Blue Racer would be opportunistic based on a compelling valuation and transaction structure.  We are very pleased with the attractive valuation achieved through the competitive sale process which represents a multiple range of approximately 14 times to 16 times estimated 2018 EBITDA based on bookends of potential payments to be received under the earn-out structure," he added. 

Farrell continued, "In concluding the credit improvement initiatives announced in March, we have sourced funds to reduce our parent-level debt by around $8 billion including equity issuance, non-core asset sales, and the Cove Point debt financing.  As a result, we will achieve our target parent company credit objectives two years earlier than originally planned."

Atlantic Coast Pipeline, Supply Header project updates
Dominion Energy also provided cost and schedule updates on the Atlantic Coast Pipeline and Supply Header projects.  The FERC stop work order and delays obtaining permits necessary for construction have impacted the cost and schedule for the project.  As a result, project cost estimates have increased from a range of $6.0 to $6.5 billion to a range of $6.5 to $7.0 billion, excluding financing costs.

Atlantic Coast Pipeline is pursuing a phased in-service approach with its customers, whereby we maintain a late 2019 in-service for key segments of the project to meet peak winter demand in critically constrained regions served by the project.   ACP will be pursuing a mid-2020 in-service date for the remaining segments of the project.  Abnormal weather and/or work delays (including delays due to judicial or regulatory action) may result in cost or schedule modifications in the future.

The Supply Header project target in-service remains late 2019."

We have been constructing ACP in West Virginia and North Carolina and on October 19 we received the final Virginiapermit required to petition FERC to be underway with full mainline construction in all three states," Farrell said.  "Following approval from FERC of our Notice to Proceed filing, we will begin mainline construction in Virginia.""

We continue to achieve key milestones toward the successful completion of this critical energy infrastructure project and look forward to delivering safe, reliable, and affordable energy to our customers in time to meet peak demand for the 2019/20 winter season," Farrell added.

Third-quarter 2018 reported and operating earnings compared to 2017 
Reported earnings increased 27 cents per share as compared to third-quarter 2017.  Business segment results and detailed descriptions of items included in reported earnings but excluded from operating earnings can be found on schedules 1, 2, and 3 of this release. 

Operating earnings increased 11 cents per share as compared to third-quarter 2017 per share operating earnings.   The increase is primarily attributable to favorable weather in our regulated electric service territory, the commercial operation of Cove Point Liquefaction project and the impact of tax reform.  Factors offsetting the increase include lower renewable energy investment tax credits and a higher share count.

Details of third-quarter operating earnings as compared to 2017 may be found on Schedule 4 of this release.

Fourth-quarter 2018 operating earnings guidance
Dominion Energy expects fourth-quarter 2018 operating earnings in the range of $0.80 to $0.95 per share, compared to fourth-quarter 2017 operating earnings of $0.91 per share.  Positive drivers include the Cove Point Liquefaction project and the benefit of tax reform. The company expects negative drivers for the quarter to include lower renewable energy investment tax credits, higher financing costs and a higher share count. 

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd