Welcome to the Dominion Energy Third Quarter 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. 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. Please, go ahead.

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 be -- we will discuss some measures of our company's performance that differ from those recognized by GAAP. Reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures, which we can calculate, are contained in the earnings release kit. I encourage you to visit our Investor Relations website to review webcast slides, as well as the earnings release kit. Joining today's call are Bob Blue, Chair, President and Chief Executive Officer; Jim Chapman, Executive Vice President, Chief Financial Officer; and Diane Leopold, Executive Vice President, Chief Operating Officer; and other members of the executive management team. I will now turn the call over to Bob.

Thank you, David. Good morning, everyone. We delivered strong third quarter results and are well positioned to meet our expectations for the year. We also have been steadily executing on our investment programs focused on decarbonization. This successful execution is already benefiting our customers, communities, the environment and our investors. I'll begin with safety. Through September, our OSHA recordable rate was 0.53, which remains low relative to our historical levels and substantially below industry averages. We take pride in our relentless focus on safety, and it is the first of our company's core values. Next, I'd like to provide some context to our announcement this morning of our initiation of a top-to-bottom business review, with the goal of ensuring that Dominion Energy is best positioned to create significant long-term value for our shareholders. In recent years, we've taken a series of strategic steps, both through M& A and through the capital allocation decisions to materially increase the state-regulated profile of our business. Our strategy remains anchored on this pure-play, state-regulated utility operating profile that centers around premier states that share the philosophy that a common sense approach to energy policy and regulation prioritizes safety, reliability, affordability and increasingly sustainability. These states also strive to create environments that promote sensible economic growth, which, like the rising tide, lifts all boats. Our state-regulated utility model offers investors long-term earnings visibility and is enhanced by our concentration in these fast-growing constructive and business-friendly states. To state the obvious, we're monitoring what's going on in the broader economy. Like everyone, we're seeing inflation, supply chain limitations and higher fuel prices, all having an impact on customer rates and our balance sheet strength. We're keenly aware of the economic pressures that are affecting our customers and taking seriously our core mission to deliver reliable, affordable…

Thank you, Bob. Those are very kind words, and I really appreciate it. As I mentioned in our release this morning, I'm really grateful for having had the opportunity over nine years to work with just outstanding people here at Dominion. I'm proud of our accomplishments we made together. On behalf of this great companies, customers and shareholders, more accomplishment to come, of course. And as many of our investors already know very well based on their experience with Steve over the years, I'm definitely handing the CFO reins over to an incredibly capable person. So from one great company to another great company for me, but let's move on, and I'll recap what was a great quarter for Dominion. Our third quarter 2022 operating earnings, as shown on Slide 11, were $1.11 per share, which for this quarter represented normal weather in our utility service areas. These results were above the midpoint of our quarterly guidance range. Positive factors as compared to the third quarter last year include increased regulated investment across electric and gas utility programs, sales growth and margins. Other factors as compared to the prior year include interest expense, tax timing and share dilution. Third quarter GAAP results of $0.91 per share reflect the non-cash mark-to-market impact of economic hedging activities, unrealized changes in the value of our nuclear decommissioning trust funds and other adjustments. A summary of all adjustments between operating and reported results is included in Schedule 2 of our earnings release kit. Turning now to guidance on slide 12. For the fourth quarter of 2022, we expect operating earnings to be between $0.98 and $1.13 per share. Positive factors as compared to last year are expected to be returned to normal weather, normal course, regulated rider growth, sales growth, the absence of a…

Hey good morning guys.

Good morning, Shar.

First, congrats, obviously, to Jim and Stephen. I guess, this means Mr. Ridge's park city skiing days are over with, but congrats to both you guys. Bob, if you can maybe elaborate a little bit on your prepared remarks as you're looking at sort of a range of scenarios. I think many would assume you start with looking at a monetization of the contracted assets. But in our view, they're really not why you're trading at a discount or why the stocks underperformed, some would argue the performance maybe driven by local politics. I guess, could we see more drastic actions like divestitures where you would only focus on Virginia or even a sale of the company to really maximize shareholder value? I guess, what is this going to look like in the end? And it seems like an update in February is a very tight time frame. So I guess, are you really progressed in this process? Thanks.

Yes, thanks, Shar. Let me take the last part of that first. This is not about corporate M&A, if that's what you're asking about. This is about a business review, a top-to-bottom business review as we made clear in our prepared remarks, looking at strategies that maximize value, business mix, capital allocation, all those kinds of things. And we're going to make decisions, as we would any strategic decision we make with respect to the company and what's in the best interest of our shareholders, of our employees and of our customers. Fundamentally, we took a look at how we're doing, how our share price is doing. And the market is telling us that, we're not performing the way investors expect. And so we think it merits a complete review from top to bottom. We're early in the process, and we're going to, obviously, in addition to shareholder value and our share price performance, be thinking about the macroeconomic environment we're in and making sure that we can deliver on our growth program to the level that we expect. So, we laid out in the opening remarks, and I'll just reiterate, as we're guided by our commitment to our state-regulated utility profile, to our credit profile and our current dividend and to transparency in ensuring shareholder value. So, as we thought about it, we could keep on the same course. As we said, we have a path to 2023. Some would suggest that doing the same thing over and over and expecting a different result, doesn't make a lot of sense, or we could have just announced something. But we thought it made a lot more sense to announce that we're doing this review, get some shareholder input and figure out what's right for our shareholders, our employees and our customers going forward in the long run.

Got it. And then just lastly, Bob, just on the 6.5% growth rate you have out there. Obviously, you're implying on slide 13 in your prepared remarks that you could change the target pending the review. Obviously, the share price reaction this morning is implying cut in the growth rate. But could a scenario actually be accretive or even supportive of the target you have out there, especially if we assume the trend with privates and financial players, paying relatively healthy multiples for assets with proceeds you can redeploy organically at one-time rate base. I mean, does the deal need to be dilutive to growth? Are you concerned about the numbers?

Yeah. We're obviously closer to the beginning of this process than the end. So we're going to have to work our way through, and see what the ultimate outcome is before I can comment on that, Shar. And I understand your interest in getting more clarity in that today. But until, we've done the process, that question is impossible for us to answer. Again, I would go back to the fact that we're very focused on earnings quality and earnings predictability. That's what our shareholders are telling us they want. That's what we're going to focus on as we're going through this review.

Okay. Terrific. Thank you, guys. I'll jump back in the queue. Appreciate it.

And our next question comes from Ross Fowler from UBS. Your line is open.

Good morning, Bob. Good morning, Jim.

Good morning.

Maybe shifting to offshore wind, I'm sure there's going to be a lot of other questions on the strategic review, but just touching on offshore wind for a minute. As we look at slide 6 and then sort of slide 8 in the deck, I think getting the settlement done, obviously, it still needs to be approved. Is sort of shifts, investors' thoughts of risk from sort of that performance guarantee around capacity factor and now there's a shift to cost. So maybe you can frame the risk to cost from here given the cost sharing arrangement? And then the second sort of part of the question is you say 75% fixed as of today, and then working to that 90% in the first quarter next year. Can you kind of just give us some framework, what has fixed actually imply or mean? Is that locked and settled? Can that move at all? What we have there ex the contingency?

Yeah. Let me start with the first part of your question. And as we said on the last call, the performance guarantee put a level of risk that our investors we knew would not find satisfactory, didn't make any sense. We've been focused on the cost of constructing this project from the very moment we conceived it. That's what we do. We built Cove Point on time and on budget, and we absolutely expect we're going to build this project on time and on budget the same way. And we're very advanced in the development here. And as you noted, and as we said in our opening remarks, 75% of costs fixed, expecting 90% by early in 2023. So we're very much on target. We're very comfortable with the estimates. The amount of contingency has actually increased since the time we filed, which gives us even more confidence. As we said in our opening remarks, we're working very well with the regulators, working our way through the environmental permitting process. So project is very much on track. We have a high degree of confidence in our ability to build it on time and on budget. And I'm going to ask Diane to walk through a little bit more detail on that.

Okay. Thanks. Good morning, everybody. So let me just give a little bit more color to the different aspects of the project. Kind of as you walk through, the first thing would be permitting. And as Bob just said, we're working through the process of the draft environmental impact statement. It is on time to come out by the end of this year. And we're working closely with the regulators with DOM and with NOA in addressing issues as they come up to minimize any risk of schedule issues. And then I'd want to remind you, we really focused on derisking the schedule from the start by having two piling seasons, two construction seasons to put those monopiles down. So we don't even install the turbines until the second season. So that allows for derisking in the construction, and we look at that as we move forward with the project. The next are our vendors and our suppliers, and we picked the worldwide experts in the offshore wind industry to ensure that we weren't adding any risk in our contracting. And of course, they were fixed price contracts. And as we move through the pieces that were variable in the offshore were commodities and fuel, and that's where you see 75% fixed as of now. So as we're looking to continue to move towards fabrication, we have all the manufacturing slots nailed down, much of the steel plate has been ordered and deliveries have actually already started. In fact, fabrications for our offshore substations and our cables have already begun. So that's as you're seeing the 75% move to the 90%, that's what's going on. The mills are operational. Our vendors are not concerned with them shutting down due to fuel issues in Europe, anything like that. And as Bob said, as we've looked at the entire projects throughout this time, we've been able to preserve and even add to our contingency. So we're feeling very good about where we are. On the -- so I think I've really answered that additional question of ramping from 75% to 90%. It's really as we're getting those deliveries and locking in the remaining part of the metals and the fuel. And the final piece of moving from that 75% to 90% is on the onshore side, on that onshore transmission and locking in those contracts.

Okay. Thank you for that. And then, Bob, maybe one for you on the strategic review, just following up to Shar's question on the growth rate. I'm trying to just sort of understand what you're trying to communicate there with a little more clarity. 6.5% was where you were, what you're saying for 2023, right, in the long-term growth rate. And you see a path to that today absent the strategic review. And I don't want to put words in your mouth here, but I think what I heard you say was the results of the strategic review could be to different outcomes in 2023. And then you have to think about what the long-term growth will look like after that. But your rate base growth at the regulated utilities is about 9%, which is higher than 6.5%, and so if that's your focus, I think that's a good thing. And I don't think you're saying here today that you're going to do things in the strategic review that are dilutive to value.

Yeah. I think what we're saying, again, I know you're looking for certainty here, but it's early days and we're just getting started. So what we are focused on, you've correctly identified is regulated high quality earnings, predictable earnings going forward. How the numbers all settle out at the end of it, we'll report when that time comes. So that's why we're saying today, we have a path and a status quo scenario, but the outcome of the review could lead to different growth qualitatively and quantitatively.

Okay. Thank you. I’ll jump back in the queue.

And our next question comes from Steve Fleishman from Wolfe Research. Your line is open.

Hi, Steve.

Good morning. Hi, Bob. So just first on the status quo scenario. I think for 2023, you mentioned that you could do it, but you would need to do more unregulated investment. Could you just comment a little more on what you mean by that?

Yeah. Let me get Jim to walk through the pieces and parts on that.

Yeah, Steve, let me go through it a little bit higher level than your specific question, but I'll address that, too. So what's going on with our guidance? So for 2022, I know it's not your question, but for 2022, we affirmed, we narrowed, we're on track, EPS and credit for 2022. For 2023, we never give forward year specific guidance on our third quarter call, and we're not doing it this time either. I'll come back and talk about that in some more detail though to give some color. And then for our long-term growth rate, we haven't changed it. We haven't withdrawn it. But as you noted, we also haven't explicitly reaffirmed it given the review. But we see these paths as we show on slide 13, path to achieving our long-term guidance and tools we have to overcome some of the macroeconomic headwinds that Bob mentioned with increased investment on the unregulated side and other initiatives. But some of those tools and businesses are the same ones that are subject to this review. Of course, everything is subject for review. So Bob, as he mentioned in his prepared remarks, cautioned that long-term outcomes consistent with our existing guidance are really achievable in the status quo result to the review. So anyway, long story short, that's the color on the 2022, 2023 and long-term. But on the slide 13, we give drivers for 2023 targets. So let me walk through and provide some detail on each line item that's in our path to make our 6.5% into 2023. So 4.10 for 2022, that's the midpoint of our guidance that we just narrowed then 6.5% of the simple math is, of course, implies and our consensus, analyst consensus is 4.37. So 4.10 to 4.37. And of course, there are…

Okay. Sorry, I have one other question. I didn't expect such a long answer, but that I was…

My last chance to talk to you for a while so…

Yes. So just, I guess, this is a bit of an unorthodox way of going about something like this. But just to try to put some perspective on how you're looking at things in this review. What do you, Bob, and the Board think the reasons are the stock is underperforming? Do you think it's due to the small amount of remaining non-utility businesses, or is it really -- is it Virginia and the kind of unique structure there, some of the noise you had? Is it the offshore wind? Like what do you -- it's kind of hard to have a perspective on this review if we don't know what you think the reasons are.

Yes, Steve, I think it could be a little bit of all of the above of what you just described. Maybe I'd phrase it a different way is, what investors are telling us they're looking for, what they're looking for is predictability. What they're looking for is earnings quality. They're looking for confidence in long-term growth. And so again, as we go through the review, those are the things that we're going to focus on to try to achieve for investors.

Okay. I mean, obviously, by doing this, you've created more unpredictability. So it's got hard to -- it becomes kind of like a circular loop here.

Steve, what I would say, maybe it's unorthodox, although I think other companies have announced reviews, maybe it's a little unorthodox. But again, as I talked about before, continuing to do the same thing we've been doing may well just end up in the same results that we've achieved before. And we're going to listen to the market. And we look forward to the opportunity to engage with investors and get their perspectives as we're working our way through this. Again, our goal with this is to land on an outcome that provides predictability and quality, and we want to do it in a very transparent fashion.

Okay. Thank you

And our next question comes from Jeremy Tonet from JPMorgan. Your line is open.

Hi. Good morning.

Hi, Jeremy.

Hi. I just want to continue with the review a bit here, if I could. I just wanted to see, maybe asking a little bit differently, what options might be off the table here, beyond the non-regulated businesses, could you look to sell some of the LDCs here and we've seen others in the space with a lot of success on this side? And then separately, just as it relates to the customer build pressures, as you said. If you could address what steps could be taken by Dominion to address that? And is there a way to address that, that isn't EPS or credit negative?

Yes. So let me start with the first one, Jeremy, what's off the table versus what's on the table. And the answer to what's off the table is the same as the answer to what's on, which is we've kicked off a review, top to bottom, and again, guided by the principles that we described in our opening comments. And then on the second part of your question, sort of policy initiatives, we described examples of things that we have done in our states over the course of the last few years to help customers, whether it was forgiving arrears, recovering reg costs through base rates, spreading out fuel over multiple periods of time. As we work with policymakers and think through the most logical ways to assure that current customer bills don't get in the way of long-term customer investment, we'll be thinking about those same approaches that we've used in the past and making sure that we achieve constructive regulatory outcomes, which I think we've demonstrated over the course of many years we're very good at achieving here.

Got it. That's very helpful. And just pivoting, if I could here. Obviously, a lot of focus on the review, but just want to touch base on the R&D side and see what kind of new initiatives are there, or if you could just update us on your thoughts?

Good morning, Jeremy, this is Diane. So the backlog just continues. It's going very well. As Bob brought up, if you do the count, we have 20 projects underway right now, four producing, 11 under construction and five more to be in construction by year-end. And those that are producing are producing as designed, and we're seeing very strong CARB scores out of them. So just how carbon negative they are, just focusing on this ag RNG business in the dairy and the swine side. So we have invested or will have invested $1 billion in this and expected to produce somewhere in the range of about $200 million by 2025. So it's going very well.

Got it. Great. If I could sneak a last quick one, and just going back with the review here. Does the upcoming triennial impact your thought process at all here?

No. Again, there are a lot of factors at play in our business and you can't identify any one of them. Where as we said, the focus is our share performance and what can we do to make sure we maintain our long-term capital investment programs.

Great. Thank you very much. End of Q&A:

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