Executive Summary / Key Takeaways

• Dominion Energy (NYSE:D) has successfully repositioned as a focused, regulated utility following its business review, emphasizing strategic simplicity, balance sheet conservatism, and consistent execution.
• Unprecedented load growth, particularly from the accelerating data center buildout in Virginia, is driving a significant increase in the company's 5-year capital plan to $50 billion, presenting a substantial opportunity for regulated rate base growth.
• Dominion is making tangible progress on major clean energy initiatives like the 2.6 GW Coastal Virginia Offshore Wind (CVOW) project, which is 55% complete and on schedule for 2026, and is exploring next-generation technologies like Small Modular Reactors (SMRs) to meet growing clean energy demand.
• The company's Q1 2025 results demonstrated strong performance driven by regulated investment growth, favorable weather, and effective cost management, affirming its full-year 2025 operating EPS guidance of $3.28-$3.52 and reaffirming 5-7% annual growth through 2029.
• While facing risks including potential CVOW cost pressures from tariffs and regulatory uncertainties, Dominion's strategic focus on regulated assets, robust demand growth, and commitment to execution underpin its investment thesis.

Powering the Future: Dominion Energy's Strategic Resurgence

Dominion Energy, a major U.S. energy provider headquartered in Richmond, Virginia, is undergoing a significant transformation. Historically, the company has evolved through strategic acquisitions, notably the integration of SCANA in 2019, and extensive infrastructure development across its core service territories in Virginia, North Carolina, and South Carolina. More recently, a comprehensive business review has led to a strategic repositioning, shedding non-core assets like its gas distribution businesses to focus predominantly on its regulated electric and gas utility operations and long-term contracted energy assets. This strategic pivot is centered on achieving simplicity, strengthening the balance sheet, and delivering consistent financial and operational performance. Management has articulated three clear priorities: consistently meeting financial commitments, executing the Coastal Virginia Offshore Wind (CVOW) project on time, and securing constructive regulatory outcomes.

Within the competitive landscape, Dominion operates alongside other large, integrated utilities such as Duke Energy (DUK), American Electric Power (AEP), and Public Service Enterprise Group (PEG), as well as competitive players like NRG Energy (NRG). While Duke Energy holds a larger overall market share (8.23% in Q1 2025) and broader geographic reach, Dominion maintains a strong regional density, particularly in Virginia, which hosts the world's largest concentration of data centers. This regional focus provides Dominion with a unique advantage in capitalizing on localized load growth. Compared to NRG's asset-light, retail-focused model, Dominion's vertically integrated structure offers greater regulatory stability and comprehensive service offerings, including gas distribution to 3.1 million customers, which NRG lacks. While AEP boasts a more extensive transmission network, Dominion's accelerated transmission projects in Virginia demonstrate a focused responsiveness to specific regional demand, aiming for enhanced grid reliability. Regulatory frameworks, while providing stability, also present challenges, such as the regulatory lag experienced in South Carolina, which management notes makes it difficult to earn the allowed return compared to neighboring jurisdictions. Despite these competitive dynamics, Dominion's strategic emphasis on regulated infrastructure investment and its deep relationships with key customers, particularly in the burgeoning data center sector, position it to capture significant growth opportunities.

A key driver of Dominion's strategy and future investment is the unprecedented load growth across its service territories, fueled significantly by the accelerating expansion of data centers in Virginia. This demand is not just increasing; it's accelerating in magnitude due to the sheer number and size of new facilities and their rapid ramp-up schedules. PJM's DOM zone forecast now projects peak summer load growth of approximately 6.3% per year for the next decade, with the projected peak load for 2034 increasing by nearly 60% from the 2022 estimate, reaching 41.5 GW. Dominion currently has approximately 40 GW of data center capacity in various stages of contracting, a remarkable 88% increase since July 2024, with over 26 GW in the initial engineering stage alone (a 245% increase). This robust demand necessitates substantial investment in the energy value chain – transmission, distribution, and generation infrastructure.

Dominion's technological focus centers on deploying and developing the infrastructure required to meet this surging demand reliably, affordably, and increasingly cleanly. While not a manufacturer of proprietary solar panels or wind turbines in the same vein as some specialized clean energy companies, Dominion's technological differentiation lies in its expertise in developing, constructing, and operating large-scale, complex energy projects and modernizing the grid. The Coastal Virginia Offshore Wind (CVOW) Commercial Project is a prime example. This 2.6 GW facility, currently 55% complete and on schedule for full completion by the end of 2026, represents the fastest and most economical way to bring a significant amount of clean energy online for the Virginia grid. Its estimated total project cost is approximately $10.8 billion, and its updated levelized cost of energy (LCOE), including renewable energy credits, is estimated at $62/MWh, benchmarking favorably against new generation alternatives. The project leverages specialized technology, including the Made in America Jones Act-compliant installation vessel, Charybdis, expected to support turbine installation this summer. This project is critical not only for meeting Virginia's clean energy mandates under the VCEA but also for powering the growing data center market and supporting national security installations.

Beyond offshore wind, Dominion is actively exploring next-generation nuclear technology, specifically Small Modular Reactors (SMRs), at its North Anna site. An MOU with Amazon (AMZN) highlights the potential for collaboration with large energy users to advance this technology. Management's intent is to support customer needs and advance carbon-free generation while protecting customers and capital providers from development risks, such as first-of-a-kind risks and cost overruns. While specific quantifiable benefits of SMRs are still being evaluated, the strategic goal is to provide reliable, around-the-clock clean power that complements intermittent renewables and meets the intense, consistent power demands of facilities like data centers. Furthermore, the company is making significant investments in transmission and distribution technology to enhance grid resilience and capacity. Accelerated plans for new 500 kV transmission lines in Northern Virginia, including two lines expected by the end of 2027, will add 6 GW of capacity in Eastern Loudon alone, directly addressing the data center load growth. These infrastructure investments, along with participation in joint planning agreements with peers like AEP and FirstEnergy (FE), are crucial for maintaining system reliability amidst unprecedented demand. For investors, these technological and infrastructure development efforts translate directly into regulated rate base growth, providing a foundation for predictable future earnings.

Reflecting its strategic focus and operational execution, Dominion Energy delivered a strong first quarter in 2025. The company reported operating earnings of $0.93 per share, exceeding analyst consensus estimates of $0.77 per share and representing a significant increase from $0.55 per share in Q1 2024. Net income attributable to Dominion Energy increased 46% year-over-year, reaching $646 million. This performance was driven by several factors, including higher rider equity returns stemming from increased capital investments, an increase in electric utility sales due to favorable weather and customer growth, decreased unrealized losses on economic hedging activities, and the absence of certain one-time impacts from the prior year. These positive drivers were partially offset by a decrease in net investment earnings on nuclear decommissioning trust funds and the impact of completed divestitures. Operating revenue saw a notable 12% increase in Q1 2025 compared to the prior year, primarily reflecting higher revenue from Virginia Power's non-fuel riders and increased sales to electric utility customers. While electric fuel and purchased gas costs also increased, these are largely offset in revenue for regulated operations, minimizing impact on net income. The increase in Other Operations and Maintenance expenses was primarily attributed to higher charges associated with severe weather events in Virginia Power's service territory. Depreciation and amortization decreased, partly due to the absence of RGGI-related amortization. The increase in Impairment of assets and other charges included a charge related to costs not expected to be recovered on the CVOW Commercial Project, reflecting the functioning of the cost-sharing mechanism. The increase in noncontrolling interests was directly related to Stonepeak's 50% share of the CVOW project's earnings and costs following the Q4 2024 transaction. Overall, the Q1 results underscore the earnings power of Dominion's core regulated assets and its ability to capture growth from strategic investments.

Looking ahead, Dominion Energy has reaffirmed its financial guidance for 2025, projecting operating earnings per share between $3.28 and $3.52, with a midpoint of $3.40. This guidance includes approximately $0.10 per share from RNG 45Z income. The company also reiterated its commitment to achieving annual operating earnings growth of 5% to 7% through 2029, off a 2025 base of $3.30 (excluding the RNG credit).

This growth trajectory is underpinned by the significantly increased 5-year capital forecast (2025-2029) of $50 billion, a 16% increase from prior guidance. Approximately 80% of this planned capital expenditure is directed towards Dominion Energy Virginia, with 60% eligible for recovery through rider mechanisms, providing a clear path to rate base expansion.

Management's confidence in this outlook is grounded in the robust demand growth, the advanced stage of major projects like CVOW, and the expectation of constructive regulatory outcomes in ongoing proceedings, such as the 2025 Virginia Biennial Review. The proposed base rate increase of $822 million (or $458 million under an alternative fuel cost proposal) and a requested 10.40% ROE in the Virginia filing are critical components of this outlook, reflecting necessary investments to serve a growing customer base. Similarly, recent constructive outcomes in South Carolina rate and rider cases, including approval for fuel cost recovery and DSM programs, support the segment's contribution. Management acknowledges potential variability in annual earnings due to factors like the Millstone refueling cycle and temporary impacts from PJM capacity market outcomes, but views these as manageable within the overall plan. The company expects to issue between $5.5 billion and $8.0 billion of long-term debt in 2025 to help fund its capital program, alongside planned equity issuances under its ATM and DRIP programs, maintaining its focus on balance sheet strength with targets of parent leverage below 30% and FFO to debt around 15%.

Despite the positive outlook and strategic momentum, investors should be mindful of potential risks. The CVOW Commercial Project, while progressing well, remains subject to potential cost increases, particularly from tariffs. While the estimated $10.8 billion cost includes contingency and a cost-sharing mechanism is in place (limiting Dominion's exposure to 50% of costs above $11.3 billion), significant increases beyond current projections could still impact financial results. Regulatory risks are inherent in the utility business; outcomes in the pending Virginia Biennial Review and fuel factor proceedings will be critical determinants of future rates and earnings. The regulatory framework in South Carolina, which management describes as creating regulatory lag, could continue to pressure earned returns in that jurisdiction. Environmental regulations, such as evolving standards for air emissions and wastewater discharges, may require additional capital expenditures, although existing regulatory frameworks are expected to provide recovery mechanisms. Other potential risks include those associated with legal proceedings, credit risk exposures from energy marketing activities, and the successful execution of complex construction projects on time and budget.

Conclusion

Dominion Energy has successfully navigated a period of strategic repositioning, emerging as a more focused, regulated utility poised to capitalize on secular growth trends. The unprecedented demand driven by the data center boom in Virginia, coupled with state-level clean energy mandates, provides a clear and compelling runway for significant, low-risk capital investment in transmission, distribution, and generation infrastructure. The company's progress on major projects like the CVOW offshore wind farm and its exploration of advanced technologies like SMRs underscore its commitment to meeting future energy needs reliably and sustainably. While challenges such as potential project cost pressures and regulatory uncertainties persist, management's reaffirmed financial guidance, increased capital plan, and emphasis on execution, balance sheet strength, and constructive stakeholder engagement provide a solid foundation for the investment thesis. For investors, Dominion Energy represents an opportunity to participate in the growth story of a transforming utility, driven by essential infrastructure investment and the clean energy transition, underpinned by a commitment to predictable financial performance.