Executive Summary / Key Takeaways

• Virginia's Data Center Boom Creates Unprecedented Regulated Growth: Dominion Energy Virginia is experiencing a structural demand surge with approximately 47 GW of data center capacity in various contracting stages, representing a 17% increase since December 2024. This AI-driven load growth is transforming Dominion from a slow-growth utility into a capital deployment engine with a $50 billion five-year plan.

• Strategic Repositioning Complete, Balance Sheet Fortified: The company has successfully executed its "strategic simplicity" mandate, completing divestitures of East Ohio, Questar Gas, and PSNC to Enbridge (ENB) in 2024. Proceeds were used to repay debt, achieving parent leverage below 30% and FFO-to-debt of approximately 15%, providing financial flexibility for the largest capital program in company history.

• CVOW Offshore Wind: First-Mover Advantage with Execution Risk: The 2.6 GW Coastal Virginia Offshore Wind project is two-thirds complete with first power expected in late Q1 2026. While this positions Dominion as a leader in U.S. offshore wind, the $11.2 billion cost estimate faces tariff exposure on $2.5 billion of remaining European spend and lingering delays with the Jones Act -compliant Charybdis installation vessel.

• Financial Execution Strong but Regulatory Challenges Persist: Dominion Energy Virginia delivered 13.2% revenue growth and 13.9% net income growth in the first nine months of 2025, while DESC saw net income surge 44.9%. However, management explicitly states that regulatory lag in South Carolina makes it "practically impossible to earn our allowed return," creating a drag on consolidated returns.

• Valuation Reflects Growth Transition, Not Fully De-Risked: At $59.84 per share, Dominion trades at 19.6x earnings with a 4.45% dividend yield—attractive multiples for a utility entering a capital supercycle. The investment thesis hinges on successful CVOW completion by end-2026 and sustained data center demand growth, with any material delays or cost overruns representing the primary downside catalyst.

Setting the Scene: The Making of a Regulated Growth Utility

Dominion Energy, incorporated in 1983 and headquartered in Richmond, Virginia, has spent four decades building one of the most concentrated regulated utility franchises in the United States. The company's core business spans two primary operating companies: Virginia Electric and Power Company (Virginia Power), which has served Virginia since the 1970s, and Dominion Energy South Carolina (DESC). Together, they provide electricity to over 6 million customers across Virginia, North Carolina, and South Carolina, while gas operations serve 3.1 million customers.

The current investment narrative represents a fundamental transformation from the Dominion of 2020. Following a comprehensive business review in 2023-2024, management executed a strategic repositioning that would have been unthinkable five years ago: the complete exit of non-core gas distribution assets. The sales of East Ohio, Questar Gas, and PSNC to Enbridge, completed between March and September 2024, generated approximately $9.2 billion in proceeds that were deployed primarily to debt reduction. This wasn't merely portfolio pruning—it was a deliberate choice to sacrifice scale for strategic simplicity, consistent execution, and balance sheet conservatism.

This repositioning occurred simultaneously with the emergence of Virginia as the world's data center capital. Approximately 450 data centers representing nearly 9 GW of capacity are now connected to Dominion's grid, with data center sales accounting for about 26% of total sales for Dominion Energy Virginia. This concentration is not accidental. Virginia's combination of world-class fiber networks, business-friendly climate, trained workforce, and increasingly clean energy access has created a self-reinforcing ecosystem. Governor Youngkin's administration actively promotes Virginia as a tech hub, with data center tax revenue making property tax bills "substantially lower than they would have to be" according to CEO Robert Blue.

The demand dynamics are staggering. PJM's DOM zone forecast projects peak summer load growth of approximately 6.3% annually for the next decade, with the projected 2034 peak load increasing nearly 60% from 2022 levels. Dominion has communicated firm energization dates for over 25 GW of capacity stretching through 2031. This isn't cyclical growth—it's a structural rewiring of the grid to support AI, cloud computing, and digital infrastructure.

Technology, Infrastructure, and Strategic Differentiation

Dominion's competitive moat rests on three pillars: regulatory relationships, integrated infrastructure, and data center partnerships. Unlike pure-play electric utilities, Dominion's integrated gas-electric model provides operational flexibility and customer stickiness that competitors cannot easily replicate. The company's 10,700 miles of transmission lines and 95,700 miles of gas mains create a physical network with natural monopoly characteristics, while dual-fuel capabilities enhance reliability for commercial customers.

The data center relationships represent a qualitative advantage that transcends traditional utility metrics. Dominion has approximately 47 GW of data center capacity in various contracting stages, with over 28 GW in substation engineering, 9 GW with executed construction letters (a 73% increase since December 2024), and nearly 10 GW under electric service agreements. This pipeline isn't just large—it's sticky. Data centers require multi-year planning, substantial upfront investment, and deep interconnection studies, creating switching costs that lock in load growth once projects advance to construction phases.

The Coastal Virginia Offshore Wind (CVOW) project embodies both Dominion's first-mover advantage and its execution risk. At 2.6 GW, CVOW will be the largest offshore wind installation in the United States, with a projected levelized cost of energy of approximately $84/MWh. The project is two-thirds complete, with all 176 monopiles installed by October 2025 and first offshore substation installed in March 2025. However, the specialized Jones Act-compliant installation vessel Charybdis faced delays due to "punch list" items, pushing some turbine installations potentially into early 2027. As CEO Robert Blue acknowledged, "we didn't properly account in our timing estimate for the risk inherent in being the first Jones Act-compliant wind turbine installation vessel to be built and regulated in the United States."

This admission reveals a broader truth about Dominion's technology risk: the company is pioneering complex infrastructure with limited domestic precedent. While the vessel's design follows global best practices, the regulatory and construction complexity of a first-of-its-kind U.S. asset created timing uncertainty that management initially underestimated. The $11.2 billion cost estimate includes $200 million of contingency, with cost-sharing mechanisms splitting overruns 50/50 between customers and Stonepeak, the 50% noncontrolling interest holder.

Financial Performance: Capital Deployment at Scale

Dominion's financial results for the nine months ended September 30, 2025, provide clear evidence that the strategic repositioning is working. Dominion Energy Virginia, representing approximately 80% of the company's $50 billion capital forecast, delivered total operating revenue of $8.8 billion, up 13.2% year-over-year. Net income attributable to Dominion Energy reached $1.8 billion, a 13.9% increase, driven by higher rider equity returns from capital investments and increased sales from economic and usage factors.

The segment dynamics reveal a tale of two jurisdictions. While Virginia thrives under rider mechanisms that provide timely cost recovery, South Carolina faces structural challenges. DESC's net income surged 44.9% to $429 million, benefiting from the 2024 electric base rate case settlement, but management explicitly states that "the existing regulatory framework for DESC creates regulatory lag, making it practically impossible to earn our allowed return compared to neighboring regulated jurisdictions." This disparity explains why 80% of capital investment is flowing to Virginia while South Carolina operates under a rate stabilization mechanism legislated in May 2025.

The Contracted Energy segment, anchored by the Millstone nuclear station, provides stable cash flows and carbon-free attributes. Millstone supplies over 90% of Connecticut's carbon-free electricity, with 55% of output hedged through late 2029 at fixed prices. The segment generated $321 million in net income on $849 million of revenue, with management noting that legislative activity in Rhode Island and Massachusetts could authorize additional nuclear procurements, creating future growth optionality.

Capital expenditures totaled $7.7 billion in the first nine months of 2025, putting Dominion on track to execute its updated $50 billion five-year forecast (2025-2029). This represents a 16% increase from prior guidance, with 60% of the spend eligible for recovery under rider mechanisms. The transmission investment alone will exceed $2.8 billion annually starting in 2027, up from the previously forecasted $2.5 billion, driven by data center interconnection needs and PJM reliability requirements.

Outlook, Guidance, and Execution Risk

Management has narrowed 2025 operating earnings guidance to $3.33-$3.48 per share, preserving the $3.40 midpoint. This range reflects strong year-to-date performance biased toward the top half, offset by a $0.06 negative impact from worse-than-normal weather in Q3. The guidance assumes normal weather for the remaining two months and includes $0.03 per share from RNG 45Z credits , which sunset at the end of 2027.

The long-term growth trajectory remains intact, with management reaffirming 5-7% annual operating earnings growth through 2029 based on the 2025 midpoint of $3.30 (excluding RNG credits). This growth will vary due to Millstone's refueling cadence, which requires a second planned outage every third year, creating a known headwind in 2026 and 2029.

The capital forecast's timing bias toward the "back end of the plan" suggests management expects incremental investment opportunities to emerge as data center demand materializes. As CFO Steven Ridge noted, "I fully expect at that time, we're going to see upward revisions to our capital plan across distribution, transmission and generation that effectively reflect what we filed in the IRP, which is some significant increases in the amount of generation." This implies the $50 billion forecast may prove conservative if data center commitments accelerate.

Dividend policy remains anchored at $2.67 per share annually until the payout ratio aligns with utility industry norms. With a current payout ratio of 87.25%, dividend growth is unlikely before 2028, placing Dominion in a holding pattern compared to peers like DUK (3.59% yield, 66% payout) and SO (3.36% yield, 73% payout). This reflects management's prioritization of balance sheet strength over shareholder distributions during the capital deployment phase.

Risks and Asymmetries: What Can Break the Thesis

The most material risk to Dominion's investment case is execution failure on CVOW. While the project is two-thirds complete, the $11.2 billion cost estimate faces multiple threats. Tariff exposure on approximately $2.5 billion of remaining European spend creates uncertainty, though management argues CVOW components qualify as "finished products" largely exempt from steel and aluminum tariffs under precedent from 2018. The absence of annexes to executive orders makes final determination impossible until March 2026, leaving a contingent liability that could trigger the 50% cost-sharing mechanism.

The Charybdis vessel delays, while not impacting first power timing, highlight the execution risk inherent in first-of-a-kind U.S. infrastructure. Any further delays pushing turbine installation beyond Q1 2027 could compress the project's revenue recognition timeline and test regulatory patience in Virginia. The $50 million after-tax charge recorded in Q3 for costs not expected to be recovered from customers demonstrates that even with cost-sharing, shareholders bear material risk.

Regulatory concentration in Virginia creates a geographic vulnerability. With data centers representing 26% of DEV sales and the entire growth narrative dependent on Virginia's business-friendly climate, any shift in state policy could derail the investment thesis. Governor Youngkin's strong support provides political cover, but utility regulation remains subject to electoral cycles and populist pressure.

South Carolina's regulatory lag represents a persistent drag on returns. Despite May 2025 legislation authorizing an electric rate stabilization mechanism, management's candid assessment that earning the allowed return is "practically impossible" suggests DESC will continue underperforming its cost of capital. This creates a capital allocation dilemma: invest in a jurisdiction with poor returns or forgo growth opportunities.

Data center demand, while robust, carries concentration risk. The 47 GW pipeline includes customers at various commitment stages, with only 9 GW having executed construction letters and 10 GW under electric service agreements. If AI demand proves cyclical or data center development slows due to capital constraints, Dominion's $50 billion capital plan could face underutilization, creating stranded assets and regulatory pressure.

Valuation Context: Pricing a Capital Supercycle

At $59.84 per share, Dominion trades at 19.6x trailing earnings and 3.2x sales, with an enterprise value of $99.1 billion representing 12.9x EBITDA. These multiples sit modestly above the company's five-year average P/E of 19.2 but below the 21.7x multiple at Southern Company (SO) and well below NextEra (NEE)'s 26.5x, reflecting Dominion's slower historical growth and execution overhang from the CVOW project.

The 4.45% dividend yield provides income support while investors await the capital deployment payoff. With an 87.25% payout ratio, the dividend is secure but lacks near-term growth, making Dominion a total return story rather than a dividend aristocrat play. This compares favorably to Duke Energy (DUK)'s 3.59% yield and Southern's 3.36% yield, though both peers offer better dividend growth prospects.

Balance sheet metrics support the investment-grade rating thesis. Debt-to-equity of 1.54x is elevated but manageable within the utility sector, particularly given the regulated nature of 90% of earnings. The company's target of parent leverage below 30% and FFO-to-debt at 15% provides a 100-200 basis point cushion above rating agency thresholds, securing access to low-cost capital for the $50 billion investment program.

Relative to peers, Dominion's valuation appears attractive for its growth profile. Duke Energy trades at 18.6x earnings with slower data center exposure. Southern Company commands a premium at 21.7x despite nuclear project delays. American Electric Power (AEP) trades at 17.3x with less compelling demand drivers. NextEra's 26.5x multiple reflects its renewable development arm, a business Dominion is building through CVOW. The key valuation question is whether Dominion's regulated returns on data center-driven capital can approach the growth rates that justify peer multiples.

Conclusion: A Utility at an Inflection Point

Dominion Energy has engineered a remarkable transformation from a diversified energy conglomerate to a focused regulated growth platform. The strategic asset sales have de-risked the balance sheet, the data center supercycle has created a visible 5-7% earnings growth trajectory, and CVOW positions Dominion as a first-mover in U.S. offshore wind. These factors collectively support a thesis that Dominion can deliver utility-like stability with above-average growth.

The investment case, however, remains contingent on execution. CVOW must come online by end-2026 within the $11.2 billion budget. Data center demand must convert from pipeline to energized load. South Carolina regulatory frameworks must evolve to allow earned returns. Any material deviation on these fronts would pressure both earnings and the premium valuation that the market has begun to assign.

For investors, the critical variables to monitor are CVOW construction milestones, data center construction letter conversions, and Virginia regulatory outcomes on the proposed $706 million base rate increase. If Dominion executes on these fronts, the stock's 19.6x multiple will appear conservative for a utility entering a decade-long capital supercycle. If execution falters, the downside is cushioned by a 4.45% yield and investment-grade balance sheet, but the growth premium will evaporate. The story is no longer about what Dominion was—it's about what Virginia's data center boom and strategic discipline can make it become.