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Dominion earmarks bulk of $26B growth capital plan for Va. utility investments

Dominion Energy Inc. on March 25 unveiled a $26 billion growth capital plan for 2019 through 2023 that the company expects will grow rate base by $19 billion over the five-year period.

Dominion management said the first three years of the capital plan will be financed with $7 billion of operating cash flow, $300 million from its annual dividend reinvestment plan, up to $300 million to $500 million annually from the company's at-the-market equity issuance program and about $2 billion in net debt refinancing.

Dominion is also transitioning to a new business structure comprising five segments: Dominion Energy Virginia, Dominion Energy Gas Transmission & Storage, Dominion Energy Gas Distribution, Dominion Energy South Carolina and Dominion Energy Contracted Generation.

"Changing our operating segments we hope helps the visibility on the growth profile of these businesses," Dominion Energy Executive Vice President and CFO James Chapman said at the company's 2019 investor day presentation at the New York Stock Exchange.

Chapman said the company hopes to complete the transition to the new operating structure by February 2020.

As part of its growth plan, Dominion earmarked about $17 billion, or 64%, of its capital spending for Dominion Energy Virginia. The Virginia utility, known legally as Virginia Electric and Power Co., will spend heavily on electric infrastructure, grid modernization and clean energy.

Dominion Energy Virginia will invest about $4.3 billion in electric transmission from 2019 through 2023, with about $1.6 billion in additional growth capital earmarked for grid transformation projects under Virginia's Grid Transformation and Security Act. Dominion Energy Virginia also expects to spend $2.4 billion on regulated solar growth and $1.3 billion on contracted solar as part of the utility's commitment to have 3,000 MW of solar in operation or under development by 2022.

In addition, the growth capital plan outlines $1.2 billion in spending over the five-year period for operating license extensions at the two-unit, 1,750-MW Surry nuclear plant in Virginia. In October 2018, Dominion filed its request with the U.S. Nuclear Regulatory Commission for a second 20-year renewal of the Surry operating licenses that, if granted, would keep the reactors online beyond 2050.

About $1.1 billion of Dominion's growth capital plan is tied to offshore wind development, building on the company's proposed 12-MW Coastal Virginia Offshore Wind pilot project off the coast of Virginia Beach. Dominion, which is investing $300 million in the offshore wind pilot venture with Danish wind developer Ørsted A/S, said it is planning for 500 MW of additional offshore wind generation to be online by 2024.

Dominion Energy Virginia also is exploring the development of a $1 billion pumped hydroelectric storage facility in the Virginia mountains to complement its 60% stake in the 3,003-MW Bath County hydro plant.

In addition, Dominion Energy Virginia's five-year investment plan calls for spending $800 million on strategic undergrounding of electric distribution lines, $500 million for environmental compliance and $500 million for the development of gas combustion turbines.

The investments are expected to grow Dominion Energy Virginia's rate base from $23 billion in 2018 to between $32 billion and $34 billion in 2023, executives said.

The parent company also plans to spend about $3.6 billion from 2019 through 2023 at Dominion Energy Gas Transmission & Storage. This business includes 90% regulated and regulated-like assets, including the Cove Point LNG export facility and the Dominion-led 600-mile, 1.5-Bcf/d Atlantic Coast Pipeline LLC project.

The Dominion Energy Gas Distribution segment has a $3.5 billion investment plan for the next five years focused primarily on pipeline replacement, customer growth and system improvements in Ohio, Utah and North Carolina.

Dominion Energy Contracted Generation includes the company's 2,101-MW Millstone nuclear plant in Connecticut, which recently secured a 10-year power purchase agreement with two electric utilities that operate in the state, and 1,124 MW of long-term contracted solar.

Dominion Energy South Carolina, which includes newly acquired utility South Carolina Electric & Gas Co., has a $2.1 billion growth capital plan focused primarily on its electric business and grid improvements, while also emphasizing electric and gas customer growth.

This plan excludes development of the V.C. Summer nuclear plant expansion.

Chapman said the company expects to file a rate case in South Carolina in 2020, with rates effective at the beginning of 2021. The CFO said South Carolina Electric & Gas, which has spent the bulk of the past decade focused on capital spending for the now-abandoned V.C. Summer reactors, has been earning below its allowed 10.2% return on equity. "[T]here hasn't been a base rate proceeding since 2011," he added.

Dominion expects to achieve a 6.7% EPS compound annual growth rate through 2020 and expects to grow EPS by more than 5% per year from 2020 through 2023.