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Dominion execs talk Cove Point LNG dropdown, Atlantic Coast pipeline progress

Dominion Resources Inc. executives pointed to a drop-down of the soon-to-be-complete Dominion Cove Point LNG LP into Dominion Midstream Partners LP and progress on the Atlantic Coast pipeline project as evidence of better times beyond what will likely be a "challenging year" for the company's earnings growth.

Dominion CFO Mark McGettrick said on a fourth-quarter earnings call that the company expects to generate roughly $7 billion of cash flow by dropping Cove Point LNG into Dominion Midstream in 2018, which he said will be used at the parent level to pay down debt, increase dividends "in excess of 8% a year," invest in new growth projects and repurchase common stock.

Dominion Midstream on Dec. 1, 2016, completed the purchase of Questar Pipeline LLC from Dominion Resources, which McGettrick said allows the company to access the market "at a very high level" and attain favorable rates.

McGettrick said earnings from the drop-down of Cove Point have not yet been discussed with Dominion Midstream's conflicts committee. The LNG export terminal, which is being built at an existing LNG import terminal in Lusby, Md., is now 84% complete and on time to enter service later this year, according to Dominion.

Progress on the Atlantic Coast pipeline project, which was No. 20 on a Trump administration list of "priority" infrastructure projects obtained by the McClatchy news service, will also bolster growth moving forward, Dominion Chairman, President and CEO Thomas Farrell II said. Following FERC's positive draft environmental impact statement on Dec. 30, 2016, Farrell said the company expects to have the project and supply header complete in the second half of 2019, even amid concern that the recently announced departure of former Chairman Norman Bay could hobble ventures awaiting major approvals.

"We don't need to have a full complement or a quorum at FERC until summertime to be on our schedule," Farrell said. "So I'm highly confident that the president will appoint folks by then; they'll be confirmed by the Senate and seated."

Dominion reported fourth-quarter 2016 operating earnings of $618 million, or 99 cents per share, missing the S&P Capital IQ consensus normalized EPS estimate by 1 cent. The result compares to operating earnings of $416 million, or 70 cents per share, in the same period of 2015.