US gas midstream sale weighs down Dominion Energy 2020 results

Houston — Dominion Energy's sale of its natural gas transmission and storage operations and cancellation of its Atlantic Coast Pipeline project weighed on its latest financial results, as it begins 2021 with a new direction, executives said Feb. 12.

Lower earnings for the fourth quarter and full-year 2020, compared with the same periods of 2019, reflect the company's decision to return to its focus on its traditional power operations.

With midstream assets gone in a sale to Warren Buffett's Berkshire Hathaway, Dominion has now squarely set its future on a less risky market approach that involves growing its regulated businesses and pursuing renewables opportunities amid the global energy transition.

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Improving its credit rating is part of the equation.

" Going forward, I wouldn't speculate on an upgrade, but what I would expect, maybe, I'm not trying to get ahead of the agencies, but what I'd hope for is increased recognition of the very material improvement in our business-risk profile from a credit perspective overall in the last year," CFO James Chapman said during a conference call with investors. "The dust has barely settled, right, on a last step of that with the sale of Gas Transmission & Storage. But I would hope ... that element would work its way more into the dialogue and even the thresholds that the various agencies apply to our company."

Dominion had built itself into a hybrid utility energy infrastructure company with the acquisition of Questar Pipeline, the construction of the Cove Point LNG export facility in Maryland, and the proposal to build ACP to deliver more Appalachian Basin gas to downstream utility customers.

Then in July, it reversed itself, agreeing to sell to Berkshire Hathaway substantially all of its gas pipeline and storage assets. Berkshire Hathaway completed the purchase of the bulk of the assets during Q4. Berkshire Hathaway is now the operator of Cove Point, although Dominion retains a 50% passive ownership. At the time the sale was announced, Dominion also scrapped the $8 billion ACP amid ballooning costs and fierce legal opposition from environmental groups.

For the three months that ended Dec. 31, Dominion reported net income of $682 million, or 82 cents/share, compared with $1.01 billion, or $1.21/share, in the same period of 2019. Q4 revenue dropped nearly 10% to $3.52 billion from $3.9 billion in the same period a year earlier. Dominion reported a loss of $401 million, or 57 cents/share, for 2020, versus a profit of $1.36 billion, or $1.62/share, for 2019.

New ventures

Dominion said its earnings decline for 2020 " was primarily attributable to a net loss from discontinued operations associated with the sale of the Gas Transmission & Storage segment and the cancellation of the Atlantic Coast Pipeline project and charges associated with the planned early retirement of electric generation facilities in Virginia."

Chapman said that while the midstream gas sale "obviously" had an impact on Dominion's original earnings guidance for 2020, the company expects to see future growth from its continuing operations and new ventures.

"We believe the historic consistency across our quarterly results is worth highlighting, and it's a track record we are absolutely focused on extending," he said.