Dominion Energy, Inc. 2021 Form 10-K Summary
Business context and reporting period
Combined annual filing for Dominion Energy, Inc. and wholly owned Virginia Electric and Power Company, covering the fiscal year ended December 31, 2021. Dominion Energy is a regulated electric and natural gas utility and contracted-generation company serving approximately 7 million customers across 13 states. Its principal segments are Dominion Energy Virginia, Gas Distribution, Dominion Energy South Carolina, Contracted Assets, and Corporate and Other.
- At year-end, Dominion Energy had approximately 30.2 GW of electric generating capacity, 10,700 miles of transmission lines, 78,000 miles of distribution lines, and 95,700 miles of gas distribution mains.
- Management expects approximately 90% of primary-segment earnings to come from state-regulated electric and natural gas utilities.
- The company had approximately 17,100 full-time employees and reported an OSHA Recordable Rate of 0.46 versus 0.41 in 2020.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Operating revenue | $13.964 billion | $14.172 billion | Down $208 million |
| Income from operations | $3.019 billion | $2.055 billion | Up $964 million |
| Net income attributable to Dominion Energy | $3.288 billion | $(401) million | Improved $3.689 billion |
| Diluted EPS | $3.98 | $(0.57) | Improved $4.55 |
| Net income from continuing operations attributable to Dominion Energy | $2.647 billion | $1.583 billion | Up $1.064 billion |
| Operating cash flow | $4.037 billion | $5.227 billion | Down $1.190 billion |
| Capital expenditures and property additions | $5.960 billion | $6.020 billion | Down $60 million |
| Cash, restricted cash and equivalents | $408 million | $247 million | Up $161 million |
Revenue declined primarily because of lower Millstone-related market and hedging revenue, Virginia customer refunds and an unbilled-revenue reduction. These effects were partly offset by higher fuel-cost recoveries, utility growth, gas riders, customer usage, and the absence of Millstone planned outages.
The filing does not present a consolidated adjusted EBITDA measure. Approximate operating margin based on income from operations divided by revenue was 21.6% in 2021 versus 14.5% in 2020; the comparison is significantly affected by unusual 2020 impairment and cancellation charges.
Segment results
| Segment contribution to 2021 net income | 2021 | 2020 |
|---|---|---|
| Dominion Energy Virginia | $1.919 billion | $1.891 billion |
| Gas Distribution | $600 million | $560 million |
| Dominion Energy South Carolina | $437 million | $419 million |
| Contracted Assets | $431 million | $402 million |
| Corporate and Other | $(99) million | $(3.673) billion |
Virginia Power reported 2021 net income of $1.712 billion versus $1.021 billion in 2020. Its operating revenue declined to $7.470 billion from $7.763 billion, while operating cash flow declined to $2.497 billion from $2.900 billion.
Balance sheet, debt and liquidity
- Total assets were $99.590 billion and total liabilities were $70.672 billion at December 31, 2021.
- Total long-term debt was $37.426 billion, compared with $33.957 billion at year-end 2020. Dominion Energy’s reported debt carrying amount, including current portions and related adjustments, was approximately $35.996 billion before junior subordinated notes.
- Short-term debt was $2.314 billion, compared with $895 million in 2020.
- Dominion Energy maintained a $6.0 billion joint revolving credit facility. Commercial paper outstanding was $1.883 billion, letters of credit were $131 million, and available capacity was $3.986 billion at year-end.
- The contractual debt-to-total-capital ratio was 56.0%, below the 67.5% maximum permitted under applicable credit agreements. No covenant defaults were reported.
- Dominion Energy issued or borrowed $7.3 billion of long-term debt in 2021 and repaid, repurchased, or redeemed approximately $4.836 billion.
- Credit ratings were BBB+ or equivalent for issuer and senior unsecured debt, with stable outlooks from Fitch and Moody’s and a positive outlook from Standard & Poor’s.
- 2021 capital expenditures totaled approximately $6.1 billion. Planned 2022–2026 capital expenditures total $47.9 billion, including $33.2 billion for Dominion Energy Virginia, $6.5 billion for Gas Distribution, $4.2 billion for Dominion Energy South Carolina, and $3.8 billion for Contracted Assets.
Material changes versus the prior comparable period
- Results benefited from the absence of 2020 charges for cancellation of the Atlantic Coast Pipeline Project, early generation retirements, nonregulated solar impairments, Fowler Ridge contract termination, and Virginia customer-account forgiveness.
- Dominion Energy completed the sale of the Q-Pipe Group to Southwest Gas in December 2021 for approximately $1.5 billion of cash plus assumption of $430 million of debt. The transaction generated a $666 million gain in discontinued operations.
- The company sold certain nonregulated solar interests for cash proceeds of approximately $540 million in aggregate, but recorded a net loss on the transactions primarily because of derecognition of noncontrolling interests.
- Dominion Energy reduced its Wrangler ownership interest from 20% to 15% and completed the contribution of its remaining nonregulated retail energy marketing operations.
- The Virginia 2021 Triennial Review resulted in $356 million of customer refunds, a $50 million prospective base-rate reduction, a 9.35% authorized ROE, and additional CCRO utilization.
- DESC’s South Carolina electric base-rate settlement resulted in approximately $267 million of after-tax charges, including the write-off of regulatory assets no longer considered probable of recovery.
- Dominion Energy issued $742 million of Series C Preferred Stock for cash and contributed an additional $250 million of Series C Preferred Stock to its qualified pension plans.
Guidance, outlook, risks and unusual items
- Management expects 2022 net income per share to increase from 2021, driven by the absence of Virginia Triennial Review charges, the absence of DESC base-rate settlement charges, growth projects, and the absence of the 2021 solar-sale loss. Offsets include the loss of Q-Pipe operations and sale gain, additional amortization of Virginia regulatory assets, and share dilution.
- The 2022 common dividend rate was set at $2.67 per share, a 6% increase from the 2021 rate. The March 2022 quarterly dividend was declared at $0.6675 per share.
- Dominion Energy targets net-zero Scope 1 carbon and methane emissions by 2050 and, beginning in 2022, expanded the commitment to include Scope 2 and material Scope 3 emissions. It anticipates approximately $73 billion of decarbonization-related investment from 2022 through 2035.
- The Coastal Virginia Offshore Wind Commercial Project is estimated at approximately $10 billion, excluding financing costs, with expected in-service by the end of 2026. Through year-end 2021, approximately $290 million had been incurred. Contracts expose the project to euro, Danish krone, and steel-price risks.
- Major risks include regulatory disallowance or delays, customer refunds and rate reductions, environmental and climate regulation, coal-ash remediation, nuclear operating and decommissioning risks, severe weather, cyberattacks, supply-chain and labor constraints, inflation, interest rates, commodity prices, financing access, and project execution risk.
- Dominion Energy’s investment in Atlantic Coast Pipeline remains subject to wind-down activities and future contributions, although management does not expect remaining losses to be material.
- Dominion Energy agreed to sell Hope for approximately $690 million, subject to regulatory approvals, and expects the transaction to close by year-end 2022. It also agreed to form Dominion Privatization, expected to generate $168 million of cash proceeds and approximately $150 million of pre-tax gains upon closing.
- The proposed sale of Kewaunee was not classified as held for sale because regulatory approval remained uncertain. Classification at year-end 2021 would have produced an estimated $725 million pre-tax loss, or $570 million after tax.
- Environmental protection and monitoring expenses were $221 million in 2021; related capital expenditures were $37 million. Estimated expenses are $223 million in 2022 and $216 million in 2023.
Most important facts for investors to verify
- Reconcile reported EPS growth with discontinued operations, investment gains, customer refunds, regulatory accounting, hedging results, and other unusual items.
- Assess the sustainability of the $47.9 billion five-year capital plan and its implications for debt issuance, equity dilution, credit ratings, and dividends.
- Review CVOW Commercial Project cost, permitting, foreign-exchange, commodity-indexing, vessel, supply-chain, and cost-recovery risks.
- Monitor Virginia and South Carolina rate proceedings, including refunds, authorized ROEs, CCRO utilization, regulatory-asset amortization, and potential disallowances.
- Evaluate the effect of net-zero commitments and evolving federal and state environmental rules on generation retirements, gas demand, capital requirements, and asset impairments.
- Review Kewaunee, Hope, Dominion Privatization, Atlantic Coast Pipeline, SCANA-related litigation, nuclear decommissioning, coal-ash obligations, guarantees, and other contingencies.
- Verify liquidity under stressed commodity, interest-rate, collateral, weather, cyber, and capital-market conditions, including the $3.986 billion of year-end revolving-facility capacity.