Dominion EnergyD

Operating earnings of $0.79 per share beat the $0.68 analysts expected, and revenue reached $4.48 billion. The company is seeing a massive rise in demand from data centers, which now require more than 50 gigawatts of power in its territory. This growth is helping the business stay on track even as it pays more for its daily operations.

Management also confirmed it expects to earn between $3.45 and $3.69 per share for the full year. This stability is important because the company just finished a major reorganization to focus purely on electric utilities. For anyone holding the stock, the focus remains on whether the company can build out the grid fast enough to keep up with these new power-hungry customers.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

The companies have officially applied for regulatory approval to merge their operations. If the deal goes through, it would create a massive utility serving four of the fastest-growing states in the country. To help get the deal approved by regulators, the companies are offering $2.25 billion in credits to customers in Virginia and the Carolinas.

This is a significant move that would combine this company's local grid with the financial scale of NextEra. For owners, the main hurdle will be the regulatory review process, as state commissions must decide if the merger is in the public interest. The companies have promised that the costs of the merger itself will not be passed on to customers.

Source: PRNewsWire

Key highlights

• Virginia segment driving growth: The Virginia utility division, the company's largest segment, saw operating earnings grow $121 million compared to the same period last year. This increase was fueled by a $105 million boost from a recent regulatory review and $79 million from rider equity returns, which are specific charges allowed by regulators to help the company earn a return on its infrastructure investments.
• Asset write downs hit profit: Reported net income fell to $340 million from $760 million a year ago, primarily because the company took $704 million in charges for its non-regulated business. These charges were mostly due to an $820 million write down on renewable natural gas facilities, which means the company reduced the value of those assets on its books.
• Data center demand rising: The company continues to see heavy demand from data centers and connected 744 MW of new capacity during the most recent full year. This growth is essential because the Virginia segment's demand is forecast to grow at a 5.4% annual rate through 2035, requiring massive ongoing investment in the power grid.
• Contracted energy earnings dip: Operating earnings for the contracted energy division fell by $16 million to $31 million this quarter. Higher interest expenses of $17 million and a $13 million increase in depreciation and amortization, which is the accounting cost of equipment wearing out over time, outweighed gains from higher margins.
• Earnings guidance confirmed: Management expects full year operating earnings to be between $3.45 and $3.69 per share, which is a tight range centered on $3.57 per share. Sticking to this goal suggests the company is confident it can manage its high debt and rising interest costs while funding its multi-billion dollar construction projects.

Our take: This was a solid quarter where strong performance in the core Virginia utility more than made up for expensive write downs in newer green energy projects. By confirming its full year profit goals, the company shows its plan to pay down debt while meeting huge data center demand is working. This supports the long term case for the stock as a stable income producer.