After reporting an earnings hit in the wake of the Atlantic Coast Pipeline LLC cancellation, executives at Dominion Energy Inc. focused their July 31 earnings call on their transition to a more utility-focused business.
Dominion plans to replace president and CEO Thomas Farrell on Oct. 1, and executives said the upcoming transition back to a regulated utility-focused business from the diversified energy infrastructure company that Farrell had heralded was the right time to implement previously designed succession plans.
Farrell will become executive chairman, though he said during an investor conference call that there was "no established time frame" for him remaining in that role. Robert Blue, executive vice president and co-COO, will become CEO.
The July 31 disclosures cement the ramifications of and plans to address the sweeping changes across the company, following the decision earlier in the month to off-load substantially all of Dominion's gas pipeline and storage assets to Warren Buffett's Berkshire Hathaway and pull the plug on the $8 billion, 1.5 Bcf/d Atlantic Coast Pipeline it was building with Duke Energy Corp.
The company emphasized its "strategic repositioning, which include a narrowed focus to our premier state-regulated utility operations," Farrell said during the call, noting that these will account for about 85% to 90% of the company's operating earnings.
"We did get quite a bit of feedback from across the spectrum," CFO James Chapman said of the strategy shift. "That feedback has been pretty good. But, it is a change a material change for Dominion."
Company officials will be engaging with the market in the coming months to better explain the moves, he said. "Everyone really wants to spend more time and make sure they get it and understand the dynamics," Chapman said.
Due largely to an accounting charge to reflect the cancellation of the pipeline and the impact on the affiliated Supply Header project, which is in limbo but may still go forward, Dominion reported a GAAP net loss for the second quarter of $1.17 billion, or $1.41 a share, compared with a profit of $54 million, or 5 cents a share, in the same period a year ago.
The Atlantic Coast Pipeline was designed to run 600 miles through West Virginia, Virginia and North Carolina, delivering gas to end-users, including utilities that serve individuals and businesses. It had been beset by numerous legal setbacks that had halted construction on key portions of the route. While the developers recently won a significant Supreme Court ruling in one of the disputes, they determined it would be too costly to move forward on a project that had already ballooned from an initial estimate of $5.1 billion.
During the earnings call, Farrell was asked whether the gas needs of customers in Dominion's utility service territory had changed since the decision to cancel the Atlantic Coast Pipeline.
"The need has not changed at all," Farrell said. "That need will now go unmet."
Farrell was also asked if EQM Midstream Partners LP's Mountain Valley Pipeline LLC, which has also faced legal challenges from landowners and environmental groups, could play a role in meeting some of those gas needs.
"Not that we can see," he said.