道明尼資源 (D) 2020 Q2 法說會逐字稿

Good morning, and welcome to the Dominion Energy Second Quarter Earnings Conference Call. (Operator Instructions)

I would now like to turn the call over to Steven Ridge, Vice President, Investor Relations.

Good morning, and thank you for joining our call. Earnings materials, including today's prepared remarks may contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings, including our most recent annual reports on Form 10-K and our quarterly reports on Form 10-Q for a discussion of factors that may cause results to differ from management's estimates and expectations.

This morning, we will discuss some measures of our company's performance that differ from those recognized by GAAP. Reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures, which we are -- which we can calculate are contained in the earnings release kit. I encourage you to visit our Investor Relations website to review webcast slides as well as the earnings release kit.

Joining today's call are Tom Farrell, Chairman, President and Chief Executive Officer; Jim Chapman Executive Vice President, Chief Financial Officer and Treasurer; as well as other members of the executive management team.

I will now turn the call over to Jim.

Thank you, Steven, and good morning. Our second quarter 2020 operating earnings were $0.82 per share, which included a $0.03 hurt from worse than normal weather in our utility service territories.

Weather-normalized results of $0.85 per share were at the top of our guidance range. And for the 18th consecutive quarter were at or above the quarterly guidance midpoint.

We expect the full year financial impact of weather to be more balanced than during the first 2 quarters of the year.

Preliminary data indicate that July was around $0.04 better than normal, and early predictions for August suggest potential for additional weather help.

Note that our second quarter GAAP and operating earnings are not adjusted to account for discontinued operations, given the timing of our recent announcement, but will be reflected beginning with our third quarter disclosures.

GAAP earnings for the quarter were negative $1.41 per share. This result was driven primarily by impairment-related charges associated with the Atlantic Coast Pipeline and Supply Header projects. We also had a positive impact attributable to net gains on our nuclear decommissioning trust funds. As a reminder, we report such gains and losses on these funds as nonoperating. A summary of adjustments between operating and reported results is included in Schedule 2 of the earnings release kit.

On Slide 4, we're initiating third quarter 2020 operating earnings guidance with a range of $0.85 to $1.05 per share. As mentioned, this range reflects the impact of recasting operating earnings to exclude discontinued operations. We're also affirming the 2020 annual guidance range provided on our July 6 investor call. As usual, these ranges assume normal weather. Variations from which could cause results to be towards the top or the bottom of these ranges. Typically, we provide year ago actual results alongside our guidance. Given the need to adjust historic results for discontinued operations to provide a useful point of comparison, we plan to provide these figures when we report third quarter and full year results, respectively.

I would also note that our 2020 10-K will include 3 full years of historic results that have been adjusted to reflect the impact of discontinued operations. Finally, we are also affirming the long-term annual growth guidance we gave earlier this month for earnings and dividends per share.

I'll now turn to discuss our observations on the financial impacts of COVID-19. The graph on Slide 5 represents daily and 7-day average weather-normalized load in the PJM DOM zone as compared to the 2-year historic weather-normal average. Strong residential and data center demand continues to support overall load levels that modestly exceed the historic average. This is a continuation of the theme we've seen since the pandemic began. And looking forward, we expect this trend to continue.

We provide corresponding data for Dominion Energy South Carolina on the next slide. Recall the story here diverged from DEV and that we did experience weather-normal load degradation earlier this year. On the first quarter call, we suggested that April could represent a bottoming out with gradual improvements through the summer. Fortunately, at least so far, that has been the case with July demand only 1% off weather-normal historic averages. I would also point out that the higher volumes sold in the summer months, like July, tend to have a larger impact on our annual sales revenues than the lower volume shoulder months. We currently expect this general recovery trend to continue in South Carolina through the remainder of the year.

We estimate that through the end of June, lower-than-budgeted sales associated with the impacts of COVID-19 across our electric utility operation has impacted operating income by approximately $0.04 per share, which thus far has been largely offset with corporate initiatives. The future remains difficult to predict, so we are reiterating the demand-related earnings sensitivities that we provided on the first quarter call and which can be found in the appendix of today's presentation.

Consistent with our expectations, customer arrears have increased modestly to date. We continue to work carefully with our customers to provide options and tools to assist them in returning their accounts to current. Our GAAP results for the quarter reflect the recognition of a COVID-related reserve of around $20 million, representing our current expectation for incremental expense associated with future uncollectible accounts.

Turning now to a financing update, as shown on Slide 7, we provide detailed guidance on our equity capital raising plans. First, we are ceasing the issuance of new shares under the DRIP program with immediate effect, resulting in a total of about $160 million of new share issuance under the program in 2020, roughly half of our prior estimate. In 2021 and beyond, we'll return to our historic norm of around $300 million of new share issuance per year. Second, starting in 2022, we expect to see our at-the-market program begin to ramp up such that by 2024, our first big year of offshore wind investment we're back to the $300 million to $500 million per year range that we previously articulated at Investor Day. And third, we continue to target year-end completion of the share repurchase we announced earlier this month.

Recall that the Board's authorization for the announced $3 billion buyback was with immediate effect. We currently expect that there may be some modest upward bias to this figure based on additional refinement of our overall tax analysis. We'll provide additional details around share repurchases next quarter, but would note that we have not yet repurchased any shares.

We have an exciting opportunity to deploy significant amounts of capital directed at sustainable energy and related projects. These projected modest equity financing activities will support these EPS-accretive capital investments.

Turning to fixed income, we've included a slide in the appendix detailing our very modest remaining issuance for the year. Overall, we view the debt capital markets as healthy and liquid across the spectrum of term, and we currently have nearly $7 billion in available liquidity. Our credit rating agencies responded positively to the announcements we made earlier this month. S&P revised their outlook to positive while Moody's and Fitch affirmed our ratings. In all cases, the agencies remarked on the credit positive aspects of our strategic repositioning. We expect that successful execution of our financial plan will further demonstrate the clear and positive reduction of our overall business risk profile.

Finally, before I summarize my remarks, let me give some insight into our Investor Relations strategy over the next several months, as shown on Slide 8. We are increasing our proactive outreach using virtual tools to interact with both existing and prospective shareholders throughout the world, including geographies where ESG-related factors are playing an increasingly prominent role in investment decisions. We are ramping up our investor targeting efforts to identify prospective shareholders for which our compelling, clean energy, operating and financial profile will resonate.

We plan to use our fourth quarter earnings call to provide something of an Investor Day-style refresh with supplementary appendix disclosures aimed at providing projected CapEx, rate base, and other inputs, which we hope will assist investors in their financial evaluations of our company. It's our responsibility to get our repositioning story into the market. We, therefore, look forward to connecting with many of you for discussions on these topics during the next several months.

So to summarize my remarks, we remain focused on extending our track record of delivering financial results that meet or exceed our public commitments. We feel that our businesses are well positioned with regard to COVID-related demand impacts, but we are monitoring that situation carefully. We are affirming our updated 2020 operating earnings guidance as well as the long-term operating earnings and dividend growth outlooks provided earlier this month. And finally, we look forward to increasing engagement with existing and prospective investors in the months to come.

I'll now turn the call over to Tom.

Thank you, Jim, and good morning, everyone. I would like to start by again expressing our gratitude for the medical and other frontline health care professionals who are engaged in a courageous effort to assist those who have been impacted by the COVID-19 pandemic. We salute their efforts, just as we salute the efforts of our employees who continue to perform a vital public service by literally keeping the lights on and critical energy flowing.

We continue to evolve our COVID response to incorporate the most up-to-date guidance from the medical and public health community, social distancing, proper PPE and where practical, remote work have become the expectation for all employees.

We're also mindful of our customers and the difficult time this has been for them. We have worked closely with regulators to take steps, including the voluntary suspension of nonpayment service disconnections and the offering of flexible payment plans to assist our customers in addressing the financial challenges they may be facing.

Turning to safety, which is our first core value on Slide 9. Our year-to-date results put us on track to make 2020 the safest year of operation in the company's more than 100-year history. As an organization with nearly 20,000 employees and 7 million customers, our safety performance matters to thousands of families and communities, which is why it matters so much to us.

The ability to impact lives on a broader scale is also why when we see an issue that deeply impacts our employees, customers and communities, we get involved. Recent social unrest, partly caused by the murder in Minneapolis, has led us to question what more we can do to assist in the cause of social justice and racial equality. Early last month, we publicly committed $5 million to social justice and community rebuilding efforts. The funds will support nonprofit organizations advocating for social justice and equality. Grants will also be designated to help minority-owned and small businesses recover from recent disruptions to their businesses.

Words can evoke sympathy, empathy, compassion and understanding. But at Dominion Energy, we believe that actions speak louder. So we're investing in recovery and reconciliation and in the vital work of overcoming years of debilitating actions, attitudes and abuses of authority that have traumatized our country. This month, we followed up on that commitment with an additional pledge of $35 million that will support 11 historically black colleges and universities, representing 35,000 students across Virginia, Ohio, North and South Carolina as well as a scholarship fund focused on African-American and underrepresented minority students across all of our service territories. These institutions have been foundational in the struggle to improve the lives of African-Americans and in the fight for social justice.

We are pleased and humbled to build on our company's nearly 40-year history of supporting historically black colleges and universities. These initiatives are a recognition of the importance of education as an equalizer in society. Across our company, we are engaged in these issues like never before, listening and being heard. We are committed in taking major steps to increase the diversity of our workforce. And in recent years, we have meaningfully improved our supplier diversity. Embracing diversity inclusion is not only the right thing to do. It is imperative to our long-term success as a company and we are changing the way that long-term success will look, operationally and financially.

Slide 11 summarizes the highlights of our strategic repositioning, which include a narrowed focus to our premier state-regulated utility operations, which will account for approximately 85% to 90% of our operating earnings, an industry-leading clean energy profile, best-in-class long-term earnings and dividend per share growth and a low-risk business profile and healthy balance sheet. We have a vision for the future and we are preparing our company to be at the vanguard of the energy transition that is accelerating across our country. We are investing billions of dollars in a transition that will make zero- and low-emitting resources accountable for around 95% of our company-wide electric generation by the end of 2035.

As shown on Slide 12, we have a plan described in our integrated resource plan filings to grow our renewable energy capacity on average over 15% per year for the next 15 years. We have successfully achieved our 3,000 megawatt target for renewable generation in service or under-development in the State of Virginia, 1.5 years ahead of schedule. And we are now the third largest owner of solar capacity among utility companies in the country.

Our pilot offshore wind project, depicted on the cover of these materials, is the only project to have successfully completed the BOEM permitting process and will begin to generate electricity this quarter. Our $8 billion, 2.6 gigawatt full-scale offshore wind deployment continues on schedule. Recent permitting recommendations for Northeast wind projects are not expected to alter materially our project plans and will be accounted for when we submit our construction and operation plan later this year. Finally, earlier this month, Virginia State Corporation Commission approved our renewable energy tariff, which enables us to offer an exciting 100% renewable energy product to our customers.

We are equally focused on emission reductions at our Gas Distribution utilities. Pipeline and other aging infrastructure replacement, extensive leak detection and repair efforts and modified operational procedures designed to capture gas that used to be ventilated -- vented during maintenance will reduce the methane emissions of our natural gas utility operations 65% by the end of this decade and 80% by the end of the next.

We are also finding innovative ways to help our customers improve their sustainability. As one of the country's largest investors in renewable natural gas, we are at the forefront of the intersection of agricultural emission reductions in offering natural gas customers a green option that is actually carbon negative, meaning that it takes more greenhouse gases out of the atmosphere than it creates when it is used by the customer. In coming months, we will share additional insights into our expanding vision for a sustainable energy future for our company and the country.

Next, let me address the upcoming Dominion Energy South Carolina rate case. Earlier this month, we made a preliminary filing that formally signaled our intent to file a general rate case proceeding next month, the first for the base electric business in South Carolina since 2012. We expect new rates based on a typical procedural schedule to be effective in March of 2021.

Since the last rate case 8 years ago, Dominion Energy South Carolina has connected over 80,000 new electric customers, representing a 12% increase and invested over $2 billion net of retirements in electric generation, transmission and distribution systems that serve customers every day.

Despite prudent cost management, the resulting earned return does not measure up to the cost of capital we must employ to maintain the excellent reliability and service that our customers rely on. We estimate that our filing will imply a single-digit percentage rate increase, which will be significantly lower than the compounded rate of inflation of nearly 14% since the end of the last test year of 2011. Customers count on us to keep the lights on and to deliver affordable and increasingly sustainable electricity. We are as committed to that ideal in South Carolina today as we were when we closed the merger.

With that, I will summarize today's call as follows: our safety performance is on track to set a new company record; we are making important financial commitments to address social justice and support African-American and underrepresented minority students; we achieved weather-normalized operating earnings that exceeded the midpoint of our guidance range for the 18th consecutive quarter; we affirmed our enhanced long-term earnings and dividends per share growth guidance; our transaction with Berkshire Hathaway is on schedule for a fourth quarter closing; and we are aggressively pursuing our vision to be the most sustainable energy company in the country.

Before we turn to your questions, I want to discuss our announcement this morning about my change of role from President and CEO to Executive Chairman of Dominion, effective at the end of this quarter. I'm in my 25th year at the company, 15th year as CEO and turned 65 last December. Three years ago, the Board began to consider various alternatives to my eventual retirement. We have undertaken a series of steps over these years. Last September, we took an important step in that process by creating the Co-Chief Operating Officer role. Today's announcement is another step in a long designed succession process.

I'm pleased to say that Bob Blue will become President and CEO on October 1, reporting to me as Executive Chair. And Diane Leopold is being promoted to Chief Operating Officer, reporting to Blue and will be responsible for all of the company's operations across our multistate footprint. Jim Chapman, our CFO, will report to Blue; as will Carter Reid, President of our Services Company; Carlos Brown, our General Counsel; Bill Murray, our Head of Corporate Affairs and Public Policy; Corynne Arnett, our Head of Regulation and Customer Experience; and Tanya Ross, our Chief Auditor. Carter Reid will also report to me in her role as Chief of Staff of Dominion.

I provide you with this detail to underscore that the team we have assembled at Dominion over the past 15 years will be the same team that carries us into the future. It is this group that has taken Dominion to the top ranks among American utilities in safety, operational excellence and compliance. It is also this team that has supported and expanded our steadfast commitment to sustainability, diversity and community engagement. These individuals, of course, did not achieve these results on their own. They were supported by thousands of others at our company who share and live our company's values. As you know, over the years, we have made significant and, in some cases, transformative changes to Dominion, like our succession process, we have taken a deliberate strategic approach to repositioning Dominion for the future.

We are now a largely state-regulated, multi-utility company with a growth profile for both earnings per share and dividends among the highest in our industry. We also have one of the strongest ESG stories in this sector. From exiting oil and gas production and merchant fossil generation to merging with Questar and SCANA, to embracing solar power, advanced storage and grid modernization, to relicensing our nuclear fleet as well as the development of the largest offshore wind farm in the Americas, it has been this team of individuals leading the way.

With our most recent strategic alignment in selling our gas storage and pipeline segment and embracing a clear path to net zero by 2050, the Board and I thought it would be an appropriate time to take the next step in our management transition at the end of this quarter. There is no established time frame for my role as Executive Chair, and I look forward to continue to serve the company on behalf of our shareholders, customers and communities. The primary goal of our succession planning process has been to ensure continuity of our strategy, public policy, corporate values and operational excellence. This change is a step in carrying out that goal.

I will also continue to serve as Chairman of the Board of Directors of the company. As Executive Chair, I will continue to represent the company engaging with key stakeholders, industry groups and others. I will be particularly focused on continuing to develop our strategic plan and Dominion's leadership in the new clean energy economy.

And with that, we will be happy to answer your questions.

(Operator Instructions) Our first question will come from James Thalacker with BMO Capital Markets.

Good morning. Can everybody hear me?

Yes, we can.

And before we start, congratulations to both you, Tom, Bob and Diane for the announcements today. I'm glad to see it. Just 2 real quick questions. On Slide 8, you discussed an Investor Day-style financial update, which will include a rolling forward of the capital plan and the rate base estimates. Would this include a year-by-year or a segment-by-segment program breakdown of the capital spend as well as the associated rate base by year and segment?

James, it's Jim. Yes. So we're in the planning stages for that for the fourth quarter rollout of that Analyst Day, Investor Day-style refresh. And we hope to do at least the kinds of things we did last time around -- last March, where we did provide by segment and mostly by year rate base and other growth data. So if we can improve on that a little bit, we're thinking through how to do that. We welcome feedback. But we do expect to provide kind of everything you just mentioned on the fourth quarter call.

Okay. And I mean -- and just staying in that vein, since you've already given sort of some of the financing through 2024, we're going to be looking forward a year. Will we probably roll this out to -- will this be like a 2021 through 2025? How are you thinking about that?

Yes. I haven't decided that yet, but that's a possibility for sure. And I would say, let me add to that, our existing disclosure is not so out of date. Last March, we set out $26 billion of growth capital spending from '19 to '23. We updated some of that on the first quarter call this year, for 3 programs under the VCEA in Virginia. Obviously, longer term, our gas transmission storage capital spend, which is about $3.5 billion, comes out of that. But our existing guidance is still largely intact and relevant, but we will be providing that roll forward with some more granular updates on the fourth quarter call.

And then just last question on this part of it is -- and really just kind of sticking to the 2025 sort of time frame. You've given a lot of line of sight on the financing through 2024. But your CapEx, really, as you start to do the offshore wind starts really building up in '23, '24. Just wondering if you are looking to sort of move your CapEx forecast out a little bit farther to kind of talk about the financing plan as we move into '24 through '26 and the offshore wind starts coming online?

Yes. Fair enough. I mean those numbers do get big, and there's a lot of visibility around that offshore wind spend. But I would say that on an overall basis, the cadence of that $26 billion build number in the updated number, I mean, it's pretty much a run rate. So yes, there's a slight increase there. So if we -- as we provide additional detail or an additional year of capital spend, we'll also support that with information on our financing plan. But I wouldn't expect a drastic departure from our kind of run rate numbers that we've talked about today.

(technical difficulty)

Yes, James, you're cutting out there a little bit, but, yes, that kind of run rate again. We'll provide an update on the fourth quarter call. But it's not going to be a drastic departure from that, if that was your question.

Yes, yes. No, that's perfect. And then the last question, I apologize. But clearly, there's been a lot of press in the last week surrounding political spending practices and vehicles. On Slide 20, you briefly address your rankings in the CPA-Zicklin Index, which highlights user trends that are under their methodology, but I was wondering if you could speak a little bit more of your past and current use of social welfare organizations like the 501(c)(4). And do you plan to modify your political strategies at all in light of the recent investigations?

Sure. Thanks for asking. First, we have fully disclosed 501(c)(4) contributions for many years. Zicklin Center you referenced is an independent organization that works with The Wharton School at the University of Pennsylvania to look at a huge, very wide variety of factors, and they rank all these companies on their disclosure practices. And our disclosure is -- ranks among the highest in the country, certainly among the highest in utilities for its transparency. And like I said, we've disclosed all of them.

And over the last 5 years, I think our contributions have been under $500,000, 70% of which went to an organization that is associated with American Petroleum Institute supporting pipeline projects. So we are -- fully disclosed everything. It's not a -- it's a very small part of what we do, under $500,000 over 5 years. And we have no intention of changing our practices because they are perfectly appropriate, completely compliant with every state and federal law by wide margins. We are -- we have nothing to be concerned about with respect to any of our political giving or giving to these so called 501(c)(4)s.

Our next question will come from Shar Pourreza with Guggenheim Partners.

Just on the equity guide, some people may be struggling with it, buying back this year and starting to issue next year. Can you touch on this thought and why not decide to delever and further sort of improve the credit metrics versus buying back, which could be sort of multiple accretive in and of itself. So -- and I just have a quick follow-up.

Yes, Shar, let me start there. So look, our balance sheet is already in the right place. And I won't take time to go through all the history but I think, as you know, we've made just a ton of progress in that area over the last several years. And it's even better pro forma for the sale of the T&S business. So that sale, almost $6 billion of the $10 billion transaction value is really, from our perspective, debt retirement. So I think the agencies have recognized that also in their commentary, as I just talked about positive outlook from S&P, et cetera.

So given that, the status of our balance sheet and the related improvements from this transaction, we feel pretty good about our plan to provide the net proceeds back to our shareholders in this buyback, which we're -- as I mentioned, we're targeting for completion by the end of the year. But that said, we do have a sizable clean energy and related capital spend program, just talked about that with James. And it's only increasing as we go through the year slowly. So therefore, we do -- even though we're doing the buyback and we're giving the net proceeds back to our shareholders, we think it's prudent with that strong balance sheet position we're in.

We do plan to recommence some equity issuance, even if it's just in this form of DRIP in 2021 and beyond. But I think the perspective is important, I mean, for spending programs of the size what we're doing, to be starting out with DRIP, less than 0.5 percentage point of our market cap a year in a pretty efficient program like DRIP. And later just with other efficient programs, all in our ATM, we think it's overall pretty modest, and we think it's the best way to go.

Got it. And then just honing in on the buyback, what's specifically, again, driving the upsizing, can you kind of sort of quantify? And then on the timing, it seems that 4Q purchases could be a little bit conservative on your viewpoint. Can you buy back sooner, even if you don't have the proceeds in the door? And can you potentially close this transaction sooner than 4Q? So what's driving the upsizing? And can you start to buy back sooner than 4Q even if the proceeds aren't in your door?

Yes. So we have a couple of things there. We have Board authority to commence our buybacks with immediate effect. We do not need to wait until the transaction closes. But we haven't bought any yet. And we retain kind of full flexibility. We can do that with open market purchases. We could do it with accelerated share repurchases, a tender, a Dutch auction, so more guidance to come on that through the fall as we go. We do expect still to complete that by the end of the year, even if we start sooner.

We're not guiding to any different closing timeline than the kind of early fourth quarter, although that all remains on track. But then as it relates to the amount, the quantum, yes, we mentioned there's upward bias. Where is that coming from? We'll provide more detail on that too as we go. But that comes from -- first of all, just a conservative first cut on what the tax -- cash taxes would be on this sale. We indicated about $700 million. So there's interplay there between the tax aspect of the sale and the tax aspect of the Atlantic Coast Pipeline abandonment and impairment of Supply Header, and the interplay of our sizable tax credit position.

So as we continue to do more work on that, we see probably, if anything, a downward bias in the taxes payable from $700 million and, therefore, an upper bias in the size of the buyback. And it's not huge. I mean, again, we'll come to that guidance. It sits somewhere between 0 and $200 million kind of that magnitude. And we'll provide more guidance. But again, conservative first cut, probably improving from there modestly, and we'll provide more detail on all that as we go through the fall.

Got it, got it. And Tom, congrats on Phase 2 of your career.

Thank you, Shar. Appreciate it.

Our next question will come from Durgesh Chopra with Evercore ISI.

Congratulations to you Tom as well.

Thank you.

So maybe just starting off, I actually have 1 question only. Just -- the other questions have been answered. Jim, so the credit rating agencies, post the transaction obviously, came out with a positive view. I didn't see it, but is there a chance that your FFO-to-debt metrics get adjusted here going forward now that the business mix is very different?

Thanks, Durgesh. By that, do you mean kind of the downgrade or upgrade thresholds from the agencies?

Exactly. Yes.

I think there -- I can't speak for the agencies there. On the downgrade side, there hasn't been action yet. I would think that as we continue to execute on this plan and improve on our business risk profile, derisk our profile that that would be a logical thing to discuss. But we're not guiding folks to expect that in the near term. But I understand the question, and we'll see what happens.

Our next question will come from Michael Weinstein with Crédit Suisse.

Congratulations, Tom, Bob and Diane, all 3 of you. I just wanted to ask about the -- as we get closer to the triennial review, I think you're going to -- you should be filing it pretty soon, if not already. What should we be looking for there in terms of time line and dates and hearings and things like that?

Michael, it's Bob Blue. So obviously, we're focused on that triennial. We will file it in March of next year, and it will be litigated over the course of that year with a decision by the end of November. So that's the cadence for that.

Okay. Great. And in terms of the offshore wind project, there wasn't really much mentioned in the presentation this time around. But I'm just wondering if you can give us an update on, I guess, the filing, which I think you're still planning towards the end of the year, right, with BOEM?

Right. We expect to file the COP with BOEM at the end of this year. And it's progressing well. The survey and geotechnical work and the preparation of that are going very well. So we're pleased, just as we were pleased with the construction on the test turbines.

And is that project included on that slide that shows the 15 -- over 15% increase in renewable generation over, say, 2035?

Yes.

Okay. So -- and it's a relatively small part of it, it looks like solar is the vast majority of it, right?

That's correct. It's large solar builds. I don't really think of the commercial project as small; however, it's the largest in the Americas.

It looks like it's going to get dwarfed by solar. Is that all in the state of Virginia and South Carolina, I suppose?

It's within the PJM footprint. But we're talking mostly in Virginia, yes.

Our next question will come from Steve Fleishman with Wolfe Research.

First, Tom, congrats to you. It's been a long time. And also congrats to Bob and to Diane, well deserved. So -- in good hands. So I guess, just -- could you just remind us what you need to do to actually get the transaction closed, in terms of approvals, just so we're tracking that?

We just have HSR, really, and that's progressing along just fine.

Okay. Great. And then, I mean, there's not going to be a lot of time to actually execute on the buyback in Q4. It's a decent amount of stock. So could you just talk about kind of how you are thinking about doing it?

Yes. Let me go there, Steve. So again, we don't have specific guidance on that yet, and we'll provide more through the fall. But I just mentioned all the kind of options we have at our disposal to get that done, but we don't necessarily need to wait until the fourth quarter to start, and we probably won't. So it could be -- it very well could be a mix of approaches of market purchases and other approaches in addition to or in place of fourth quarter tender-style event. So I know that's pretty broad. But we don't need to compress that into just a month or 2 in the fourth quarter. We have the authority to start now.

Okay. And then maybe just when you look at -- I guess, that -- I know you said you're going to be doing a lot of continued marketing on the company and story and the kind of new clean energy further refocus there. Just maybe you could give a little color on what kind of feedback you've gotten so far because, obviously, there was big news with the financial changes and then this refocus. What kind of investor feedback you've gotten so far?

Yes. Let me start there. And that was just 3 weeks ago or so when we made those announcements. And we did get quite a bit of feedback from across the spectrum, different types of investors. And we took it all to heart. We sat around and considered a lot of that pretty carefully, including, notably, the feedback from retail investors who are very focused on the dividend and income fund investors. So we get that and took that to heart. But the feedback from, I guess, maybe longer-term investors, institutional investors and those investors, as I mentioned in my prepared remarks, that are North America or elsewhere, that increasingly are thinking about their investment decisions through the lens of ESG topics. That feedback was pretty positive on the long-term prospects of this transaction, repositioning the company in this way, strengthening the balance sheet, increasing the growth rate, highlighting all the -- already underway, ESG spending programs, clean energy and related. So that feedback has been pretty good.

But it is a change -- a material change for Dominion. So we have been already and we highlighted here that we're going to spend a lot of time in the next few months just reconnecting with people, existing investors, prospective investors. We're walking through that story, making sure everyone gets it, not only what we've done, but exactly what we're doing under these spending programs and the size and scale and cadence and the financing. So there's a lot to talk about. And one thing that's been consistent in all of our interactions with investors, existing perspectives in the last 3 weeks is everyone really wants to spend more time to make sure they get it and they're understanding all the dynamics. But overall, it's been pretty positive.

And our last question will come from Jeremy Tonet with JPMorgan.

Just a multipronged question on natural gas, if I could here. Just wondering how you think the needs in your service territories have changed over time since you first announced ACP. And with the ACP cancellation, what are your expectations for gas distribution CapEx into the fourth quarter refresh here? Is there an upward bias especially without (inaudible) competing for capital? And finally, if I could, just how do you think hydrogen could fit into the picture over time here?

Thank you for the question. I'm just -- on the -- let me -- I'm going to answer the very first part of it and then turn it over to Diane. The need for the Atlantic Coast Pipeline in our service territory, of course, the service territory for us was Virginia and North Carolina and potentially South Carolina. Well, the need has not changed at all. The result of it is that need will go unmet as a result of the cancellation of the Atlantic Coast Pipeline. The pipeline was over 90% subscribed for 15 years by utility companies that were going to use it to serve gas distribution customers and convert coal plants to natural gas facilities over the years to come. That need will now go unmet. So with respect to that 1 project, no change.

The balance of the question, I'll turn over to Diane.

Okay. So with respect to the LDC capital spend and -- certainly, we'll give a refreshed look in the Q4 call. But we really don't see any change there. So we really have jurisdictions that are in very supportive states for our programs. And they're in high-growth areas. So we have North Carolina, Utah, Ohio, West Virginia in the key jurisdictions. We have pipeline replacement programs in essentially all of those areas that are significant, and our commissions recognize the long-term nature of those programs and the need to have that infrastructure replacement for safety, reliability and sustainability. So I really don't see anything there as well as the continued growth projects to meet the increasing demand in these high-growth areas. So really no change on the LDC side.

With respect to hydrogen, we do see that there will be an increase in hydrogen utilization in the energy mix over the next several decades. And we've certainly spent a lot of time studying it. At the moment, at least to our knowledge, no continental U.S. LDC is blending hydrogen into its supply mix today. We committed a couple of years ago to making sure our LDC system is ready to accept up to 5% hydrogen by 2030, so just in the next decade. And our initial pilot is in advanced planning stages in Utah. So high level, we think there's going to be a lot of activity in this area. But for the most part, it's still in that study and preparatory planning stage. But expect it to be ramping up and look forward to sharing updates.

That's very helpful. And just going back to the gas situation real quick. With MVP, do you think that there's any role for that to play, I guess, in meeting some of those needs that are going to go unmet without ACP?

Not that we can see.

Got it. And just 1 last one, if I could. With regards to the upcoming election here, just wondering if you had any preliminary thoughts on potential impacts at the federal or state level for Dominion overall?

I have no intention whatsoever of commenting on the upcoming elections in any respect.

Thank you, and this does conclude this morning's conference call. You may disconnect your lines, and enjoy your day.