Investing.com -- Shares of Dominion Energy, Inc. (NYSE:D) tumbled 4.4% following the announcement that its Coastal Virginia Offshore Wind (CVOW) project will now cost more than initially expected. The company’s recent update indicated a roughly 9% increase in the total project cost, from $9.8 billion to $10.7 billion, primarily due to higher network upgrade costs assigned by PJM, the regional electric grid operator, and increased onshore electrical interconnection costs.
Despite the cost hike, Dominion Energy reported that the CVOW project, a 2.6 GW fully permitted offshore wind initiative, is about 50% complete and on schedule to finish by the end of 2026. The project is credited with creating 2,000 jobs and generating $2 billion in economic activity. Significant construction milestones have been achieved, including the installation of the first 16 transition pieces and the delivery of major components for on-schedule installation.
The updated cost reflects a revised estimate for network upgrade costs, which represented the largest unfixed cost input for the project. The company’s contingency now accounts for approximately 5% of the remaining project investment. Dominion Energy reassured stakeholders that robust cost-sharing mechanisms are in place to protect both customers and shareholders from the cost increase. The expected average impact on a typical residential customer bill is projected to be an increase of 43 cents per month over the life of the project.
Dominion Energy also reaffirmed its existing guidance for 2025 operating EPS (non-GAAP), its long-term operating EPS growth rate, and credit. The company will discuss its financial results, updated capital investment expectations, and financing plans during its fourth quarter 2024 investor call on February 12, 2025.
Shahriar Pourreza of Guggenheim Partners commented on the cost increase, stating, "we acknowledge that some investors may place a discount on the name until they see more construction completion." He noted that while the cost-sharing settlement and stake sale agreement from 2022 and 2024 will limit Dominion’s funding of the overage to $100 million, the remainder of the project continues on schedule with key component deliveries and installations progressing. Pourreza emphasized the importance of supplier performance and constraints within the schedule for the project’s success.
Dominion Energy’s stock movement reflects investor concerns over the updated costs and the potential impact on the company’s financials, despite assurances of cost-sharing measures and ongoing progress in the construction of the CVOW project.
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