TITLE: Dominion's Offshore Wind Gamble: Is the Juice Worth the Squeeze?
Dominion Energy's Q3 earnings call paints a picture of steady performance, highlighted by progress on their Coastal Virginia Offshore Wind (CVOW) project. Operating earnings came in at $1.06 per share, with GAAP results at $1.16. Not bad, fueled by regulated investment growth and a favorable DESC rate case settlement. But let's drill down, because the devil's always in the details, especially when you're talking about a project as massive and complex as CVOW.
The headline? CVOW is two-thirds complete, with 100% monopile installation achieved. They're still aiming for first power by late Q1 2026. Sounds promising, right? The company is touting its commitment to renewable energy. But here's the thing: the project's costs have ballooned to $11.2 billion. That's a hefty sum, and Dominion took a $50 million after-tax charge for costs they don't expect to recover from customers. Ouch. That figure alone should prompt anyone to ask whether the juice is worth the squeeze.
The Data Center Mirage?
Dominion is also banking on a surge in data center demand, reporting approximately 47 gigawatts in various stages of contracting, a 17% jump since December 2024. That's significant growth, no question. But is it sustainable? Or are we looking at a speculative bubble fueled by AI hype? Data centers consume enormous amounts of power. If that demand doesn't materialize as projected, Dominion could be left with a lot of excess capacity and a very expensive offshore wind farm. I've looked at hundreds of these filings, and this particular over-reliance on a single sector is unusual.
The company's forward-looking guidance narrows the full-year earnings range to $3.33 to $3.48 per share, sticking to the original midpoint of $3.40. They're talking about delivering shareholder value through strong commercial and residential sales. But, and this is a big but, they're also planning to update future capital investment forecasts in early 2026. What happens if those forecasts include further cost increases for CVOW? Will shareholders still be happy?
Weather also played a role, shifting from a tailwind to a minor headwind, impacting earnings by $0.02. That might seem insignificant, but it underscores the vulnerability of weather-dependent energy production. And then there's the Charybdis, the wind turbine installation vessel, facing delays and requiring remediation before turbine installation can even begin. These are the kinds of operational challenges that can quickly derail a project of this scale.
A Safety-First Facade?
Dominion is making a big deal about its safety performance, with an OSHA recordable rate of 0.28%. That's a positive trend over the past three years, no doubt. But let's be real: safety is table stakes. It's what you're supposed to do. It shouldn't be a key selling point in an earnings call. It's like a restaurant bragging about washing their dishes—it's expected, not exceptional.
Here's the part of the report that I find genuinely puzzling: the narrative carefully avoids discussing any alternatives to CVOW, or any potential scaling back of the project given the rising costs. The company is all-in on offshore wind, come hell or high water. It's a high-stakes gamble, and the company is betting big.
The Wind Isn't Always Free
Dominion's earnings call presents a mixed bag. Strong financial performance is overshadowed by the escalating costs of the CVOW project and the reliance on data center demand. While the company is making progress on renewable energy initiatives, the financial risks are substantial. The question isn't whether Dominion can build an offshore wind farm; it's whether they can do it without bankrupting their shareholders. And that remains to be seen.