Dominion Energy Wins Court Injunction for CVOW, Easing Immediate Freeze but Underlying Risks Remain Elevated

What happened

The U.S. District Court granted Dominion Energy a preliminary injunction, allowing construction to resume on the Coastal Virginia Offshore Wind (CVOW) project while its lawsuit against federal agencies proceeds. This development mitigates the near-term threat of prolonged delays from the Trump administration's offshore wind freeze, which had heightened regulatory and political overhangs. However, the DeepValue report underscores that CVOW is a binary policy risk, with cost estimates already at $11.2 billion and unrecoverable charges of $558 million signaling potential disallowances. The injunction merely permits work to continue during litigation, leaving underlying legal challenges and cost-recovery approvals from the Virginia SCC unresolved. Consequently, while this step aligns with the bull scenario's condition of lifting the freeze, Dominion's high leverage, negative free cash flow, and tight regulatory scrutiny persist as core vulnerabilities.

Implication

The injunction lowers the probability of the bear scenario where CVOW faces extended federal delays, potentially supporting the stock in the short term by aligning with the bull scenario's trigger. However, it fails to address the Virginia SCC's history of trimming rate hikes and disallowing costs, which could impede full recovery of CVOW overruns and strain earnings. Dominion's valuation at ~21x P/E and net debt/EBITDA of 6.18x offers limited downside protection if further setbacks emerge, as highlighted in the DeepValue report. The company's heavy capex plan and data-center dependence remain exposed to regulatory tightening and affordability concerns, keeping the investment thesis skewed toward risk. Thus, while this news is favorable, it does not justify a shift from the 'POTENTIAL SELL' rating; investors should await clearer outcomes on lawsuits and SCC decisions before considering new exposure.

Thesis delta

The preliminary injunction partially fulfills the bull scenario's condition by lifting the CVOW freeze, reducing near-term downside risk and potentially supporting a move toward the base case of negotiated mitigation. However, the core thesis remains unchanged, as the injunction does not secure cost recovery or address regulatory headwinds, leaving the binary policy risk intact. Until the Virginia SCC affirms full recovery and legal challenges are resolved, the investment call stays cautious, with the delta being a marginal improvement rather than a fundamental shift.