Dominion's Upbeat Growth Narrative Clashes with Deep CVOW and Regulatory Risks

What happened

A Seeking Alpha article portrays Dominion Energy as positioned for long-term returns, citing a $50B capital plan, 66% complete Coastal Virginia Offshore Wind project, and surging data center demand. However, DeepValue's master report reveals critical headwinds, including a federal freeze on CVOW leases due to Trump administration actions and over $558 million in unrecoverable costs already recorded in filings. The company's 2025 EPS guidance of $3.40 per share assumes regulatory smooth sailing, but Virginia regulators have trimmed rate hikes and signaled tighter oversight on data-center-driven capex recovery. While management highlights progress, the stock trades at ~21x trailing EPS with net debt/EBITDA of 6.2x, offering limited valuation support if CVOW faces delays or further disallowances. This creates a stark disconnect between optimistic projections and the binary policy and regulatory risks that could derail earnings growth and equity value.

Implication

Dominion's fate is now dominated by external factors, particularly the outcome of CVOW's federal freeze and Virginia's regulatory stance, which could lead to project delays, cost overruns, and earnings pressure. Any material slippage in CVOW timing or recovery may force equity dilution due to high leverage and negative free cash flow, eroding per-share value. Recent regulatory actions, such as trimmed rate hikes and new data-center rate classes, indicate growing affordability concerns that threaten the recovery of Dominion's $50B capex plan. Prudent investors should avoid new exposure until CVOW's legal overhang resolves and regulatory support becomes clearer, as the stock's rich multiples discount an optimistic scenario without adequate risk pricing. Over the next 6-12 months, the stock is likely to remain volatile, with downside skewed unless favorable policy catalysts emerge to unlock upside.

Thesis delta

The new article reinforces management's growth narrative but overlooks the acute risks documented in SEC filings, such as CVOW cost disallowances and regulatory tightening highlighted in the DeepValue report. Our thesis remains unchanged: Dominion is a high-risk utility with binary outcomes dependent on policy resolutions, and investors should wait for clearer signals on CVOW and rate recovery before committing capital. No material shift in the investment case; if anything, the article's positivity underscores market complacency toward the substantial downside risks.