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Spikes and Valleys

The financial wins and environmental challenges facing Dominion Resources.


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For the powerful electric utility Dominion Resources, as Charles Dickens might say: It is the best of times, it is the worst of times.

When shareholders packed Dominion’s Glen Allen technical center last week, they heard Chief Executive Thomas Farrell expound on a remarkable wave of growth, including $19 billion in capital spending, over the next six years.

That includes part of a $5 billion natural gas pipeline, a liquefied natural gas export facility on the Chesapeake Bay and two new natural gas power plants. The utility’s operating earnings for 2014 also beat analysts’ estimates, bringing more cheer.

At the same time, Dominion — the state’s top corporate donor to politicians — is facing the strongest opposition from multiple fronts in years.

Some homeowners bitterly oppose the $5 billion Atlantic Coast Pipeline that will carry controversial fracked natural gas over sensitive mountain habitat from West Virginia to North Carolina. The company’s taking heat on its LNG plant at Cove Point, Maryland. And it’s facing criticism for sticking with fossil fuel and nuclear plants while seeming to ignore such renewables as wind projects.

Shareholders had to pass about 140 noisy protesters on their way into the May 6 meeting. Once there, they listened to a host of proposals calling for Dominion to report the financial risks to equity holders from climate change, scrapping plans for a third nuclear reactor at North Anna and tying executive compensation — Farrell made $17.3 million last year — to reducing carbon dioxide emissions.

The proposals were all shot down. But the bigger story is that some of them got a substantial number of votes. The climate risk resolution received 83.3 million votes, or 23.6 percent of the total. A proposal requiring the company to report on methane emissions from natural gas use got 25 percent of the total.

“This is significant, and I’ve been going to these meetings for three years,” says Seth Heald, a Dominion shareholder and vice chairman of the Sierra Club. The votes represent $6 billion in equity held by Dominion shareholders, he says.

Also of note is the Sisters of Mercy. The Catholic religious group which is a vanguard in the national shareholder activism movement, has targeted Dominion for the first time. Marcela I. Pinilla, director of shareholder advocacy for the religious order’s investment arm, Mercy Investment Services of St. Louis, said they proposed a resolution that Dominion set clear goals for reducing carbon dioxide emissions. Dominion “needs to step up their action on climate change,” she says.

While Dominion took lumps from many sides on environmental issues, it’s sparkling on the economic front.

Cory Renauer, a utility analyst at Seeking Alpha, describes the utility’s dividend yield as a “juicy” 3.6 percent. Farrell’s huge natural gas construction play “could make this a great dividend growth stock in years ahead,” writes Renauer, who expects Dominion’s rising projects to be “lucrative.”

Dominion spokesman Jim Norvelle says that the expansions are needed because Dominion imports a lot of electricity from other states and needs to ramp up generation.

Environmentalists are suspect of the build-out because it seems to avoid renewable energy and sticks ratepayers with older, more polluting generation that Dominion claims is cheaper. “We’re just extremely disappointed that Dominion is choosing the dirty power path,” says Glen Besa, executive director of the Virginia chapter of the Sierra Club.

Another Sierra Club official, Ivy Main, a Northern Virginia lawyer, says that Dominion makes allusions toward renewables but seems to pull away. The utility had won kudos when it announced a $230 million plan to erect two six-megawatt wind turbines offshore of Virginia Beach.

But when Dominion auctioned for contractors, it got only one bid. It was from $375 million to $400 million — about double what Dominion had planned, so it halted the project. Getting just one bid is suspect, Main says, adding, “we wonder if it was set up to fail.”

For now, it seems that Dominion will get its way. It’s 80 percent finished with engineering plans to retrofit the Cove Point liquid natural gas export facility, which will serve utilities in Japan and India. Analyst Renauer says the project will be profitable almost immediately.

The opposition won’t be letting up either. This weekend, Dominion is the main sponsor of Dominion Riverrock, a popular outdoor sports and music festival on Brown’s Island headlined by Blues Traveler.

Green forces will be out. Wild Virginia, a Charlottesville group that seeks to preserve forest habitat, will have an informational display that intends to “tell the truth” about Dominion, it says.

“We have toured the George Washington National Forest where Dominion wants to put the pipeline,” says Misty Boos, the group’s director. “It is amazing what damage their right of way will do.” S

Editor's note: This story reflects a correction from the print edition, which said Cove Point was 80 percent complete. It is the engineering phase that is 80 percent complete.


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