Dominion Energy is ordering $ 175 million by decision of the Supreme Court

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Dominion Energy is ordering $ 175 million by decision of the Supreme Court


Dominion Energy is ordering $ 175 million by decision of the Supreme Court

Image by Mark Thomas from Pixabay 

Investing requires balancing risk with reward, and this is quite true for individual investors as it is for companies that own them. The public utility giant 
Dominion Energy (NYSE: D) is a clear example of that today, as it is completing a major natural gas project that has faced physical environmental 
payment. Indeed, despite the U.S. Supreme Court case over the Atlantic Coast pipeline, Dominion increased its stake in the project. Here's what you 
need to know about this deal and project.

Little money, which is a noticeable decision
The Atlantic Coast pipeline aims to bring natural gas from West Virginia to Virginia and South Carolina. It is an underground pipeline that Dominion 
says is necessary because the current capacity of natural gas will not be sufficient to meet the increasing demand in the areas it will serve. There 
are three main clients of the project: Dominion, Duke Energy and The Southern Company (NYSE: SO). The original multi-billion dollar investment 
was owned by all three companies, and Dominion controlled 48% of the project, the Duke of 47%, and South of 5%.

When Dominion released its earnings for the fourth quarter of 2019, it noticed that it had bought Southern's 5% stake. This brings its control over 
the project to more than 50%, giving it complete control over the investment. The acquisition cost about $ 175 million and included some other natural 
gas assets. To be fair, this is a relatively small cost compared to the entire project, which has already spent $ 3.4 billion on construction efforts and is 
not about to be done yet (the total cost is expected to be around $ 8 billion at this time, but it can go higher). However, when you consider the
 increased control Dominion bestows, it is a noticeable step. It comes at an interesting time.

Pressure on the environment against the Atlantic Coast pipeline was intense. Indeed, the increasing difficulty of completing such projects was one of
 the main reasons the South chose to sell its stake. During the conference call that took place during the last quarter of 2019 from Southern, I noticed
 that the pipeline was simply a very small location that the facility could not care about because the financial return did not justify the uncertainty and 
complexity the project added to the company's business. Today's complexity includes an appointment with the U.S. Supreme Court to make 
a somewhat vague decision.

Who controls this forest?
The big question before the court is who can grant approval for the pipeline to cross the Appalachian Pass. At this point, the U.S. Forest Service has 
given its seal of approval, but the path is actually a multi-state entity that is effectively run by the Appalachian Conservation Corporation. This group, 
however, is not the group that raises the issue, it is outside the environmental groups that defend the battle. In fact, the Tories decided not to oppose
 the pipeline.

The results of the case are noticeable in the Appalachian Trail. Track control is something of a loose affiliation that includes implicit approvals left 
alone because it has succeeded relatively well so far. It is almost an official setting and can be adjusted if Dominion loses. For Dominion, the Supreme
 Court case is notable because although it is only a small part of the pipeline, it is an important point of contact.

If Dominion is not victorious, and the U.S. Forest Service is not the appropriate entity to approve, the tool may have to obtain congressional approval 
to grant the crossing. This is something you are already working on, but it makes completing the pipeline more difficult and, frankly, uncertain. Losing 
the Supreme Court will not be the end of the road, but it will be a major hurdle. So why increase the ownership situation now?

The answer is probably two-fold. Although neither Southern nor Dominion has stated this as a fact, Dominion's earnings during the last quarter of 
2019 have made it clear that Southern has remained a major customer. It is possible that purchasing the southern part of the project at 5% was aiming
 at least partly to calm a major customer. Secondly, and most importantly, Dominion's current downfall is that the Atlantic Coast pipeline could add
 up to $ 0.25 per share to earnings starting in 2022, assuming it was completed on time. Given that operating profit for the entire year in 2020 is 
expected to range between $ 4.25 and $ 4.60 per share, this would represent a profit increase of nearly 5%. Although this may not look like a huge
 deal, this number is great for utilities - especially because it is associated with only one investment.

In other words, Dominion is making a calculated bet that can complete the project, and that the added cost of purchasing "Southern Out" will be worth the expense if it keeps things moving completely. But many are running on the outcome of the Supreme Court case, because the loss may push the cost of the project higher

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