Dominion Energy 8K/A Electric fuel and other energy-related purchases | D 27 Feb 18

Dominion Energy, Inc.

Consolidated Statements of Income *

Unaudited (GAAP Based)

(millions, except per share amounts)

Three Months Ended

Year Ended

December 31,

2017

2016

2017

2016

Operating Revenue

$3,210

$3,086

$12,586

$11,737

Operating Expenses

Electric fuel and other energy-related purchases

590

542

2,301

2,333

Purchased (excess) electric capacity

)

Purchased gas

260

207

701

459

Other operations and maintenance

709

931

2,875

3,064

Depreciation, depletion and amortization

484

447

1,905

1,559

Other taxes

149

148

668

596

Total operating expenses

2,206

2,267

8,456

8,110

Income from operations

1,004

819

4,130

3,627

Other income

(84

)

165

250

Interest and related charges

300

295

1,205

1,010

Income from continuing operations including noncontrolling interests before income tax expense (benefit)

620

585

3,090

2,867

Income tax expense (benefit)

(713

)

(30

)

655

Income from continuing operations including noncontrolling interests

1,333

491

3,120

2,212

Noncontrolling interests

121

Net Income attributable to Dominion

$1,312

$457

$2,999

$2,123

Reported earnings per common share - diluted

$2.04

$0.73

$4.72

$3.44

Average shares outstanding, diluted

643.9

627.1

636.0

617.1

*	The notes contained in Dominion Energy’s most recent quarterly report on Form10-Q or annual report on Form10-K are an integral part of the Consolidated Financial Statements.

Schedule 1 - Segment Reported and Operating Earnings

Unaudited


(millions, except earnings per share)	Three months ended December 31,
	2017			2016			Change
REPORTED EARNINGS¹		$1,312			$457			$855
Pre-tax loss (income)²		207			256			(49	)
Income tax²		(934	)		(95	)		(839	)

Adjustments to reported earnings		(727	)		161			(888	)

OPERATING EARNINGS		$585			$618			$(33	)

By segment:
Power Delivery⁴		141			121			20
Power Generation⁴		311			331			(20	)
Gas Infrastructure^{3, 4}		285			243			42
Corporate and Other		(152	)		(77	)		(75	)

		$585			$618			$(33	)

Earnings Per Share (EPS):
REPORTED EARNINGS¹		$2.04			$0.73			$1.31
Adjustments to reported earnings (after tax)		(1.13	)		0.26			(1.39	)

OPERATING EARNINGS		$0.91			$0.99			$(0.08	)

By segment:
Power Delivery		0.22			0.19			0.03
Power Generation		0.48			0.53			(0.05	)
Gas Infrastructure³		0.44			0.39			0.05
Corporate and Other		(0.23	)		(0.12	)		(0.11	)

		$0.91			$0.99			$(0.08	)

Common Shares Outstanding (average, diluted)		643.9			627.1

(millions, except earnings per share)	Twelve months ended December 31,
	2017			2016			Change
REPORTED EARNINGS¹		$2,999			$2,123			$876
Pre-tax loss (income)²		235			359			(124	)
Income tax²		(945	)		(135	)		(810	)

Adjustments to reported earnings		(710	)		224			(934	)

OPERATING EARNINGS		$2,289			$2,347			$(58	)

By segment:
Power Delivery		531			484			47
Power Generation		1,181			1,397			(216	)
Gas Infrastructure³		898			726			172
Corporate and Other		(321	)		(260	)		(61	)

		$2,289			$2,347			$(58	)

Earnings Per Share (EPS):
REPORTED EARNINGS¹		$4.72			$3.44			$1.28
Adjustments to reported earnings (after tax)		(1.12	)		0.36			(1.48	)

OPERATING EARNINGS		$3.60			$3.80			$(0.20	)

By segment:
Power Delivery		0.83			0.78			0.05
Power Generation		1.86			2.26			(0.40	)
Gas Infrastructure³		1.41			1.18			0.23
Corporate and Other		(0.50	)		(0.42	)		(0.08	)

		$3.60			$3.80			$(0.20	)

Common Shares Outstanding (average, diluted)		636.0			617.1

¹⁾	Determined in accordance with Generally Accepted Accounting Principles (GAAP).

²⁾	Adjustments to reported earnings are included in Corporate and Other segment reported GAAP earnings. Refer to Schedules 2 and 3 for details, or find “GAAP Reconciliation” in the Earnings Release Kit on Dominion Energy’s website atwww.dominionenergy.com/investors.

³⁾	Includes Dominion Energy Questar effective September 2016.

⁴⁾	In connection with its corporate rebranding, Dominion Energy changed the names of its principal operating segments to Power Delivery, Power Generation and Gas Infrastructure from Dominion Virginia Power, Dominion Generation and Dominion Energy, respectively.

Schedule 2 - Reconciliation of 2017 Operating Earnings to Reported Earnings

2017 Earnings (Twelve months ended December 31, 2017)

The $235 millionpre-tax net effect of the adjustments included in 2017 reported earnings, but excluded from operating earnings, is primarily related to the following items:

•

$158 million of impairment charges associated with our equity method investments in wind-powered generation facilities.

•

$72 million of transaction and transition costs, primarily associated with the Dominion Energy Questar combination.

•

$46 million net gain related to our investments in nuclear decommissioning trust funds.

The 2017 Tax Reform Act reduced the corporate income tax rate from 35% to 21%. Dominion Energy recognized $851 million of tax benefits resulting from there-measurement of deferred income taxes to the new corporate income tax rate.


*(millions, except per share amounts)*	1Q17			2Q17			3Q17			4Q17			YTD 2017 ²
Reported earnings		$632			$390			$665			$1,312			$2,999

Adjustments to reported earnings¹:
Pre-tax loss (income)		(31	)		47			12			207			235
Income tax		10			(16	)		(5	)		(934	)		(945	)

		(21	)		31			7			(727	)		(710	)

Operating earnings		$611			$421			$672			$585			$2,289

Common shares outstanding (average, diluted)		628.1			629.2			642.5			643.9			636.0

Reported earnings per share		$1.01			$0.62			$1.03			$2.04			$4.72
Adjustments to reported earnings(after-tax)		(0.04	)		0.05			0.01			(1.13	)		(1.12	)
Operating earnings per share		$0.97			$0.67			$1.04			$0.91			$3.60

¹⁾	Adjustments to reported earnings are reflected in the following table:


	1Q17			2Q17			3Q17			4Q17			YTD 2017
Pre-tax loss (income):
Impairments of equity method investments											158			158
Merger-related transaction & transition costs		3			20			16			33			72
Net gain on NDT funds		(34	)		(3	)		(4	)		(5	)		(46	)
Other					30						21			51

		($31	)		$47			$12			$207			$235

Income tax expense (benefit):
Tax effect of above adjustments to reported earnings *		10			(16	)		(5	)		(83	)		(94	)
Re-measurement of Deferred Tax Balances **											(851	)		(851	)

		$10			($16	)		($5	)		($934	)		($945	)

Income taxes for individualpre-tax items include current and deferred taxes using a transactional effective tax rate. For interim reporting purposes, such amounts may be adjusted in connection with the calculation of the Company’syear-to-date income tax provision based on its estimated annual effective tax rate.

Federal tax reform, enacted in December 2017, reduced the corporate income tax rate from 35% to 21%, effective 1/1/2018. Deferred taxes are required to be measured at the enacted rate in effect when they are expected to reverse. As a result, deferred taxes werere-measured to the 21% rate. For regulated entities, where the reduction in deferred taxes is expected to be recovered or refunded in future rates, the adjustment was recorded to a regulatory asset or liability instead of income tax expense.

²⁾	YTD EPS may not equal sum of quarters due to share count differences

Schedule 3 - Reconciliation of 2016 Reported Earnings to Operating Earnings

2016 Earnings (Twelve months ended December 31, 2016)

The $359 millionpre-tax net effect of the adjustments included in 2016 reported earnings, but excluded from operating earnings, is primarily related to the following items:

•

$197 million additional charge associated with the asset retirement obligations for ash ponds and landfills at certain utility generation facilities to comply with the EPA coal combustion residuals rule.

•

$74 million of transaction and transition costs associated with the Dominion Energy Questar combination, which was completed in September 2016.

•

$65 million charge associated with an organizational design initiative and primarily comprised of employee severance benefits.

•

$23 million of restoration costs associated with Hurricane Matthew affecting our electric utility service territories.


*(millions, except per share amounts)*	1Q16			2Q16			3Q16			4Q16			YTD 2016 ²
Reported earnings		$524			$452			$690			$457			$2,123
Adjustments to reported earnings¹:
Pre-tax loss (income)		67			(12	)		48			256			359
Income tax		(19	)		1			(22	)		(95	)		(135	)

		48			(11	)		26			161			224

Operating earnings		$572			$441			$716			$618			$2,347

Common shares outstanding (average, diluted)		598.2			617.0			626.0			627.1			617.1

Reported earnings per share		$0.88			$0.73			$1.10			$0.73			$3.44
Adjustments to reported earnings(after-tax)		0.08			(0.02	)		0.04			0.26			0.36

Operating earnings per share		$0.96			$0.71			$1.14			$0.99			$3.80

¹⁾	Adjustments to reported earnings are reflected in the following table:


	1Q16			2Q16			3Q16			4Q16			YTD 2016
Pre-tax loss (income):
Future ash ponds and landfill closure costs											197			197
Questar transaction and transition costs		2			5			53			14			74
Organizational design initiative		70			(5	)								65
Hurricane Matthew costs											23			23
Other items		(5	)		(12	)		(5	)		22			0

		$67			($12	)		$48			$256			$359

Income tax expense (benefit):
Tax effect of above adjustments to reported earnings *		(19	)		1			(10	)		(95	)		(123	)
Divestiture tax settlement								(12	)					(12	)

		($19	)		$1			($22	)		($95	)		($135	)

²⁾	YTD EPS may not equal sum of quarters due to rounding or share count differences

Schedule 4 - Reconciliation of 4Q17 Earnings to 4Q16


Unaudited	Three Months Ended						Twelve Months Ended
*(millions, except EPS)*	December 31,						December 31,
	2017 vs. 2016						2017 vs. 2016
	Increase / (Decrease)						Increase /(Decrease)
Reconciling Items	Amount			EPS			Amount			EPS
Change in reported earnings (GAAP)		$855			$1.31			$876			$1.28
Change inPre-tax loss (income)¹		(49	)					(124	)
Change in Income tax¹		(839	)					(810	)

Adjustments to reported earnings		($888	)		($1.39	)		($934	)		($1.48	)

Change in consolidated operating earnings		($33	)		($0.08	)		($58	)		($0.20	)

*Power Delivery*
Regulated electric sales:
Weather		$5			$0.01			($14	)		($0.02	)
Other		3			0.01			15			0.02
FERC Transmission equity return		1			0.00			14			0.02
Storm damage and service restoration		(3	)		(0.01	)		14			0.02
Other		14			0.03			18			0.03
Share dilution		—			(0.01	)		—			(0.02	)

Change in contribution to operating earnings		$20			$0.03			$47			$0.05
*Power Generation*
Regulated electric sales:
Weather		$9			$0.01			($36	)		($0.06	)
Other		5			0.01			32			0.05
Merchant generation margin		(19	)		(0.03	)		(28	)		(0.05	)
Outage costs		(21	)		(0.03	)		(22	)		(0.03	)
Renewable energy investment tax credits		54			0.08			(133	)		(0.21	)
Depreciation		(9	)		(0.01	)		(46	)		(0.07	)
Electric capacity		(12	)		(0.02	)		58			0.09
Interest expense (project level solar)		(4	)		(0.01	)		(15	)		(0.02	)
Other		(23	)		(0.04	)		(26	)		(0.04	)
Share dilution		—			(0.01	)		—			(0.06	)

Change in contribution to operating earnings		($20	)		($0.05	)		($216	)		($0.40	)
*Gas Infrastructure*
Dominion Energy Questar combination²		$0			$0.00			$184			$0.30
Farmout transaction		6			0.01			13			0.02
Transportation and storage growth projects		8			0.01			29			0.04
Noncontrolling interests		(3	)		(0.01	)		(30	)		(0.05	)
Cove Point import contracts		(27	)		(0.04	)		(86	)		(0.14	)
Other		58			0.09			62			0.10
Share dilution		—			(0.01	)		—			(0.04	)

Change in contribution to operating earnings		$42			$0.05			$172			$0.23
*Corporate and Other*
Renewable energy investment tax credits		($90	)		($0.14	)		$0			$0.00
Interest expense and other		15			0.03			(61	)		(0.08	)

Change in contribution to operating earnings		($75	)		($0.11	)		($61	)		($0.08	)

*Change in consolidated operating earnings*		($33	)		($0.08	)		($58	)		($0.20	)
Change in adjustments included in reported earnings¹		$888			$1.39			$934			$1.48

*Change in consolidated reported earnings*		$855			$1.31			$876			$1.28

¹⁾	Adjustments to reported earnings are included in Corporate and Other segment reported GAAP earnings. Refer to Schedules 2 and 3 for details, or find “GAAP Reconciliation” in the Earnings Release Kit on Dominion Energy’s website at www.dominionenergy.com/investors.

²⁾	Excludes financing impact of Dominion Energy Questar combination.

Note: Figures may not add due to rounding

Dominion Energy (D) 8-K/AElectric fuel and other energy-related purchases