Tom Hamlin - VP, IR and Financial Planning Tom Farrell - CEO Mark McGettrick - CFO Paul Koonce - EVP, President and CEO of Dominion Generation Group

Greg Gordon - Evercore ISI Julien Dumoulin-Smith - Bank of America Merrill Lynch Steve Fleishman - Wolfe Research Michael Weinstein - Credit Suisse Angie Storozynski - Macquarie Group Stephen Byrd - Morgan Stanley

Good morning and welcome to the Dominion Energy and Dominion Energy Midstream Partners Fourth Quarter Earnings Conference Call. At this time, each of your lines is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. Instructions will be given as to the procedure to follow, if you would like to ask a question. I would now like to turn the call over to Tom Hamlin, Vice President of Investor Relations and Financial Planning for the Safe Harbor Statement.

Good morning and welcome to the fourth quarter 2017 earnings conference call for Dominion Energy and Dominion Energy Midstream Partners. During this call, we will refer to certain schedules included in this morning's earnings releases and pages from our earnings release kit. Schedules in the earnings release kit are intended to answer the more detailed questions pertaining to operating statistics and accounting. Investor Relations will be available after the call for any clarification of these schedules. If you have not done so, I encourage you to visit the Investor Relations page on our websites, register for email alerts, and view our fourth quarter and full-year earnings documents. Our website addresses are dominionenergy.com and dominionenergymidstream.com. In addition to the earnings release kit, we have included a slide presentation on our website that will follow this morning's discussions. And now for the usual cautionary language; the earnings releases and other matters that will be discussed on the call today may contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings including our most recent Annual Reports on Form 10-K and our Quarterly Reports on Form 10-Q for a discussion of factors that may cause results to differ from management's projections, forecasts, estimates, and expectations. Also on this call, we will discuss some measures of our company's performance that differ from those recognized by GAAP. Reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures, we are able to calculate and report are contained in the earnings release kit and Dominion Energy Midstream Partners’ press release. Joining us on the call this morning are our CEO, Tom Farrell; our CFO, Mark McGettrick; and other members of our management team. Mark will discuss our earnings results and Dominion Energy's earnings guidance. Tom will review our operating and regulatory activities and review the progress we’ve made on our growth plans. I will now turn the call over to Mark McGettrick.

Good morning. Dominion Energy reported operating earnings of $3.60 per share for 2017 which was in the middle of our guidance range. Mild weather conditions in our electric service territory in both the winter and summer had a $0.10 per share negative impact on our results. Adjusting for weather, our earnings results were in the upper half of our range. Other negative factors impacting earnings were a lower allowed rate of returns on our Virginia rider projects and lower margins from our merchant generation business. The positive factors for the year relative to our guidance includes lower than expected general merchant capacity expenses, interest expenses and operating expenses. EBITDA summaries of our operating segments for the fourth quarter and full year 2017 are shown on slides four and five. Overall, we are very pleased with the performance of our operating segments in 2017. GAAP earnings were $4.93 per share for the year. The principal difference between GAAP and operating earnings was a $988 million gain due to tax reform, primarily driven by an adjustment to a deferred tax liability. The reconciliation of operating earnings to reported earnings can be found on schedule 2 of the earnings release kit. Dominion Energy Midstream Partners produced adjusted EBITDA of $299 million for 2017, which is more than double the level produced in 2016. Distributable cash flow was $178 million, which was 68% higher than 2016. The acquisition of Questar Pipeline in December of 2016 was the principal driver of the increase. On January 25th, Dominion Energy Midstream's Board of Directors declared a distribution of $31.8 per common unit payable on February 15th. This distribution represents a 5% increase over the last quarter’s payment and is consistent with our 22% per year distribution growth rate plan. Our coverage ratio remains strong at 1.29 times. Also we are in advanced stages of securing a $500 million revolving credit facility for Dominion Midstream that will replace its existing credit line with the parent company. This should be in place in the next few weeks. Moving to treasury activities at Dominion Energy, cash flow from operating activities was $4.6 billion for 2017. We have $5.5 billion for credit facilities and taking into account cash, short term investments and commercial paper outstanding, we ended the year with available liquidity of $2.2 billion. We are also in the process of increasing Dominion’s credit facilities by $500 million up to a total of $6 billion, which would further improve our liquidity. For statements of cash flow and liquidity please see pages 13 and 24 of the earnings release kit. On Slide 8, we outline a number of initiatives we've planned for 2018 which are in support of our balance sheet and credit profile. First, we issued $500 million of new common equity through our at-the-market program in January. This issuance was not related to our planned SCANA financing. Second, we've reviewed our capital spending plan and anticipate reducing our expenditures by $1 billion over the next two years. These reductions will have no impact on our previously disclosed growth capital estimate. Third, as I just mentioned, we are securing an extension in upsize of Dominion's credit facilities up to a total of $6 billion. This is in addition to the new $500 million credit facility planned at Dominion Energy Midstream Partners. And finally, we're initiating the process of de-levering a parent company and on a net basis will reduce holding company debt by $800 million or more this year. These and other elements of our 2018 financing plan excluding our planned SCANA transactions are shown on Slide 9. I want to assure everyone that we're committed to investment grade ratings and we'll strive to meet the associated credit metrics. Moving to tax reform on Slide 10, recently enacted changes to the federal tax code were a significant impact on most utilities. Assessing the impact is a difficult process for a multifaceted company like Dominion, operating in seven different states. In estimating the ongoing impact from tax reform, we've assumed that the benefits of lower tax rates will be passed-through to customers in all of our state regulated businesses. On the plus side, lower tax rates will improve the profitability of our non-regulated and long-term contracted businesses. Also the normalization, amortization of excess deferred income taxes will provide incremental growth to rate base in our regulated businesses. On the negative side as highlighted by some of the recent comments from the rating agencies, tax reform creates strong credit headwinds particularly for companies like Dominion who are currently not-cash taxpayers. We estimate the 2018 impact of federal tax reform will be a positive $0.10 to $0.15 per share. Now to earnings guidance at Dominion Energy, operating earnings for 2018 are expected to be between $3.80 and $4.25 per share. The midpoint of our range is 10% above the middle of last year's guidance range. Positive factors compared to last year are earnings from Cove Point and return to normal weather, one fewer refueling outage at Millstone, and a lower effective tax rate due to tax reforms. However, a large portion of the tax reform benefit will be offset by the delay in promotional operation for Cove Point. Tom Farrell will expand on the operational timing of Cove Point in a few minutes. Negative factors for 2018 compared to last year include lower investment tax credits, higher financing costs, and share dilution. Our earnings growth rate remains 6% to 8% for the 2017 through 2020 period. This compound growth rate could improve to 8% plus if we are successful in our efforts to combine with SCANA Corporation. Our operating earnings guidance for the first quarter of this year is $0.95 to $1.15 per share compared to $0.97 for the first quarter of last year. Positive factors for the quarter compared to last year's first quarter are returned to normal weather, a contribution from Cove Point export, higher merchant generation margins and federal tax reform. Negative factors include lower solar investment tax credits, higher financing cost, higher capacity expenses and higher DD&A. You will notice in our guidance documents that projected EBITDA for our operating segments and total company were showed a decline compared to the prior period, even though net income and earnings per share are higher. This is due to the impact of the flow-through benefits of tax reform and our state regulated businesses. So let me summarize my financial review. Operating earnings were $3.60 per share, remaining in the middle of our guidance range despite mild weather. Changes to federal tax code are expected to be a net positive for Dominion's earnings. We are taking aggressive steps to strengthen our balance sheet to offset the credit impact of tax reform and 2018 operating earnings are expected to be at least 10% above the midpoint of our 2017 operating earnings guidance range, consistent with previous guidance. I'll now turn the call over to Tom Farrell.

Good morning. Strong operational and safety performance continued at Dominion Energy in 2017. All of our business units either met or exceeded their safety goals for the year. Our employees set an all-time low OSHA Recordable Rate of 0.66 in 2016. In 2017, they exceeded that record by an additional 10% to a new record low of 0.60. We are very proud of our companywide commitment to improve safety performance. Our nuclear fleet continues to operate well. The net capacity factor of our six units in 2017 was a record 95.1%, exceeding the previous record of 93.7% set in 2013. Weather-normalized electric sales for the year were up 1.7% over 2016, led by growth and sales to data centers and residential customers. Total new customer connects were above our expectations with strong growths in both residential and commercial sectors. For the year, we connected 13 new data centers compared to 11 in 2016. Now few comments on Millstone Power Station, we are looking forward to the opportunity to compete with other non-emitting generating resources in a state-sponsored solicitation for zero carbon electricity. It provides a path-forward to retain 1,500 well-paying jobs in Millstone's substantial environmental energy and economic benefits for Connecticut. Preliminary reports issued by DEEP and PURA in December and January highlighted the importance of Millstone to the region's power markets and the state's economy. We have worked with the regulatory agencies including the sharing of confidential financial information, to convey the actual cost of operating two dissimilar units in a high regional labor market. An updated report issued on January 22, concluded that the solicitation should take place in that Millstone can't participate. Our recent report from ISO New England regarding the region’s future fuel security and reliability risks also supports the need for Millstone. The final report from DEEP and PURA is expected this week and we look forward continue to work through this process with the Connecticut regulators. Now for an update on our growth plans; construction of the 1,588-megawatt Greensville County Combined Cycle Power Station continues on time and on budget. As of December 31, the $1.3 billion project was 73% complete. All major equipment is set. The primary natural gas line and M&R station are completed and awaiting final commissioning. Greensville is on schedule to achieve first buyer in the second quarter and is expected to achieve commercial operations late this year. The upgrade of our electric transmission network continues. In 2017, we invested $806 million and placed $519 million of assets into service. We plan to invest $800 million on electrical transmission business this year and every year for at least the next decade. Progress on our growth plan for gas infrastructure continues as well. Construction of our Cove Point Liquefaction project is complete and we are in the final stages of commissioning. While commissioning has taken longer than we originally planned, we are progressing toward an in-service state in early March. This is an enormously complicated process, and we and our contractors are ensuring that all the work is done safely, thoroughly and correctly. We are currently in the process of cooling down to liquefying temperatures to make LNG and met final tuning and testing phase. The actual production of LNG at the facility is imminent. Once commercial, our contracts become effective and the project will produce the expected earnings we have previously discussed. However, as Mark mentioned, the absence of these earnings for the first few months of the year will offset some of the earnings benefits expected from lower income taxes. Nevertheless, we still expect 2018 earnings to be at least 10% above the midpoint of last year’s guidance. On January 19th, FERC issued a Limited Notice to proceed for the Atlantic Coast Pipeline and the related Supply Header Project, which allows us to begin felling trees. Tree-felling started for ACP in Virginia and West Virginia on January 20th and for the Supply Header on January 26th. We are making excellent progress particularly in the mountain areas. Last week, we received our final North Carolina 401 water quality permit as well as our final E&S permits from West Virginia. We expect all remaining major permits including our Army Corps 404 and Virginia E&S permits any day. These are the final major permits necessary to request FERC authorization to commence full construction. We remain on schedule for completion of the projects in the second half of next year. It is noteworthy that during the cold weather earlier this month, power crisis in Virginia and North Carolina increased substantially, surpassing the highest daily power price average in New England by 10% and underscoring the urgent need for the increased regional gas transportation that the Atlantic Coast Pipeline and Supply Header Project will provide. Finally, a few comments on our offer to merge with SCANA Corporation, on January 3rd, we announced our agreement for Dominion would exchange 0.669 shares of its common stock for each SCANA share. Including the offer was a proposal for upfront payments and ongoing build reductions that would substantially reduce the cost to customers from the abandoned nuclear development projects. We filed a regulatory proposal with South Carolina Public Service Commission on January 12thj. All of the other state regulatory filings and the application for Hart-Scott-Rodino clearance have been made. We expect to receive approval from SCANA's shareholders in May. We’ve participated in legislative caring to explain our proposals to lawmakers who are considering possible changes to the South Carolina Base Load Review Act. We are optimistic that our proposal will be viewed favorably by law makers and regulators, and we can complete the transaction later this year. So to summarize, our businesses delivered record setting operating safety performance in 2017. Construction of the Greensville County project in on-time and on budget, commissioning of Cove Point is continuing, and we expect to be in service in early March. We received the Limited Notice to Proceed for Atlanta Coast Pipeline and the Supply Header Project and have begun tree-felling along the route. Other permits are expected any day. We expect earnings growth of at least 10% in 2018 driven by completion of the Cove Point Liquefaction project and 6% to 8% from 2017 to 2020. Success in our efforts to merge with SCANA could increase our growth rate to 8 plus percent. Because of our unique MLP structure, our superior cash flows will also allow a dividend growth rate of Dominion Energy of 10% per year through at least 2020. And finally, the programmatic investment plans across all of our business units we’ve highlighted last fall, provide the foundation for earnings growth of at least 5% well into the next decade. With that, we would be happy to take your questions.

[Operator Instructions] The first quarter will come from Greg Gordon with Evercore ISI. Please go ahead.

Notwithstanding just the very short delay that you’ve got on Cove Point, when I think about the structural benefits of tax reform, the $0.10 to $0.15, because obviously being delayed a few months of Cove Point is just a few months doesn’t really matter in the long run. Is it fair to think about the steps you’ve taken in terms of issuing the 500 million of equity and reducing the CapEx budget by about $1 billion and bringing -- starting the $800 million of targeted debt reduction at the parent early? Like all those things are sort of you’re taking the earnings benefit of tax reform and utilizing that to get a jumpstart on the deleveraging goals? So in other words like your earning targets are so on track because you were able to take the benefits of tax reform and use them to get a jump on the deleveraging that you’ve articulated you’re looking to achieve. Is that the right way to think about this? Or am I not thinking about it correctly?

Greg, this is Mark. I think you’re right on track there. A large piece of that we’re using to go ahead and aggressively support credit. One reason, we went ahead and issued equity at the market in January, knowing what our position was going to be even with a slight delay in Cove. So, we did take advantage of that and we’re committed to the ratings that we have. We will take the steps necessary to support that and we took advantage of taxes to get a jump start.

Great, I just wanted to make sure I understood that, that was the sort of what you were doing. Other than that I actually don't have any other questions, congratulations on a good year.

Thank you. The next question will come from Julien Dumoulin-Smith with Bank of America Merrill Lynch. Please go ahead. Julien Dumoulin-Smith: So, a quick clarification actually, just given the conversations with Moody's and other agencies of late, just to the extent at which you've updated your plan at present. Does this put you in a position to get back on track and remove some of these outlooks? I mean obviously you've probably added some of the conversations you've shared with us this morning. Is this more of a question of timing and execution to get you up and put debt metrics in a place that is consistent with the agencies for your current ratings? Is that the right way to think about that at this point? And maybe you could even share just a little bit on, how you see the FFO to debt profile off the lows here progressing?

Hi, Julien, this is Mark. We have shared with agency our plans, and this is obviously an industry-wide issue for regulated utilities in terms of FFO pressure because of tax reform. We think this gives us a very strong start to support our FFO metrics going forward, but there's probably more work to be done in the future. The approach I think we believe agency is going to take are for all the companies that are impacted by the FFO is to make sure they can execute the plans that they outlined for the agencies and for investors and that's what we're committed to do to get our FFO metrics where all the agencies are comfortable with them and very strong investment grade, that's our commitment and will remain our commitment. Julien Dumoulin-Smith: And I wanted to come back to the earnings growth. Obviously, you've got a number of moving pieces in the update, not least of which at the $0.10 to $0.15 in tax reform. I know you in the key takeaways reaffirmed the 8% plus trajectory, but can you talk about ex-SCANA just how this might shift your standalone prospects for the earnings outlook, if it does at all?

Well, Julien, I think, I hope we've been clear on at that -- our 2017, 2020 growth rate is 6% to 8% without SCANA on a compound annual rate. And I think as Tom mentioned, 5 plus percent post 2020. If we're successful in the SCANA transaction that growth rate from '17 to '20 could move to 8 plus percent. So with or without SCANA, we're in terrific position with one of the best growth rates we believe in the industry and one of the highest dividend growth rates as well, but certainly SCANA would be a positive result for us.

Thank you for the question. The next question will come from Steve Fleishman with Wolfe Research. Please go ahead.

Same question in a different way. Assuming that $0.10 to $0.15 net benefit continued through 2020, why wouldn’t you be a little bit higher in your 6% to 8% growth? Or is that $0.10 to $0.15 change over the period?

Steve, I think it's going to change a little bit over the period, but again I think the 6% to 8% range we feel real comfortable with and there's a lot of moving parts on tax reforms still in terms of how states might handle it, how FERC might handle it, and timing of the cash impacts on that. So, we've made our best assumptions here, and we think that 6% to 8% is the right range without SCANA. Could it move us off a little bit? It's possible. I don't think it will move us down at all, but I think taxes could move around little bit post '18.

And then just to clarify, could you remind us if you are including any Millstone kind of benefits of the potential contract there on not in your plan?

We are not. Again, our range that could move us within our range depending on the success at Millstone, but we did not put a specific number in when we came out with our 6% to 8% growth range for prior to the Millstone legislative work.

Could you maybe also just talk a little bit about the Virginia legislation that was recently proposed? And then what's Dominion's view on that and potential impacts?

Steve, this is Tom. There is a comprehensive piece of legislation that has been developed by a variety of leaders in the General Assembly, both in the Senate and the House that deals with lots of issues in the state energy policy. It's moving through -- Virginia moves legislation through in a very rapid pace normally. And I don’t think this will be an exception, they have to adjourn by the end of the first week of March. So, we are working with a variety of stakeholders on it. We think there are some very good things in it. There are some things that will have to accommodate ourselves to, but overall we think it's constructive a piece of legislation for our state and our customers.

The next question will come from Michael Weinstein with Credit Suisse. Please go ahead.

I was wondering if -- maybe you could discuss some of the opportunities that you see from the legislation for both investors and customers. I know in the past we have talked about grid mod and riders and some other possible benefits.

I don’t -- I think it's premature to talk about it. There is still lots of work to be done on it -- maybe a little bit later when we see the final products in the committee hearing will be coming up in the next couple of weeks, and we will see how goes from here. And we'll be in a position to talk about it I think more thoroughly on the next call.

On the Dominion Midstream, in the past you used to talk about $7 billion to $8 billion of cash from 2016 to 2020. Is there any update for that as well post tax reform?

No update on that, Michael. We still expect that cash to come back to Dominion and that is the one of the many levers we are going to have to de-lever the parent. That story has been consistent in terms of the drop of Cove Point into the Dominion midstream and the benefits back to the mainly shareholders since day one and we fully expect to execute on that beginning in this year.

And just one last question on -- in New England, can you talk about whether you would -- whether you plan to bid in the forward capacity auction Millstone? Or is that dependent on the outcome on February 1st of the review?

Michael, this is Paul Koonce. We are not prepared to discuss what we are going to bid. I mean that’s obviously competitively sensitive. So, we are working very well with both DEEP and PURA to kind get through that process. They are going to issue their final report as Tom said later this week. That will we believe lead to an RFP being issued in the May timeframe, and so we will be working with DEEP and PURA between the final report in May to understand the structure of a bid and then we will submit our bid as any others.

Thank you for your question. The next question will come from Angie Storozynski with Macquarie Group. Please go ahead.

So my question is -- okay, so, the $1 billion reduction in your CapEx doesn’t impact your gross CapEx? So, what is this? Is this maintenance CapEx that is getting reduced?

Hey, Angie, this is Mark. It's going to be a number of things. The largest component of that $1 billion is associated with an announcement we’ve made recently to go ahead and put nine of our generating facilities in Virginia into coal storage based on current market economics. The timing of that over the next 12 months or so would have required a lot of maintenance at all those units and that will be a lowered portion of the reduction. But there will also be reductions in other non-core maintenance activities over the next couple of years to come up with the $1 billion over the two year period. But we have very good line of sight on that.

Okay. Second question on the credit negative outlook, credit outlook and -- okay so the negative outlook was issued in January and if I understand it correctly, the credit agencies were already aware of the equity financing and the lower CapEx that you’re proposing. Does it mean that you need to step up some of the credit improvement initiative i.e. do I need to account for more equity come '19 and ‘20?

Angie, when we shared with the agencies our plans over the next three years, it was associated with the SCANA transaction and we had not adjusted for the equity that we’ve talked about today or the $1 billion adjustment. They were not advised until very recently and that was a decision that we made internally here to make sure that we -- our focus on the metrics -- they know we’re focused on the metrics and are making quick headway to improve that based on the tax reform impact. So, they were in their original numbers and we think this is a big step forward, as we go ahead and complete SCANA transaction.

Thank you. Our final question will come from Stephen Byrd with Morgan Stanley. Please go ahead.

I just wanted to check in on the overall goals in terms of leverage given a lot of helpful commentary this morning around target credit metrics. But just -- you had mentioned in the past the desire to reduce the holdco debt as a percentage of total debt moving from 50% down to lower level by the end of the decade, I believe 30% to 40%. Is that still we should be thinking in terms of how you think about your total holdco leverage?

Yes, you’re sure. That’s the same range. We may get although little quicker for some of the changes that we talked about today, but that is the range we’re targeting by 2020, 30% to 40% at the holdco as a percentage of total family debt.

Okay, great. And then shifting, this is I know a little broader and off the beaten path, but couldn’t help but notice the Amazon shortlist locations, three of them are in your territories. Have you all thought through what might be required in terms of infrastructure, if one of those selections took place? Is this something that could be material in terms of infrastructure? Or is it more likely you can broadly utilize the existing infrastructure that you have?

Well, there’s talking about a lot of jobs and a lot of -- that means a lot of homes and residences and businesses to spin off of that 50,000 jobs over a decade I think. And obviously depending upon where it is they want mass transportation, you’re referring I am sure -- what you’re referring to I think obviously is the District of Columbia, suburban Marilyn and Suburban Virginia were all suburbs of Washington were all included on that shortlist. There will be a lot to deal with over a decade, and we’re hopeful that they see the wisdom of coming in the right state.

Thank you. This does conclude this morning’s conference call. You may disconnect you lines and enjoy your day.