Dominion Energy, Inc. (D) FY2025 Earnings Quality Report

Grade: F — Major Red Flags

Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles

Data: SEC EDGAR 10-K (Filed 2026-02-23) + Yahoo Finance

Auditor: Deloitte & Touche LLP — Clean opinion (1 critical audit matter: impact of rate regulation on Virginia Power financial statements)

One-line verdict: Dominion Energy is a major regulated utility holding company whose primary subsidiary, Virginia Electric and Power Company (Virginia Power), serves 2.8 million customers. Dominion is building the $9.8B Coastal Virginia Offshore Wind (CVOW) Commercial Project — the largest offshore wind project in the U.S. — which dominates both the risk profile and the financial trajectory. The F grade reflects three structural fails (negative FCF, cash vs debt, post-acquisition FCF), with no genuine accounting anomalies. Revenue grew 14.2% to $16.5B, net income surged 47.4% to $3.0B, and CFFO grew 6.8% to $5.4B. However, total debt of $48.9B against $250M cash and FCF of -$7.3B represent the most capital-intensive investment profile in this batch. Deloitte flagged regulatory asset recoverability — specifically Virginia Power's recorded charges for costs "not expected to be recovered from customers on the CVOW Commercial Project" — as a key audit focus.

Business: Virginia Power + CVOW

Dominion Energy operates through multiple segments including Dominion Energy Virginia (the largest), Dominion Energy South Carolina, and Contracted Energy. From the 10-K quarterly disclosure, Virginia Power reported:

Virginia Power Income Statement (from 10-K)

Virginia Power's impairment charges nearly doubled from $292M to $516M in FY2025. This includes costs related to the CVOW Commercial Project that Virginia Power determined it will not seek recovery from customers.

Quarterly Results (from 10-K)

Q4 included a $108M after-tax charge for Virginia Power's share of CVOW costs not expected to be recovered from customers, plus $81M of mark-to-market hedging losses, partially offset by $97M pension gains and $79M nuclear decommissioning trust gains.

Revenue and Income

Revenue growth of 14.2% and net income growth of 47.4% are the strongest in this utility batch. The margin expansion suggests rate case outcomes are outpacing cost growth.

Cash Flow: CVOW Drives Massive Negative FCF

The -$7.3B FCF is the largest negative FCF in this batch by far, reflecting the CVOW Commercial Project's massive capital requirements. CFFO of $5.4B is strong, but CapEx and investment spending dwarf it. This negative FCF will persist until CVOW reaches commercial operation and begins earning its authorized return.

CVOW: Not Expected to be Fully Recovered

A critical disclosure: Deloitte's critical audit matter report specifically mentions "testing Virginia Power's recorded charges for costs not expected to be recovered from customers on the CVOW Commercial Project." This means Dominion has already accepted that some CVOW costs will be absorbed by shareholders rather than passed through to customers — a partial regulatory disallowance.

From the 10-K specific items in Q4 2025: "$108 million after-tax charge for Virginia Power's share of costs not expected to be recovered from customers on the CVOW Commercial Project."

The 18-Point Screening

Revenue Quality

All three revenue quality checks pass. AR growth of 16.7% slightly exceeds revenue growth of 14.2%, but the difference is modest and within normal range for a utility experiencing rate increases.

Expense Quality

Cash Flow Quality

C4: The $48.9B debt is the second-largest in this batch (after Duke Energy's $90.9B). The $250M cash balance is minimal, though Dominion maintains credit facilities for liquidity.

Balance Sheet

Acquisition & Manipulation

Deloitte Critical Audit Matter: Regulatory Assets at Virginia Power

From Deloitte's report, the critical audit matter focused on "whether recovery of regulatory assets through future rates or a regulatory liability due to customers is probable." Key procedures included reading orders issued by relevant commissions and "testing Virginia Power's recorded charges for costs not expected to be recovered from customers on the CVOW Commercial Project."

This is a substantive concern: the $9.8B CVOW project's cost recovery is partially uncertain, with some costs already written off. The regulatory judgment of what portion customers will bear vs. shareholders is a multi-billion dollar accounting estimate.

Key Risks

1. CVOW cost overruns and recovery risk. The largest offshore wind project in the U.S. at ~$9.8B carries construction, technology, and regulatory recovery risk. Some costs are already confirmed unrecoverable from customers.

2. Nuclear decommissioning. From the 10-K, Dominion holds nuclear decommissioning trust funds with volatile mark-to-market impacts. Q4 2025 saw $79M in after-tax gains, but Q1 saw $76M in losses.

3. Foreign currency exposure on CVOW. From the 10-K: "The Companies' exposure to foreign currency exchange rate risk is related to certain fixed price contracts associated with the CVOW Commercial Project... approximately €2.6 billion and 5.1 billion kr."

4. Commodity and hedging volatility. From the 10-K, Dominion's Contracted Energy segment contributes significant mark-to-market gains and losses from economic hedging activities ($586M after-tax gain in 2023, volatile in 2025).

Altman Z-Score and F-Score

Summary

Grade: F — entirely structural, driven by CVOW capital intensity.

Dominion's F grade is the purest structural false positive in this batch. All three fails are the direct consequence of building the $9.8B CVOW offshore wind project: massive negative FCF ($7.3B), trivial cash ($250M) vs. enormous debt ($48.9B), and persistently negative post-acquisition FCF. Revenue quality is clean across all three checks, margins are improving, and the F-Score fraud probability of 0.20% is reassuring. The genuine risk is CVOW recovery uncertainty — Dominion has already acknowledged that some project costs will not be passed through to customers, and the regulatory outcome of the remaining billions is a material accounting judgment.

**Disclaimer**: This report is based on Dominion Energy's FY2025 10-K (SEC EDGAR, filed 2026-02-23) and public financial data. This is NOT investment advice.

Data: SEC EDGAR 10-K (Filed 2026-02-23) + Yahoo Finance

Auditor: Deloitte & Touche LLP (Unqualified opinion, 1 critical audit matter)