Morning. Welcome to the Dominion Energy Investor Update 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 for the procedure to follow if you would like to ask a question. I would now like to turn the call over to Mr. Steven Ridge , Vice President, Investor Relations.
Good morning, welcome to our Investor Update conference call. We appreciate everyone accommodating this time, given the short notice. I'll begin by reminding you that call materials, including today's prepared remarks, 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 estimates and expectations. This morning, 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, which we can calculate, are contained in the earnings release kit available on the investor relations website. Joining today's call are Tom Farrell, Chairman, President, and Chief Executive Officer.
Jim Chapman, Executive Vice President, Chief Financial Officer, and Treasurer, as well as other members of the executive management team. I will now turn the call over to Tom.
Thank you, Steve. Good morning, everyone. Yesterday afternoon, we announced an agreement to sell substantially all of the assets in our gas transmission and storage segment to Berkshire Hathaway Energy in a transaction valued at nearly $10 billion. The transaction includes the assumption by Berkshire of nearly $6 billion of existing debt, which reduces Dominion's overall leverage. The transaction also includes a $4 billion cash payment to Dominion, which we intend to utilize, after accounting for taxes and other adjustments, to repurchase around $3 billion worth of shares of our common stock. Closing of the sale, which is expected to occur during the fourth quarter, is subject to Department of Energy approval and HSR clearance, but is not expected to require FERC or any other state utility commission approvals.
Over the last two decades, as we expanded our gas transmission and storage operations, our talented employees have consistently set the industry standard for operating, environmental, and safety performance in providing round-the-clock service for our customers. They've also managed and delivered immense capital projects on time and on budget, including the Cove Point Liquefaction project, the largest investment in our company's history. I'm pleased that these world-class employees are now joining another world-class organization in the form of Berkshire Hathaway Energy, who has agreed to provide significant protections for existing employees and honor existing union commitments. Berkshire's operating expertise and financial resources will also ensure that our customers will continue to receive the high level of service to which they have grown accustomed. The transaction includes the assets shown on slide four.
We have decided to retain a 50% non-controlling and unlevered interest in Cove Point and its attractive long-term contracted profile and strong cash flows. We're also retaining our investments in renewable natural gas, which play an important role in our efforts to reduce greenhouse gas emissions. Given the scale of this announcement, it warrants addressing the strategic rationale for the decision, which we strongly believe will create significant long-term value for our shareholders. In the second half of last year, we began considering the long-term role of our best-in-class storage and transmission assets within the Dominion family. As a part of that review, early this year, Berkshire Hathaway Energy, an obviously credible and respected operator, indicated their interest in acquiring these high-quality assets. We decided to engage.
As we learned more about their interests, it became clear Berkshire was willing to satisfy several essential aspects for any potential transaction we evaluate. First, a very attractive valuation. Second, very strong commitments to our employees. Third, the ability to continue to serve our customers well. To state the obvious, permitting for investment in gas transmission and storage has become increasingly litigious, uncertain, and costly. This trend, though deeply concerning for our country's economic growth and energy security, is a new reality which threatens the pace at which we intended to grow these assets. Over the last couple of years, we've observed a widening divergence in valuation for utility and energy transmission asset classes. As we've engaged with shareholders, it has become apparent these steady, cash-yielding assets may garner more value for a different type of owner.
In reviewing this transaction in the context of our long-term strategic direction, we weighed several key considerations, including the value to our industry-leading ESG-focused strategy. Providing a pure-play profile by narrowing our focus to state-regulated utility operations. Increasing our long-term earnings growth rate by nearly one and a half percentage points, representing a 30% increase driven by our robust state-regulated investment opportunities. Rebasing our dividend to reflect our revised operating and financial model and adopting a payout ratio aligned with peers and which provides for an increased growth rate. Improving our credit and balance sheet as we embark on what will be the company's largest ever programmatic capital investment plan, totaling tens and tens and tens of billions of dollars. As we carefully weighed the implications of these factors and evaluated our path forward, we determined that this is the right step at the right time.
With the sale of these assets, Dominion Energy is positioned to offer an updated investment proposition captured in five major themes on slide six, which represents a compelling and differentiated opportunity for our investors. First, this transaction reflects the increased focus on our premier state-regulated utility operations, where our commitment to customers and communities, combined with supportive regulatory and legislative policy, allows us to deliver reliable, affordable, and increasingly sustainable energy to our nearly seven million regulated utility customers. Second, Dominion offers an industry-leading clean energy profile, which includes a comprehensive net zero target by 2050, one of the nation's largest zero-carbon electric generation and storage investment plans, as well as significant investments in renewable natural gas and other methane reduction activities.
Third, we are increasing our long-term earnings and dividend per share growth guidance, which, as Jim will cover in a moment, aligns with some of the industry's highest valued companies. Fourth, this transaction complements the substantial efforts we have made in recent years to strengthen our balance sheet and improve our business risk profile. It will enhance our credit profile and position our balance sheet to support the expansive capital investment plans we have. Finally, our updated and narrowed operational profile will allow us to extend our track record of delivering on earnings guidance and overall transparency, attributes that we know are highly valued by investors.
In recent years, the company has taken a series of strategic steps, as shown on slide seven, including mergers with Questar Corporation and SCANA Corporation, and the divestiture of Blue Racer Midstream and merchant generation assets to increase materially the regulated nature of our profile. The sale of these gas transmission and storage assets will further position the company as a pure play, state-regulated utility operating in some of the most attractive regions in the United States. As we look forward, we expect that state-regulated utilities will contribute between 85% and 90% of our operating earnings, a major increase over historic levels. On slide eight, we update our segments to reflect the elimination of the gas transmission and storage segment later this year. This should be familiar to you, as it is largely consistent with prior disclosures.
The retained 50% unlevered interest in Cove Point will now report through the Contracted Assets segment, formerly known as Contracted Generation. Our growing investments in renewable natural gas will report through the Gas Distribution segment. Taken as a whole, we are now approaching a 100% state-regulated earnings profile. Residual, high-quality, regulated-like earnings comprised of Cove Point, the contracted Millstone nuclear power station, as well as a portfolio of contracted solar projects, generate earnings primarily under 10- to 20-year fixed price take-or-pay contracts with high-quality demand pull counterparties. Turning to slide nine. Dominion Energy offers an industry clean energy profile. Our enterprise-wide commitment to net zero carbon and methane emissions by 2050 captures the environmental footprint of both our electric and gas operations. We're moving aggressively under the direction of state policy toward renewable and zero-carbon forms of electric generation.
As described in our most recent integrated resource plans, we aim to transition one of the nation's largest electric generation systems to around 70% zero-carbon by 2035. An additional 25% will come from ultra-efficient, low-emitting natural gas. The transaction also immediately reduces the emissions produced by our gas infrastructure assets by around 50%, bringing us much closer to achieving our comprehensive net zero targets. Finally, we are allocating capital in a way that supports our public environmental commitments. We project up to $55 billion of growth capital investment in programs that will reduce our emissions footprint, including zero-carbon generation and storage, replacement and modernization of gas distribution lines, and expanding our investments in renewable natural gas. We provide additional information about the Virginia Clean Economy Act in line with previous disclosures in the appendix for your review.
Our company continues to evolve, allowing us to focus even more on serving our customers and positioning us for a bright and increasingly sustainable future. We believe that Dominion Energy offers one of the industry's most compelling profiles for ESG-focused investors and stakeholders. With that, I turn the call over to Jim to discuss the financial implications of the transaction.
Thank you, Tom. Good morning, everyone. Before I jump into our updated earnings guidance, let me spend just a minute on the transaction valuation. We are divesting around $1 billion of EBITDA, which implies an approximately 10 times EBITDA multiple. By way of reminder, for those reconciling to our gas transmission and storage segment adjusted EBIT guidance, that EBIT guidance includes 100% of Cove Point as the Brookfield-owned minority interest is removed below the line. It also includes the full amount of ACP equity earnings, as well as our RNG and other small gas investments. The remainder is attributable to some accounting nuances like intercompany interest and pension allocation. While we don't provide asset-by-asset EBITDA guidance, the public FERC forms may provide a useful starting point for your analysis.
We evaluated this transaction, of course, on a variety of metrics, but let me speak specifically to the implied EBITDA multiple. One way we thought about it was to look at where public companies of similar size and business profiles trade. For that, we looked at companies focused generally on contracted natural gas transmission, such as Kinder, Williams, Equitrans, and Energy Transfer, for example. Those peers trade at around nine times. People may view our assets as lower risk than those peers, but also potentially slower growing. In summary, we feel quite good about that 10 times EBITDA multiple in that context. Even more importantly perhaps, as we look forward to delivering the best value for shareholders, we are focused on executing our revised earnings trajectory. Turning to slide 10, let me walk through our updated 2020 operating earnings step by step.
First, our original 2020 guidance for operating earnings for Dominion Energy Virginia, Dominion Energy South Carolina, Gas Distribution, and Corporate and Other, is affirmed and unchanged at $2.89 to $3.11 per share, reflecting full-year normal weather. Second, as Tom mentioned, we are retaining a 50% unlevered interest in Cove Point, which will be reported within the Contracted Assets Segment. As a result, we are increasing that segment's annual guidance by around $0.25 per share for the full year. Third, we will eliminate the Gas Transmission and Storage Segment. Income associated with the assets being sold will be accounted for as discontinued operations under GAAP and will be excluded for the full year from our operating earnings. Thus, our new 2020 operating earnings guidance per share is $3.37 to $3.63, with a midpoint of $3.50.
Keep in mind, this number reflects at most a de minimis impact from our anticipated share repurchases given the expected late-year timing of those purchases. Moving to slide 11. We expect 2021 operating earnings per share to grow by around 10% to 11%, attributable partially to organic growth and partially to the full-year impact of the planned share repurchases. Thereafter, we expect our operating earnings to grow annually at around 6.5% off the 2021 base, which compares well with the industry's highest growth rates and which represents a significant increase from our previous guidance of 5% plus. ESG, reliability, and customer growth-driven programmatic investments will drive earnings and rate-based growth, combined with continued O&M discipline. Turning now to slide 12. The sale of a material portion of our assets, of course, has implications for our dividend policy as well.
Decisions around changes to our dividend are not taken lightly, but we believe these steps will position shareholders for the best long-term outcome. We now expect our 2020 dividend payment to total around $3.45 per share, which includes three payments of $0.94 per share and a fourth payment in December of $0.63 per share, reflecting our updated target dividend payout ratio of 65%, which we expect to be effective upon closing of the transaction in the fourth quarter. In recent years, our payout ratio has consistently exceeded 80%, much higher than the industry norm of around 65%. A couple of thoughts here. This elevated payout ratio has seemingly not garnered an enhanced valuation for our investors. In fact, it's been the opposite, with what in my view has been investor distraction regarding this outlier payout ratio with a low dividend per share growth rate.
This new payout ratio better reflects our revised operating and financial strengths, aligns with our best-in-class industry peers, and allows us to grow our dividend much more rapidly than before at a rate of 6% annually off a base year of 2021, instead of our prior guidance of just 2.5%.Of course, I should note that as is customary, all dividend declarations are subject to board approval. Turning now to slide 13. The pro forma operational and financial results of this transaction solidly align Dominion Energy with the profiles of some of the industry's most highly valued utility companies. We are positioning the company as an increasingly pure-play, state-regulated utility with a differentiated clean energy profile. Further, our financial outlook, specifically our long-term earnings and payout ratio guidance, now compares much more favorably with this peer set.
Our efforts to improve our credit profile in recent years, complemented by this transaction, have significantly de-risked our financial and business risk profiles. Going forward, our focus will be to extend our track record of consistent and credible financial results, a characteristic we know to be highly valued by utility investors. Before turning it back to Tom, let me spend a minute on credit on slide 14. Of course, we don't speak for the agencies, but we view this transaction as credit positive and as complementing the material improvement in our credit profile in recent years. First, our allocation of transaction enterprise value skews towards de-leveraging, with almost 60%, or nearly $6 billion, applied to debt reduction. Second, we are materially increasing the percentage of our cash flows that come from state-regulated utilities.
This continued shift towards a regulated utility profile has resulted, historically, in the reduction of our credit metric downgrade thresholds as depicted here. The merger with SCANA, combined with non-regulated asset sales or otherwise de-risking steps, resulted in S&P reducing their downgrade threshold 200 basis points to 13%. Moody's reduced their threshold significantly as well. We believe the agencies will continue to consider the de-risking of our business profile as they assess our credit going forward. Third, we are retaining 50% of Cove Point cash flows, but transferring 100% of the related debt at Dominion Energy Gas Holdings, or DEGH, to the buyer as part of the sale. I'll address what that means for DEGH bondholders in a minute.
We estimate that the change to our dividend payout ratio, combined with the expected reduction of shares outstanding based on planned share repurchases, will allow us to conserve about $1.3 billion of cash in 2021 and beyond, which can be used to fund operations and capital investment growth. Our general credit guidance is unchanged. We target credit ratings of high triple B at our parent and single A at our opcos. Our CFO pre-working capital to debt, as reported by Moody's, has increased from 11% in 2016 to 15.5% in 2019. We expect FFO or CFO pre-working capital to debt figures to continue to be in the mid-teens percent range. Let me note that we do not expect the cancellation of the Atlantic Coast Pipeline, which Tom will address shortly, to significantly impact our existing credit metrics.
In computing our metrics, we have consistently and conservatively imputed our share of off-balance sheet project-level debt and excluded the non-cash AFUDC equity earnings from FFO or from CFO pre-working capital. With regard to DEGH bondholders. As shown on slide 15, Berkshire Hathaway Energy, which carries an A rating, is committed to de-leveraging DEGH post-closing. They have agreed to forego the refinancing of some $1.2 billion of DEGH maturities over the coming 12 months. Berkshire will also consider additional credit-supportive measures, including additional de-leveraging post-2021 if needed. With that, I'll turn it back to Tom.
Thank you, Jim. Separately, and unrelated to our decision to divest our gas transmission and storage assets, Dominion Energy and Duke Energy have announced the cancellation of the Atlantic Coast Pipeline due to ongoing delays and increasing cost uncertainty, which threaten the economic viability of the project. Excuse me. For almost six years, we have worked diligently and invested literally billions of dollars to complete the project and deliver the much-needed infrastructure to our customers and communities. We have engaged extensively with and incorporated feedback from local communities, labor and industrial leaders, government and permitting agencies, environmental interests, and social justice organizations. We deeply appreciate the tireless efforts and important contributions made by all who were involved in this essential project. This announcement reflects the increasing legal uncertainty that overhangs large-scale energy and industrial infrastructure development in the United States.
Until these issues are resolved, the ability to satisfy the country's energy needs will be significantly challenged. Despite last month's overwhelming seven to two victory at the Supreme Court of the United States, which vindicated the project and decisions made by permitting agencies, recent developments have created an unacceptable layer of uncertainty and anticipated delays for ACP. Specifically, the decision of the United States District Court for the District of Montana overturning the Nationwide Permit 12 program, a long-standing federal permit authority for water body and wetlands crossings, followed by a Ninth Circuit ruling on May 28th indicating appeal is not likely to be successful, are new and serious challenges. The potential for a Supreme Court stay of the district court's injunction would not ultimately change the judicial venue for appeal, nor decrease the uncertainty associated with an eventual ruling.
The United States District Court for the District of Montana decision is also likely to prompt similar challenges in other circuits related to permits issued under the Nationwide Permit 12, including for ACP. This new information and litigation risk, among other continuing execution risks, make the project too uncertain to justify investing more shareholder capital. The Atlantic Coast Pipeline was initially announced in 2014 in response to a lack of energy supply and delivery diversification for millions of families, businesses, schools, and national defense installations across North Carolina and Virginia. Robust demand for the project is driven by the regional retirement of coal-fired electric generation in favor of environmentally superior, lower-cost natural gas-fired generation, combined with widespread growing demand for residential, commercial, defense, and industrial applications of low-cost and low-emitting natural gas.
Those needs are as real today and will be tomorrow as they were at project inception, as evidenced by the recently renewed customer subscription of approximately 90% of the project's capacity. The project was also expected to create thousands of construction jobs and millions and millions of dollars in tax revenue for local communities across West Virginia, and North Carolina. We remain steadfast in the belief that fuel diversity, including renewables, nuclear, and natural gas, is critical for reliably and sustainably serving our customers and communities. We will continue aggressively to pursue the development of renewables, storage, nuclear license renewals, electric vehicle infrastructure, energy delivery infrastructure, as well as energy efficiency and demand-side management programs to meet our customers' needs while creating jobs and spurring new business growth. We've covered a lot of ground today.
These are undoubtedly significant steps that we believe optimally position our company for many years to come. We are narrowing our focus to our premier utility franchises. We are leading the way in aggressively transforming our system-wide environmental footprint. We are offering a refreshed earnings and dividend growth outlook that aligns our long-term growth with the highest-valued utility peers. We are repositioning our credit and balance sheet as we embark on the company's largest-ever programmatic capital investment plan. By narrowing our strategic and operational focus, we are improving our ability consistently to deliver on our commitments to all stakeholders, financial, community, customers, employees, and the environment. With that, we will be happy to answer your questions.
Thank you, sir. At this time, we will open the floor for questions. If you would like to ask a question, please press the star key followed by the one key on your touch-tone phone now. If at any time you would like to remove yourself from the question queue, please press star two. Again, to ask a question at this time, please press star one now. Our first question comes from Shahriar Pourreza with Guggenheim Partners. Please go ahead.
Hey, good morning, guys.
Morning, Char.
Morning.
Just a couple of questions, if I may. Given sort of the gas demand within the region, can you sort of talk about incremental spending opportunities with ACP now shelved? Your peers talked about a plan B that will center around gas distribution, looping electric wires, maybe tying into NBP, some of which may help offset the lost capital spending opportunities with the ACP exit. Just maybe thoughts on how you're thinking about incremental spending opportunities given some gas needs you do have within the region ex ACP.
Char, you're speaking specifically about our local gas distribution companies in the region. Are you saying gas spending, gas asset spending? Couldn't quite hear your question.
Right. Well, I guess, how do you offset?
Okay, as opposed to our overall capital spending program with our electric utilities in the region as well, just to differentiate.
Right.
We have one of the fastest-growing LDCs in the country is our utility that's in North Carolina, that was part of SCANA Corporation. That is the central part, Raleigh-Durham, down through the central part of the state. Very fast-growing LDC. Our Utah LDC is fast-growing. Our South Carolina utility is fast-growing. East Ohio is of moderate growth. All of these programs have bare steel pipe replacement programs, which total $hundreds of millions every year. Our RNG program that will be associated with that part of the business. Plenty of growth opportunities there, Char. Transforming our electric companies to more renewable energy, more robust grid protections, that's also obviously a very large opportunity for us. That's where we will be concentrating our capital investments over the next at least decade.
Got it. Can you talk-
It's more than 55. It's tens and tens and tens and tens of billions of dollars over the next decade.
Got it. Thank you for that. Then maybe, can you talk about how you're thinking about the remaining 50% non-operating interest in Cove Point, at least in the medium term? Why wasn't it part of the current transaction? Was it your decision? Was it Berkshire's? Is further monetization near-term opportunities?
It was a mutual decision. That was a negotiated point between the two companies. Char went back and forth on that, actually a few times. We are quite pleased to retain a 50% unlevered free cash flow from that company, from that portion of our company. We have no plans to monetize the balance of it.
Got it. Just lastly, obviously this decision today frames nicely with your zero carbon generation plan. We saw you obviously completed the pilot program and the Northeast projects. They seem to be making pretty good progress. What's your latest thinking, timing, thoughts around full scale, the $8 billion-$9 billion project?
Our plan is unchanged. 2024 through 2026, have it all online.
Got it. Thanks, guys. Congrats on the transaction.
Thank you, Shahr.
Thanks, Shahr. .
Thank you. Our next question will come from Steve Fleishman with Wolfe Research. Please go ahead.
Yeah. Hi. Tom, can you hear me?
Morning, Steve. Yes, sir, Steve. Good morning.
Hey, good morning. I guess maybe first, it sounded like you started this with a process strategically looking at obviously where you want to go in the future. Maybe you just give a little more color on what your vision of the industry is in terms of future of gas, in particular, in terms of making the strategic decision here to sell. Any more color on that?
Sure, Steve. Well, Steve, you of all the people on the phone, I think will recall what we did with our E&P company like 14 years ago, because you were on gardening leave at the time.
Yep.
I recall quite well.
Yeah
is a little bit different, but it's the same vein. Part of it is in the same vein, parts of it different. What we were looking at there was the fact that there was this huge disconnect between multiples of E&P companies and multiples of electric state utilities. We were a very different company then than we are today. That was part of what drove that decision. Here, we made a decision, I guess 5 years ago now, something like that, to create an MLP. We had robust growth there in our MLP. We used that as a financing vehicle to finance the building out of Cove Point, which we were then going to sell back to the MLP over probably a 3-year period. We would have planned it by year, but it would've been something like that. Totally refinanced it.
That helped drive our dividend growth profile that we had. That was a very good plan at the time. FERC, couple years ago now, changed the dynamic of that completely and destroyed the entire MLP industry. That put us in a situation where, okay, that financing vehicle is no longer available. That's one thing. Over the next couple of years, we saw a divergence, significant divergence, in the multiples between midstream businesses. We tried hard not to call ours a midstream business because it really isn't a midstream business. It's a contracted gas pipeline business that we think is going to be around for a long time to come. We don't have the traditional growth drivers that some of those other companies like the big Canadian companies use with gas processing and all those very commodity-centric parts of their businesses.
We don't have that in our business.
Didn't want that in our business. That was part of it, looking at the multiple differentiation. Then the world's changed a great deal in the last five years, too, with ESG, our state policy mandates on renewable energy that we have to move into. In looking to the future, we thought that if we could exit this business and make sure that our employees ended up in a very good home with very good people, that our customers were protected for the service that they had become used to, and we got a very fair price, that the best thing to do for our employees and our communities and our shareholders and our bond holders, particularly at DEGH, was to exit the business and concentrate on these state utilities.
It's a combination of the financial valuation differential between 20% of our company and the balance of the company. The growth opportunities in that 80% of the company far outweighed the growth opportunities in that 20% of the company. Putting all those things together with the future of ESG. ESG means more than looking after shareholders. It means looking after communities and our customers and our employees. We got a very fair price. You put all those things together, that's what led to the strategic decision.
Yeah. No, that makes sense. Just one quick one for Jim, just on The 6.5% long-term growth rate, that's obviously pretty specific. A lot of companies give ranges. Maybe give a little color on your thinking there and just how you think about the duration of the growth rate. Thank you.
Yep. Thanks, Steven. A little color there. We recognize we're unusual in the way we describe our long-term growth expectations and guidance. That goes back to the time of our analyst day preparation last year, where we introduced the 5% plus our prior guidance structure. At that time, when we had become a much more regulated, through a series of transactions that he's done, a much more regulated and predictable company, we discussed this and wondered why we would need it at 200 basis point range if we're a more regulated and more predictable company. Many of our peers, I guess, do choose a 200 basis point range. We elected instead that 5% plus. Fast-forward to now, where we're becoming even more state-regulated, and we expect even more predictable.
We again wondered, well, if we think we're going to grow 6.5%, why would we put a range around that? We will, of course, every year provide an annual guidance range, but we expect long-term to grow at 6.5%, so that's what we're guiding is 6.5% and not something less specific. Rightly or wrongly, that's where we landed. As far as the duration, the second part of your question, we don't have an end date for that because our capital spending programs are, Tom just mentioned, pretty long-term. To clarify, it is valid for the duration of our planning horizon, which is five years.
Great. Thank you very much.
Thanks, Steve.
Thank you. We will move to our next question, and that comes from Michael Weinstein with Credit Suisse. Please go ahead.
Hi, Tom.
Hey, guys.
Morning, Michael.
Morning. Do you think your exit from the gas business and the contracted gas midstream business, is that saying that no public company really should be in this business? Are you making a statement about private assets versus private hands versus public hands owning this type of asset with its volatility but long-term cash flows?
No, Michael, not at all. I would always be reluctant to make any comment about any other company or its strategy, excuse me, or an industry in a strategy. We were looking at our situation, our long-term situation, where we are, where we've gotten, and where we think our shareholders, bondholders, customers, political leadership wants us to go. In this case, it was as I was explaining to Steve's question, it's really a combination of the financial aspects of the differentiation and multiple valuations of these kind of companies, the difficulty in growing them longer term, and the prospects we have in ESG, renewables, energy efficiency, all those other things, where we have very specific targets in front of us that we intend to meet. I think I can only speak for our own strategic needs.
Sort of on the other side of that coin, does the healthier balance sheet that you have and your higher credit profile, does that give you the room to or even the desire to maybe expand further with M&A, buying more utility assets, for example, or more renewable assets in that direction?
I suppose anything's possible, but right now, we're just concentrating on this transaction, Michael.
Okay. Thank you very much.
Thank you.
Thank you.
Next we will go to Anthony Crowdell with Mizuho. Please go ahead.
Hey. Good morning, Tom. Just hopefully two quick questions.
Morning, Anthony.
Good morning. If I could follow up on Steve's question.
Hey, sorry, Anthony. Anthony, we're having a hard time hearing you. Anthony, I'm sorry, we have a hard time hearing you.
Is this worse? Sorry. Can you hear me?
That's a little better. A little better.
Apologies. Ten-year-old daughter's headset. The Beats don't work that well on conference calls. If I could follow up on Steve Fleishman's question, can I assume the growth in the LDCs is going to be north of, say, 6.5% and your state-regulated electric business's growth will be lower than 6.5%, or you're not willing to get that granular right now?
No, I think when you look at the rate base growth that we're projecting for both those businesses, they're pretty much on par. Not a gap between them to differentiate between.
Okay. Just lastly, if I could talk about the cut in the dividend. As Tom, you spoke about earlier, I think when FERC issued that decision that really changed the Dominion Midstream, and that was a great financing vehicle. The company was adamant about keeping the dividend there and maybe growing earnings so that the dividend, and I guess growing into the dividend rate or the payout ratio. Why now make the change for the dividend versus you were willing to keep it when the Dominion Midstream issue arose?
Well, actually, I think what we did was we said we were going to keep the 10% growth rate through 2019, and we were going to have to reconsider that in 2020. That's with the commitment we've made because they changed the rules in 2018, and we'd had a lot of folks counting on that. We said in 2018, we'll keep the dividend growth rate where it is through 2019, and then we'll have to reconsider. Obviously, we cut it to 2.5% this year. Then, of course, now we're selling 20% of the company's business with the cash flows that come with it. That was going to necessitate a cut in the dividend, or I don't know, I hadn't thought about what our payout ratio would be, over 100% or close to 100%, I guess, if we hadn't.
Since we are moving our growth rate up 30% to where the highest value peers are, and obviously that's where we end up in this is up to you all, not to us, but that's the highest value peers are in that area in growth. They're also in about a 65% payout ratio. That's the reason why we decided to go ahead. Jim's got some more color.
Anthony, quickly, as I mentioned, we don't take a reduction in the dividend lightly by any means, but two more ways to think about that. One is that there's a dividend reduction, but we are providing $3 billion of capital to our shareholders late this year in a buyback, as mentioned. For those that, of course, prefer today's dividend to the revised level, given the increase in the dividend growth rate to 6%, we'll be back to today's level in seven years' time. It's not really a permanent reduction. It's a pause, if you will, and seven years, we're back to where we are today. Just some color and context.
Cool. Great. Thanks for taking my questions. I appreciate it.
Thank you.
Thank you.
Next, we will go to Andrew Weisel with Scotiabank. Please go ahead.
Hey, good morning, everyone. Congratulations.
Morning. Thank you.
Good morning.
My first question is on financing. You've been very clear about this $3 billion repurchase program planned, but how should we think about equity needs going forward after the recapitalization? In other words, is this going to be a one-time recap and then no real change to the prior expectation for CapEx and equity plans?
I'd say it slightly differently, Andrew Weisel, that those plans for equity are paused for some time. Our prior guidance on equity, as you'll recall from early last year, was a run rate of ATM of $300 million-$500 million. That, for 2021, obviously goes to zero. Separately, our DRIP program is just always on, always has been, will be. Very small, $300 million, well less than half a percentage point of our market cap every year. That stays on. What happens to that ATM guidance? 2021, zero. Beyond that, we're continuing our spending program and even increasing our spending program, through our projection period. In 2022 and beyond, some of that ATM comes back into the picture. That run rate of $300 million-$500 million is probably fair to assume. In 2022, it'd be at most the low end of that range.
Beyond that, on a multi-year basis, it's probably that same run rate, $300 million-$500 million, all in our existing programs, ATM and DRIP.
Great. That's a very detailed color there. Thank you for that. Two quick ones on ACP. First, will you just remind us what was the expected 2020 EPS contribution?
About $0.20.
Okay, great. Second, with that project now canceled, do you anticipate subscribing for capacity on MVP? Maybe more broadly, just talk about how you plan on getting the gas you'll need in the short term. You've talked about reducing the need over time, how do you think about the more near-term outlook?
That remains to be seen.
Okay, fair enough. Thank you, guys.
Thank you.
Thank you.
Thank you. This does conclude this morning's conference call. You may now disconnect your lines and enjoy the rest of your day.