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Dominion Energy to sell assets to Berkshire Hathaway Energy

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LNG Industry,

Dominion Energy has announced that it has executed a definitive agreement to sell substantially all of its Gas Transmission and Storage segment assets to an affiliate of Berkshire Hathaway Inc. in a transaction valued at US$9.7 billion, including the assumption of US$5.7 billion of existing indebtedness.

Thomas F. Farrell, II, Dominion Energy Chairman, President, and Chief Executive Officer, said: “Today's announcement further reflects Dominion Energy's focus on its premier state-regulated, sustainability-focused utilities that operate in some of the most attractive regions in the country.

“Over the past several years the company has taken a series of steps – including mergers with Questar Corporation and SCANA Corporation, and the divestiture of Blue Racer Midstream and merchant generation assets – to increase materially the state-regulated nature of our profile, enhance the customer experience, strengthen our balance sheet, and improve transparency and predictability. Our mission over that period has remained the same: providing round-the-clock affordable and sustainable energy, world-class customer service, and meaningful community engagement.

“We offer an industry-leading clean-energy profile which includes a comprehensive net zero target by 2050 for both carbon and methane emissions as well as one of the nation's largest zero-carbon electric generation and storage investment programmes. Over the next 15 years we plan to invest up to US$55 billion in emissions reduction technologies including zero-carbon generation and energy storage, gas distribution line replacement, and renewable natural gas. In addition, between 2018 and 2025 we expect to retire more than 4 GW of coal- and oil-fired electric generation.

“This narrowing of focus will also allow us to increase our long-term earnings growth rate guidance by approximately 30%. Our rebased dividend policy 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.

“This transaction represents another significant step in our evolution as a company, allowing us to focus even more on fulfilling utility customer needs and positioning us for a bright and increasingly sustainable future.”

Warren Buffett, Chairman of Berkshire Hathaway, said: “I admire Tom Farrell for his exceptional leadership across the energy industry as well as within Dominion Energy. We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business.”

Pro-forma operating profile

Dominion Energy expects that up to 90% of its future operating earnings will come from its portfolio of best-in-class electric and natural gas state-regulated utility companies centred around five key states: Virginia, North Carolina, South Carolina, Ohio, and Utah. Retained non-state regulated utility operations, most notably a 50% passive and unlevered interest in Cove Point – a bidirectional LNG facility in Maryland – and the company's zero-carbon nuclear and solar contracted generation fleet, represent high-quality, long-term contracted, regulated-like assets with virtually no direct commodity exposure.

The Gas Transmission and Storage segment will be eliminated from Dominion Energy's future reporting and operating structure. Dominion Energy's retained interest in Cove Point will be reported under the Contracted Generation operating segment (which will be renamed Contracted Assets). The company will also retain its investments in renewable natural gas, earnings from which will be reported in Gas Distribution segment results.

Transaction overview

Dominion Energy has executed a definitive agreement to sell gas transmission and storage assets – including more than 7700 miles of natural gas storage and transmission pipelines and approximately 900 billion ft3 of gas storage that the company currently operates – to an affiliate of Berkshire Hathaway Energy in a transaction valued at approximately US$9.7 billion, including the assumption of approximately US$5.7 billion of existing indebtedness which will reduce Dominion Energy's total leverage. The buyer will also make a cash payment of approximately US$4 billion to Dominion Energy upon closing.

Farrell said: “Dominion Energy's best-in-class gas transmission and storage business has been a major component of our success. Our talented employees set the standard for industry operating, environmental and safety performance and provide our customers with reliable, affordable, and safe service. They will be joining another of the foremost corporate organisations in Berkshire Hathaway Energy which has agreed to provide significant protections for existing employees and to honour existing union commitments."

Assets covered by the sale agreement include the company's ownership interests in Dominion Energy Transmission, Questar Pipeline (including Overthrust and White River Hub), Carolina Gas Transmission, Iroquois Gas Transmission System (50% interest), legacy gathering and processing operations, farmout acreage, as well as a 25% operating interest in Cove Point. These assets will be reclassified as discontinued operations for GAAP reporting and excluded from operating earnings for full-year 2020. The company's interest in the Atlantic Coast Pipeline is not included in the transaction.

The transaction is expected to close during the fourth quarter. It requires Hart-Scott-Rodino clearance as well as approval from the US Department of Energy.

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