- Consistent with the previously outlined commitments &
priorities of the ongoing business review
- Transactions valued at $14.0
billion – all cash consideration of $9.4 billion plus assumption of debt
- Highly credit accretive—100% of after-tax proceeds expected
to be used to retire debt
- All sales expected to close by end of 2024, subject to
customary regulatory approvals
- Company now expects to conclude review and announce
repositioned outlook during the fourth quarter of 2023 given vital
importance of ensuring the company is best positioned to create
maximum long-term value for shareholders
RICHMOND, Va., Sept. 5,
2023 /PRNewswire/ -- Dominion Energy (NYSE: D) today
announced that it has concluded a robust and competitive sale
process and executed three separate definitive agreements to sell
its three natural gas distribution companies to Enbridge (TSX: ENB)
(NYSE: ENB).
The three LDCs – The East Ohio Gas Company, Public Service
Company of North Carolina,
Incorporated, and Questar Gas Company along with Wexpro Company –
serve about 3 million homes and businesses in Ohio, North
Carolina, Utah,
Wyoming, and Idaho and collectively comprise approximately
78,000 miles of natural gas distribution, transmission, gathering,
and storage pipelines; more than 62 Bcf of working underground and
liquefied natural gas storage capacity; and approximately 400 Bcfe
of cost-of-service regulated gas reserves as of year-end 2022.
Robert M. Blue, Dominion Energy
chair, president, and chief executive officer, said:
"Dominion Energy's best-in-class gas utilities and our
incredible employees set the standard for industry reliability,
environmental and safety performance, customer service, and
community engagement. These businesses and employees have
been an integral part of the Dominion Energy team which is why we
approached this decision with careful and deliberate
consideration.
"We are delighted to be partnering with Enbridge who shares our
ideals around employee engagement, regulatory transparency, local
community investment, and exceptional customer service. As
one of the largest and most experienced operators of energy
infrastructure assets in North
America, Enbridge will be an outstanding steward of these
businesses to the benefit of employees, customers, and communities
alike. Specifically, as part of the agreements, Enbridge has
agreed to provide significant protections for existing employees,
honor existing union commitments, and maintain local operating
leadership."
Financial information
Aggregate transactions value of
$14.0 billion, including the
assumption of $4.6 billion of debt,
represents approximately 1.5x estimated 2022 year-end rate base of
$9.2 billion.
Aggregate purchase price of $9.4
billion represents approximately 16.6x estimated 2023
operating earnings of $564 million
and approximately 16.7x estimated 2024 operating earnings of
$561 million.
Total estimated after-tax proceeds of $8.7 billion are expected to be used to reduce
parent debt in addition to the conveyance of $4.6 billion of operating company debt. The
transactions are expected to improve the company's consolidated FFO
to debt by approximately 3.4%.
Additional information related to the transactions can be found
in materials included on the Investor Relations website at
investors.dominionenergy.com. Transaction details by
operating company are as follows:
The East Ohio Gas Company
- Implied transaction value: $6.6
billion
- Assumed indebtedness: $2.3
billion
- Purchase price: $4.3 billion
- Implied transaction value as a multiple of estimated 2022
year-end rate base: 1.5x
- Purchase price as a multiple of estimated 2023 operating
earnings: 16.3x
- Purchase price as a multiple of estimated 2024 operating
earnings: 16.0x
- Estimated after-tax proceeds: $4.2
billion
Public Service Company of North
Carolina, Incorporated
- Implied transaction value: $3.1
billion
- Assumed indebtedness: $1.0
billion
- Purchase price: $2.2 billion
- Implied transaction value as a multiple of estimated 2022
year-end rate base: 1.7x
- Purchase price as a multiple of estimated 2023 operating
earnings: 20.1x
- Purchase price as a multiple of estimated 2024 operating
earnings: 20.7x
- Estimated after-tax proceeds: $1.8
billion
Questar Gas Company and Wexpro Company
- Implied transaction value: $4.3
billion
- Assumed indebtedness: $1.3
billion
- Purchase price: $3.0 billion
- Implied transaction value as a multiple of estimated 2022
year-end rate base: 1.5x
- Purchase price as a multiple of estimated 2023 operating
earnings: 15.1x
- Purchase price as a multiple of estimated 2024 operating
earnings: 15.5x
- Estimated after-tax proceeds: $2.7
billion
The transactions require clearance under the Hart-Scott-Rodino
Act, approval from the Federal Communications Commission, approval
from the Committee on Foreign Investment in the United States as well as review or
approval from Idaho Public Utilities Commission, North Carolina
Utilities Commission, Public Utilities Commission of Ohio, Utah Public Service Commission, and
Wyoming Public Service Commission. Closing of each
transaction is expected to occur following receipt of each
respective state regulatory approval(s), as required, and are not
cross conditioned upon each other.
Ongoing business review
Robert M. Blue, Dominion Energy chair,
president, and chief executive officer, continued:
"Today's announcement further highlights Dominion Energy's
premier state-regulated, electric utilities that operate in some of
the most attractive regions in the country. Data center expansion,
bolstered by artificial intelligence (AI), along with
electrification, and general economic activity are driving the most
significant demand growth in our company's history and shows no
signs of abating. This unrivaled demand growth will drive
very significant regulated capital investment to ensure reliable
energy for our nearly 3.5 million electric utility customers.
"In addition, the thoughtful approach taken by Virginia legislators and regulators to develop
a framework for our regulated offshore wind project is delivering
exceptional results for customers and local economies. It
enabled us to take a differentiated approach to project
development, securing agreements early with offshore wind suppliers
for material and services while giving them confidence in our
project's completion. This allows our vendors to maintain
focus on delivering their equipment and services on time. Not
only is our project on budget and on schedule, but it is also
estimated to deliver electricity at a levelized cost that competes
very favorably with the nation's unregulated offshore wind projects
while creating hundreds of jobs and millions of dollars of local
economic benefit.
"The transactions announcement also represents another
significant step in our business review, which is focused on
repositioning the company to create maximum long-term value for
shareholders, employees, customers, and other stakeholders.
However, our work is not complete.
"Consistent with prior communications, we are focused on
strengthening the company's credit position within its existing
consolidated rating categories of Baa2 (Moody's issuer rating),
BBB+ (S&P issuer rating) and BBB+ (Fitch issuer rating).
We want to emerge from the review with a sustainable credit
foundation that, over time, will consistently meet and exceed our
current downgrade thresholds even during temporary periods of cost
or regulatory pressure.
"Therefore, as part of the ongoing business review we continue
to evaluate efficient sources of capital to solidly position our
balance sheet for the long-term while seeking to minimize any
amount of external equity financing need. In combination with
the sale of our remaining interest in Cove Point and today's
announced sales of our natural gas distribution companies,
additional capital sourcing would be driven by: (1) de-risking of
our regulated offshore wind project through the assumption of a
noncontrolling equity financing partner as provided for in recent
Virginia legislation; (2) the
impact of the $350 million customer
rate reduction at Dominion Energy Virginia, which became effective
July 1; (3) the potential impact of a
prolonged period of elevated interest rates; and (4) funding
of our industry-leading regulated investment opportunity driven by
unrivaled demand growth."
Business review investor event
Dominion Energy
expects to host an investor event during the fourth quarter to
discuss the company's repositioned strategic and financial
outlook. The event is expected to follow the completion of
Dominion Energy's ongoing business review. During the
investor event, management will review Dominion Energy's overall
strategy, provide comprehensive and multi-year financial and
capital investment guidance, and participate in Q&A.
Additional information
The assets included in the
transactions will be reclassified as discontinued operations for
GAAP reporting and excluded from operating earnings for the
third-quarter and full-year 2023. We expect a decrease of
$0.05 to $0.06 per share from the previously announced
third-quarter operating earnings guidance range of $0.72 to $0.87 per
share for the removal of such assets, which excludes any potential
impact from the use of sales proceeds. Given the pending business
review, the company has not provided full-year 2023 earnings
guidance.
Legal and financial advisors
McGuireWoods LLP served
as legal counsel to Dominion Energy. Citi and Goldman Sachs &
Co. LLC acted as co-financial advisors for the transaction.
Important note to investors regarding operating earnings, FFO
to debt, reported net income, net cash provided by operating
activities, long-term debt, short-term debt and securities due
within one year
Dominion Energy uses operating earnings
(non-GAAP) as the primary performance measurement of its earnings
guidance and results for public communications with analysts and
investors. Operating earnings are defined as reported earnings
adjusted for certain items. Dominion Energy also uses operating
earnings internally for budgeting, for reporting to the Board of
Directors, for the company's incentive compensation plans and for
its targeted dividend payouts and other purposes. Dominion Energy
management believes operating earnings provide a more meaningful
representation of the company's fundamental earnings power. In
providing estimated operating earnings of The East Ohio Gas
Company, Public Service Company of North
Carolina, Incorporated, Questar Gas Company, and Wexpro
Company, the company notes that there could be differences between
such non-GAAP financial measure and the GAAP equivalent of reported
net income.
Dominion Energy intends to use FFO to debt (non-GAAP) as a
supplemental liquidity measure of its ability to service its debt
obligations in its guidance and results for public communications
with analysts and investors. FFO to debt is defined as net cash
provided by operating activities adjusted for certain items,
including, but not limited to, discontinued operations and changes
in working capital as a ratio to total debt, consisting of
long-term debt, short-term debt, and securities due within one
year, adjusted for certain items including, but not limited to,
under-recovered fuel balances and operating leases. Dominion Energy
management believes FFO to debt provides a more meaningful
representation of the company's ability to service its debt
obligations. In providing FFO to debt, the company notes that there
could be differences between such non-GAAP financial measure and
the GAAP equivalents of reported net cash provided by operating
activities and reported long-term debt, short-term debt, and
securities due within one year.
Reconciliations of such non-GAAP measures to applicable GAAP
measures are not provided, because the company cannot, without
unreasonable effort, estimate or predict with certainty various
components of such measures.
About Dominion Energy
About 7 million customers
in 15 states energize their homes and businesses with
electricity or natural gas from Dominion Energy (NYSE: D),
headquartered in Richmond, Va. The company is committed
to safely providing reliable, affordable and sustainable
energy. Please visit DominionEnergy.com to learn
more.
This release contains certain forward-looking statements with
respect to the sale of The East Ohio Gas Company, Public
Service Company of North Carolina,
Incorporated, Questar Gas Company, and Wexpro Company, and their
consolidated subsidiaries, as applicable, which are subject to
various risks and uncertainties. Factors that could cause actual
results to differ include but are not limited to: the risk that
Dominion Energy and Enbridge may be unable to obtain any necessary
regulatory approvals for any, or all, of the transactions or that
required regulatory approvals may delay any, or all, of the
transactions and the risk that any conditions to the closing of
any, or all, of the transactions may not be satisfied. Other
risk factors are detailed from time to time in Dominion Energy's
quarterly reports on Form 10-Q and most recent annual report on
Form 10-K filed with the Securities and Exchange Commission.
These forward-looking statements speak only as of the date of this
press release. Dominion Energy assumes no obligation to provide any
revisions to, or update, any projections and forward-looking
statements contained in this press release.
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SOURCE Dominion Energy