Virginia-based Dominion Energy has concluded a competitive sale process and executed a definitive agreement to sell its 50 percent non-controlling limited partner interest in Cove Point to Berkshire Hathaway Energy, which currently operates the facility and owns a 100 percent general partner and 25 percent limited partner interest.
Cove Point is a gas liquefaction facility located in Lusby, Md.,
“Since 2002, Cove Point has been an excellent service provider to its international and domestic customers – linking global gas supplies with American customers, and American gas supplies with customers around the world,” said Robert M. Blue, Dominion Energy chair, president, and chief executive officer.
“However, this investment is non-core to Dominion Energy as we focus on our state-regulated utility operations. The sale demonstrates our commitment to the company’s credit profile and represents an attractive exit from what has been an excellent investment for our shareholders.
“With this sale, we have recycled $8.9 billion of cash flow, including dividends from Cove Point, since 2018 — well in excess of our total investment in the facility inclusive of the export project construction cost of approximately $4.1 billion. Further, this sale gives us the opportunity to reduce variable rate debt consistent with our goal of strengthening our balance sheet.”
Headquartered in Richmond, Dominion Energy continues to make progress on its business review that is still under way.
Consistent with the previously announced timeline, the company plans to host an investor day in the third quarter during which management will provide an updated strategic and financial outlook.
Breaking down the sale
The total transaction value of $3.5 billion, inclusive of transaction proceeds ($3.3 billion) and expected proceeds from the termination of related interest rate derivatives ($0.2 billion), represents approximately 10.8x estimated 2025 EBITDA of $325 million for Dominion Energy’s 50 percent non-controlling interest in Cove Point.
Total after-tax proceeds of approximately $3.3 billion are expected to be used to repay debt including the existing $2.3 billion term loan secured by its noncontrolling interest in Cove Point. The company estimates that the transaction will increase the company’s consolidated FFO to debt by approximately 0.7 percent.
Associated with repaying the term loan, the company will unwind its related in the money “floating-to-fixed” interest rate derivative which is expected to result in proceeds to the company of approximately $200 million.
The sale is subject to customary closing conditions including clearance under the Hart-Scott-Rodino Act and a filing with the U.S. Department of Energy.
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Crystal Graham
