Dominion Energy Sells Gas Assets to Warren Buffett
image credit: Brunswick County Power Station, from Dominion Energy
- Jul 8, 2020 4:30 pm GMT
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The Virginia-based utility company is moving out of gas, by selling most of its gas transmission and storage assets to a subsidiary of the billionaire's Berkshire Hathaway corporation for nearly $10 billion. This signals a move towards renewables and emissions reduction, which has recently been a significant part of the company's operations, and also an alignment towards more state-regulated utilities in its portfolio.
The sale includes 7,700 miles of natural gas storage and transmission pipelines and about 900 billion cubic feet of gas storage that the company currently operates.
Thomas F. Farrell, II, Dominion Energy Chairman, President, and CEO, says, “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 programs. Over the next 15 years we plan to invest up to $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 four gigawatts of coal- and oil-fired electric generation.”
Farrell expects the long-term earnings growth of the company to increase by 30% as a result of this deal. Dominion Energy forecasts that up to 90 per cent of its future operating earnings will come from its portfolio of best-in-class electric and natural gas state-regulated utility companies centered around five key states: Virginia, the Carolinas, Ohio, and Utah.
Assets covered by the sale agreement include the company's interests in Dominion Energy Transmission, Questar Pipeline (including White River Hub and Overthrust), a 50 per cent interest in Iroquois Gas Transmission System, Carolina Gas Transmission, legacy gathering and processing operations, farm-out acreage, as well as a 25% operating interest in Cove Point.
The complete deal, worth $9.7 billion, includes $5.7 billion of existing indebtedness which will reduce Dominion Energy's total leverage. Berkshire Hathaway will also make a cash payment of approximately $4 billion to Dominion Energy on deal close.
Dominion Energy has kept a few non-state regulated utility operations, most notably a 50 per cent interest in Cove Point LNG facility in Maryland. The company will continue operating its zero-carbon nuclear and solar-contracted generation fleet, with the explicit goal of reducing carbon and methane emissions to net zero by 2050.
Since 2013 the company has invested more than $3.5 billion in renewables and has increased its total solar generation portfolio to over 2600 MW, as well as investing in wind generation.
Besides its land-based solar and wind generation assets, Dominion Energy is also a player in the burgeoning US Offshore Wind market, partnering with Ørsted, the largest offshore wind developer in the world. On June 29 it announced construction was complete in the first two turbines of the Coastal Virginia Offshore Wind (CVOW) project. This is only the second commercial offshore wind array in the US (after Block Island Wind Farm, near Rhode Island) and the first to be installed in federally-owned waters. The twin 12 Megawatt turbines are undergoing testing and are expected to deliver first power later on this year. The entire project is expected to eventually deploy 180 wind turbines, for a capacity of 2.6 GW.
It looks like Dominion Energy intends to move away from GHG-emitting sources in its ambitious target to reach net zero emissions by 2050.