Dominion sells natural gas distribution companies to Enbridge for $14B

Dominion Energy (D) 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 (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 3M 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. Aggregate transactions value of $14.0B , including the assumption of $4.6B of debt, represents approximately 1.5x estimated 2022 year-end rate base of $9.2B. Aggregate purchase price of $9.4B represents approximately 16.6x estimated 2023 operating earnings of $564M and approximately 16.7x estimated 2024 operating earnings of $561M. Total estimated after-tax proceeds of $8.7B are expected to be used to reduce parent debt in addition to the conveyance of $4.6B of operating company debt. The transactions are expected to improve the company’s consolidated FFO to debt by approximately 3.4%. 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, as required, and are not cross conditioned upon each other. The assets included in the transactions will be reclassified as discontinued operations for GAAP reporting and excluded from operating earnings for the Q3 and FY23. The company said, “We expect a decrease of 5c-6c per share from the previously announced Q3 operating earnings guidance range of 72c-87c 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 FY23 earnings guidance.” McGuireWoods served as legal counsel to Dominion Energy. Citi and Goldman Sachs & Co. acted as co-financial advisors for the transaction.