On the same Independence Day Weekend that it announced a multi-billion-dollar natural gas pipeline joint venture with Duke Energy was cancelled, Virginia-based utility Dominion made a deal to sell “substantially all” of its natural gas transmission and storage assets to an affiliate of Warren Buffett’s Berkshire Hathaway in a $9.7 billion transaction.
If completed, the divestment would focus Dominion more intently as a state-regulated “pure play” utility power provider, according to the company’s statement. The Berkshire Hathaway unit is acquiring more than 7,700 miles of natural gas storage and transmission pipeline and about 900 billion cubic feet of gas storage capacity.
The buyer is assuming $5.7 billion of existing debt and will make a $4 billion cash payment upon closing, according to terms of the deal.
Dominion CEO Thomas Farrell pointed out his company’s years-long move increasing its state-regulated utility profile, involving a series of deals that included the mergers with Questar and SCANA, as well as previous divestitures of Blue Racer Midstream and merchant generation assets. The company’s regulated utility is moving toward energy sustainability and emissions reduction in its five-state service territory.
“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,” Farrell said in a statement. “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.”
The Berkshire Hathaway deal follows the announcement that Duke and Dominion would cancel plans to build the Atlantic Coast Pipeline. Legal challenges and other issues have pushed the anticipated price tag of the natural gas pipeline beyond $6 billion, Duke CEO Lynn Good revealed earlier this year. Ironically, the U.S. Supreme Court last month ruled 7-2 to reverse a lower court decision that canceled a crucial permit for the pipeline that would cross under the Appalachian Trail.
Other legal roadblocks, however, remained before construction on the project could ever begin. The joint statement by Duke and Dominion cited “legal uncertainty” as causing project cost increases and timing delays which ultimately doomed the project.
If built, the Atlantic Coast Pipeline would have served growing markets in Virginia and North Carolina and replaced retired coal-fired generation plants, cutting comparable carbon dioxide emissions by more than half.
Opponents of the pipeline objected to its route involving the protected Appalachian region.
The Atlantic Coast Pipeline was not part of the Berkshire Hathaway transaction. That agreement includes Dominion’s ownership interests in Dominion Energy Transmission, Questar Pipeline (including Overthrust and White River Hub), Carolina Gas Transmission, Iroquois Gas Transmission System (50 percent interest), legacy gathering and processing operations, farmout acreage, as well as a 25 percent operating interest in the Cove Point LNG project in Maryland. 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.
Berkshire Hathaway’s energy division also owns the MidAmerican Energy utility in Iowa.
(Rod Walton is content director for Power Engineering and POWERGEN International. He can be reached at 918-831-9177 and [email protected]).