Posted on April 1, 2024
Dominion Energy announced Feb. 22 it had reached an agreement with investment firm Stonepeak to sell a 50% noncontrolling stake in the utility’s Coastal Virginia Offshore Wind project for nearly $3 billion.
The deal is expected to close by the end of 2024, if approved by the Virginia State Corporation Commission and the North Carolina Utilities Commission, as well as federal regulatory agencies. Richmond-based Dominion would retain full operational control over the $9.8 billion CVOW project, which is under development 27 miles off the Virginia Beach coast. The 176-turbine offshore wind farm received final federal approvals in January and is expected to begin construction in May.
“The Coastal Virginia Offshore Wind project continues to proceed on time and on budget and consistent with our previously communicated timing and cost expectations,” Dominion Chair, President and CEO Bob Blue said in a statement. “A competitive partnership process attracted high-quality interest, resulting in a compelling partner for CVOW.”
Under the deal, Dominion Energy expects to receive $3 billion — representing 50% of the offshore wind farm’s construction costs through the anticipated closing of the deal by Dec. 31, minus $145 million, the initial withholding amount. If total construction costs remain at the current budget of $9.8 billion or less, excluding financing costs, Dominion will get back $100 million from the withholding amount.
However, if construction costs more than $11.3 billion, the Fortune 500 utility will receive no money back from the withheld $145 million. If the project costs reach $11.3 billion, Stonepeak and Dominion would each contribute 50% of additional capital costs needed to fund construction, but if the project costs between $11.3 billion and $13.7 billion, Stonepeak would not be required to contribute more capital to pay the additional costs, although it has the option to do so.
In terms of structure, Stonepeak would invest in a newly formed Virginia-based utility subsidiary of Dominion Energy Virginia. The transaction is expected to improve Dominion’s estimated 2024 consolidated funds from operations-to-debt ratio by approximately 1% and reduce the utility’s overall financing needs during construction.
In September 2023, Dominion said it intended to sell a noncontrolling interest in the CVOW to lower risk in the project and solidify the company’s balance sheet. In November 2023, Dominion officials said during its third-quarter earnings call that the utility was in the advanced stages of finding a co-investor.
