Dominion Energy is on the verge of returning to its utility roots as it nears offloading the remainder of its US natural gas pipeline assets to Berkshire Hathaway, CEO Thomas Farrell said Nov. 5.
With electricity demand stable or growing in parts of its business and more revenue certainty from operating in regulated markets, Dominion sees its future much the way it started.
That's a reversal from the hybrid utility energy infrastructure company that Farrell and other executives sought to build in recent years with the acquisition of Questar Pipeline, the construction of the Cove Point LNG export facility in Maryland, and the proposal to build the Atlantic Coast Pipeline to deliver more Appalachian Basin gas to downstream utility customers.
In July, Berkshire Hathaway agreed to buy substantially all of Dominion's gas pipeline and storage assets for $4 billion in cash and the assumption of $5.7 billion in debt. Berkshire Hathaway completed the purchase of the bulk of the assets earlier in November. The sale of the remaining 20%, including Questar and related infrastructure, is on track to lose in early 2021, Farrell said during a conference call to discuss Dominion's third-quarter financial results.
With the transaction, Berkshire Hathaway is now the operator of Cove Point, an important outlet for US gas to Europe and beyond with a capacity of about 5.25 million mt/year, and holds a 25% stake. Dominion retains a 50% passive ownership. When it announced the midstream assets sale, Dominion also scrapped the $8 billion Atlantic Coast Pipeline, amid ballooning costs and fierce legal opposition from environmental groups.
"We believe that the investment proposition created through Dominion Energy's strategic repositioning is compelling," Farrell said. "We have a strong balance sheet and a significantly improved business risk profile."
While Dominion is shifting its focus back to its core regulated utility businesses, Berkshire Hathaway is making a bigger bet on gas midstream and LNG.
Farrell said the strategy reversal is the right one for Dominion in an uncertain commodity market and US political environment.
"Turning to the election for a moment, we, like everyone else, continue to monitor results," Farrell said. "We want to see exactly how future policy reflects the final result. But in any case, we are on an unwavering and industry-leading path to net-zero emissions, consistent with state-level policy priorities. A more sustainable energy future is what our shareholders, customers, communities, and employees want, and we intend to deliver."
