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Dominion (D) to Sell Gas Distribution Companies & Cut Debts
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Dominion Energy (D - Free Report) announced that it entered into three separate definitive agreements to sell its three natural gas distribution companies to Enbridge (ENB - Free Report) for $14 billion, which includes the assumption of $4.6 billion of debt. The deal is expected to close by 2024-end, subject to necessary regulatory approval.
The three natural gas distribution companies, which Dominion decided to sell to Enbridge, collectively control 78,000 miles of natural gas distribution, transmission, gathering and storage pipelines, have more than 62 billion cubic feet of working underground and liquefied natural gas storage capacity and nearly 400 billion cubic feet equivalent of cost-of-service regulated gas reserves as of year-end 2022.
Dominion will also ensure job security for the existing employees of these three gas distribution companies and as part of the agreements, ENB has agreed to provide significant protections for existing employees, honor existing union commitments and maintain local operating leadership.
The assets included in the deal will be reclassified as discontinued operations for GAAP reporting and excluded from operating earnings for the third quarter and full year 2023. Dominion expects a decrease of 5 to 6 cents per share from the previously announced third-quarter operating earnings guidance range of 72 to 87 cents per share for the removal of such assets from continued operation.
Dominion’s Benefits From the Deal
Dominion Energy will utilize the after-tax net proceeds of $8.7 billion from this deal to lower its existing debt level and strengthen its balance sheet. This deal will also improve Dominion’s credit position and might improve its credit rating from the rating agencies.
This deal will allow Dominion to focus more on its thriving clean electricity generation business, which is benefiting from rising demand from data center expansion, bolstered by artificial intelligence, along with electrification and general economic activity.
Dominion Energy aims to attain net-zero carbon and methane emissions from its electric generation and natural gas infrastructure by 2050 and focusing on clean electric generation operations will assist the company in achieving its target. Dominion is planning to invest $39.3 billion in the 2023-2026 period to further strengthen its clean power generation.
Transition in Electricity Space
The operators in the U.S. electric power sector are gradually moving toward cleaner sources of energy to produce electricity. Per the U.S. Energy Information Administration (EIA), the annual share of U.S. electricity generation from renewable energy sources will likely remain at 22% in 2023 in sync with 2022 and is expected to increase to touch 25% in 2024 as a result of the continuing addition of solar and wind-generating capacity.
Per the EIA, the United States’ renewable energy generation capacity has been growing rapidly and the electric power sector plans to add 27 gigawatts (GW) of new solar generating capacity by the end of 2023 and a further 31 GW in 2024.
Few electric utilities have already announced plans to become net-zero emission companies over the long term. Utilities like Xcel Energy (XEL - Free Report) and WEC Energy Group (WEC - Free Report) , among others, have already announced plans to achieve net-zero carbon emissions by 2050.
XEL and WEC have well chalked out capital expenditure plans to strengthen operations and add more clean sources in generation assets to cut emissions over the long term.
Price Performance
In the past six months, its shares have lost 14.4% compared with the industry’s 4.1% decline.
Image: Bigstock
Dominion (D) to Sell Gas Distribution Companies & Cut Debts
Dominion Energy (D - Free Report) announced that it entered into three separate definitive agreements to sell its three natural gas distribution companies to Enbridge (ENB - Free Report) for $14 billion, which includes the assumption of $4.6 billion of debt. The deal is expected to close by 2024-end, subject to necessary regulatory approval.
The three natural gas distribution companies, which Dominion decided to sell to Enbridge, collectively control 78,000 miles of natural gas distribution, transmission, gathering and storage pipelines, have more than 62 billion cubic feet of working underground and liquefied natural gas storage capacity and nearly 400 billion cubic feet equivalent of cost-of-service regulated gas reserves as of year-end 2022.
Dominion will also ensure job security for the existing employees of these three gas distribution companies and as part of the agreements, ENB has agreed to provide significant protections for existing employees, honor existing union commitments and maintain local operating leadership.
The assets included in the deal will be reclassified as discontinued operations for GAAP reporting and excluded from operating earnings for the third quarter and full year 2023. Dominion expects a decrease of 5 to 6 cents per share from the previously announced third-quarter operating earnings guidance range of 72 to 87 cents per share for the removal of such assets from continued operation.
Dominion’s Benefits From the Deal
Dominion Energy will utilize the after-tax net proceeds of $8.7 billion from this deal to lower its existing debt level and strengthen its balance sheet. This deal will also improve Dominion’s credit position and might improve its credit rating from the rating agencies.
This deal will allow Dominion to focus more on its thriving clean electricity generation business, which is benefiting from rising demand from data center expansion, bolstered by artificial intelligence, along with electrification and general economic activity.
Dominion Energy aims to attain net-zero carbon and methane emissions from its electric generation and natural gas infrastructure by 2050 and focusing on clean electric generation operations will assist the company in achieving its target. Dominion is planning to invest $39.3 billion in the 2023-2026 period to further strengthen its clean power generation.
Transition in Electricity Space
The operators in the U.S. electric power sector are gradually moving toward cleaner sources of energy to produce electricity. Per the U.S. Energy Information Administration (EIA), the annual share of U.S. electricity generation from renewable energy sources will likely remain at 22% in 2023 in sync with 2022 and is expected to increase to touch 25% in 2024 as a result of the continuing addition of solar and wind-generating capacity.
Per the EIA, the United States’ renewable energy generation capacity has been growing rapidly and the electric power sector plans to add 27 gigawatts (GW) of new solar generating capacity by the end of 2023 and a further 31 GW in 2024.
Few electric utilities have already announced plans to become net-zero emission companies over the long term. Utilities like Xcel Energy (XEL - Free Report) and WEC Energy Group (WEC - Free Report) , among others, have already announced plans to achieve net-zero carbon emissions by 2050.
XEL and WEC have well chalked out capital expenditure plans to strengthen operations and add more clean sources in generation assets to cut emissions over the long term.
Price Performance
In the past six months, its shares have lost 14.4% compared with the industry’s 4.1% decline.
Image Source: Zacks Investment Research
Zacks Rank
Dominion has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.