Dominion Energy will receive around $3bn, in exchange for 50% of the CVOW construction costs, and is expected to receive $100m of the initial withholding if the final construction costs of CVOW are $9.8n or less, excluding financing costs
Dominion Energy to sell 50% of CVOW project to Stonepeak. (Credit: Jesse De Meulenaere on Unsplash)
Dominion Energy has agreed to divest a 50% non-controlling stake in its Coastal Virginia Offshore Wind project (CVOW) to alternative investment firm Stonepeak, by forming an offshore wind partnership.
Under the terms of the agreement, the US-based electric services company will retain full operational control of the construction and operations of CVOW.
Dominion Energy will receive around $3bn in proceeds, representing 50% of the CVOW construction costs incurred through closing the initial withholding of $145m.
The company is expected to receive $100m of the initial withholding, if the final construction costs of CVOW are $9.8n or less, excluding financing costs.
The transaction is expected to be completed by the end of 2024, subject to certain customary and regulatory approvals.
Upon closing, Dominion Energy and Stonepeak will each contribute 50% of the remaining capital to fund the construction of CVOW, given the total cost is less than $11.3bn.
Stonepeak can make additional capital contributions for the project costs, excluding financing costs, totalling between $11.3bn through $13.7bn., supported by Dominion Energy.
Dominion Energy will continue to oversee the day-to-day operations and construction works at CVOW, supported by Stonepeak’s expertise in investing.
Dominion Energy chair, president and CEO Robert Blue said: “The Coastal Virginia Offshore Wind project continues to proceed on-time and on-budget and consistent with our previously communicated timing and cost expectations.
“Stonepeak is one of the world’s largest infrastructure investors with more than $61bn in assets under management and an extensive track record of investment in large and complex energy infrastructure projects including offshore wind.
“We have reviewed the transaction with our credit-rating agencies and expect the transaction to be viewed as a significant credit-positive, which will ultimately benefit our customers.
“A financially healthy Dominion Energy with a strong credit profile and balance sheet is optimally positioned to attract the capital we need to provide an exceptional customer experience and support the Commonwealth of Virginia’s economic and environmental goals.”
CVOW is a 2.6GW offshore wind project that will feature 176 turbines and three offshore substations in a nearly 113,000-acre lease area, 27 miles (43km) off the coast of Virginia Beach.
The project, which can address the power needs of 660,000 homes, will be the largest offshore wind farm in the US and one of the largest offshore wind farms worldwide, upon completion.
Dominion Energy started developing CVOW in 2013 and is anticipated to begin offshore construction this spring, with completion expected by year-end 2026.
Upon completion, CVOW will support energy security and reliability, reduce fuel costs by diversifying Dominion Energy customers’ energy supply, and eliminate carbon emissions.
Vinson & Elkins served as legal advisor to Stonepeak, while Mizuho Securities USA, through its affiliate Greenhill & Co., and Santander US Capital Markets served as co-financial advisors.
McGuireWoods and Morgan Lewis served as legal advisors, while Citi and Goldman Sachs & Co. served as co-financial advisors to Dominion Energy, on this transaction.
Stonepeak senior managing director Rob Kupchak said: “We look forward to extending our relationship through CVOW, which is a fitting addition to our global renewables strategy given its potential to provide meaningful renewable capacity to the U.S., advanced stage of development, and downside-protected fundamentals.
“Dominion Energy’s impressive track record building and operating large-scale infrastructure projects paired with Stonepeak’s experience successfully constructing offshore wind assets gives us confidence in CVOW’s path forward, and we are excited to partner with Dominion in delivering this critical renewable energy generation resource to its customers.”