Dominion to Sell Two Natural Gas Utilities
for $970 Million
RICHMOND, Va. — Dominion (NYSE: D) will sell its natural
gas local distribution utilities in Pennsylvania and West Virginia to Equitable
Resources (NYSE: EQT) for about $970 million plus adjustments to reflect capital
expenditures and changes in working capital under an agreement expected to be
completed by the first quarter of 2007.
Under the agreement, Dominion will sell Dominion Peoples,
which serves about 357,000 homes and businesses in Pennsylvania from its headquarters
in Pittsburgh, and Dominion Hope, which serves 116,500 homes and businesses
in West Virginia from its headquarters in Clarksburg, W.Va. Together, they serve
less than 12 percent of Dominion’s 4 million electric and natural gas
local distribution customers in the mid-Atlantic and Midwest.
The agreement is subject to regulatory approvals in Pennsylvania
and West Virginia as well as approval under the federal Hart-Scott-Rodino Act.
Proceeds from the sale will be used for general corporate
purposes, including debt reduction. Dominion models acquisition and divestiture
activities on a financing formula of 50 percent debt and 50 percent equity.
Applying 50 percent of the after-tax proceeds to repay debt and 50 percent to
buy back stock at Dominion’s current share price, the effect of the transaction
would be slightly accretive to earnings. Net cash received will be positively
impacted by the use of prior tax losses to reduce actual taxes paid. Should
management choose to use a greater portion of the proceeds to pay down debt,
however, the result may be mildly dilutive to earnings.
Thomas F. Farrell II, president and chief executive officer
of Dominion, said:
“Dominion Peoples and Dominion Hope are well-run businesses.
We have the highest regard for the skilled and dedicated employees who work
there as well as for the communities and people that they serve.
“Dominion has grown rapidly and, as we have said repeatedly,
we continually review our assets to determine if they fit strategically and
will provide the commensurate return on invested capital. In reviewing Dominion
Peoples and Dominion Hope, we determined that these businesses might be of greater
value to another owner. Coincidentally, we received a number of unsolicited
expressions of interest in the two businesses. We pursued that interest through
a competitive auction process that resulted in the sale agreement. We look forward
to working with Equitable to make this a smooth transition for everyone involved.”
“We also look forward to continuing to be an active
member of the Pennsylvania and West Virginia communities through our other businesses
that operate in both states,” Farrell said. The other businesses are:
Dominion Transmission, the interstate natural gas pipeline and storage business;
Dominion Exploration & Production, one of the nation’s largest natural
gas and oil producers; Dominion Generation, which operates more than 28,000
megawatts of electricity generating capacity; and Dominion Retail, one of the
nation’s largest marketers of competitively priced energy and related
products and services.
Dominion engaged Goldman, Sachs & Co. as its financial
adviser in the transaction. McGuireWoods LLP provided legal services to Dominion
in connection with the transaction.
Dominion is one of the nation's largest producers of energy,
with a portfolio of about 28,100 megawatts of generation, about 6.3 trillion
cubic feet equivalent of proved natural gas reserves and 7,800 miles of natural
gas transmission pipeline. Dominion also operates the nation's largest underground
natural gas storage system with more than 950 billion cubic feet of storage
capacity and serves retail energy customers in nine states. For more information
about Dominion, visit the company's Web site at www.dom.com.
This release contains forward-looking statements, including
our expectations for timing of the completion of the divestiture of Dominion
Peoples and Dominion Hope and the impact of the divestiture on our future earnings,
that are subject to various risks and uncertainties. Factors that could cause
actual results to differ materially from management's projections, forecasts,
estimates and expectations may include factors that are beyond the company's
ability to control or estimate precisely, such as the timing of the receipt
of regulatory approvals in connection with the divestiture, conditions required
in connection with regulatory approvals and our operation of Dominion Peoples
and Dominion Hope prior to completion of the divestiture. Factors that may affect
our projections generally include realization of and timing of the receipt of
expected business interruption insurance proceeds, estimates of future market
conditions, estimates of proved and unproved reserves, the company’s ability
to meet its production forecasts, the behavior of other market participants,
and the effects of hurricanes on our operations, oil and gas production and
commodity prices. Other factors include, but are not limited to, weather conditions,
governmental regulations, economic conditions in the company's service area,
fluctuations in energy-related commodity prices, including changes in the cost
of fuel for our regulated electric business, risks of operating businesses in
regulated industries that are subject to changing regulatory structures, changes
to regulated gas and electric rates recoverable by Dominion, changes to rating
agency requirements and ratings, changing financial accounting standards, trading
counter-party credit risks, risks related to energy trading and marketing, and
other uncertainties. Other risk factors are detailed from time to time in Dominion’s
annual report on Form 10-K filed with the Securities & Exchange Commission.
