Dominion to Sell Half of 2.6 GW Coastal Virginia Offshore Wind Project in Multi-Billion-Dollar Deal

February 22, 2024, by Adnan Memija

Stonepeak, an alternative investment firm specialising in infrastructure and real assets, has reached an agreement with Dominion Energy to acquire a 50 per cent interest in its 2.6 GW Coastal Virginia Offshore Wind (CVOW) project in the US through the formation of an offshore wind partnership.

“Having previously partnered with Dominion Energy, 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,” said Rob Kupchak, Senior Managing Director at Stonepeak.

Stonepeak will invest in a newly formed subsidiary of Dominion Energy Virginia. Subject to State Corporation Commission of Virginia (SCC) approval, the subsidiary will be a public utility in Virginia entitled to recover its incurred costs of constructing and operating the project under the existing Virginia offshore wind rider programme.

Dominion Energy will retain full operational control of the construction and operations of CVOW. Stonepeak will own a 50 per cent noncontrolling equity interest and will have customary minority interest rights.

The transaction is subject to customary and regulatory approvals and is expected to be completed by the end of 2024.

Under the terms of the agreement, at closing Dominion Energy expects to receive proceeds of approximately USD 3 billion, representing 50 per cent of the CVOW construction costs incurred through closing less USD 145 million (the initial withholding).

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If the final construction costs of the offshore wind project are USD 9.8 billion or less, excluding financing costs, Dominion Energy will receive USD 100 million of the initial withholding. Such an amount is subject to downward adjustment with Dominion Energy receiving no withheld amounts if the total costs, excluding financing costs, of CVOW exceed USD 11.3 billion, the company said.

Following closing, Dominion Energy and Stonepeak will each contribute 50 per cent of the remaining capital necessary to fund the construction of CVOW, provided the total project cost, excluding financing costs, is less than USD 11.3 billion (mandatory capital contributions).

This represents 50/50 cost-sharing up to 15 per cent, or nearly USD 1.5 billion, higher than the project’s current project budget (USD 9.8 billion) and up to 20 per cent, or nearly USD 2.0 billion, higher than the project’s current pre-contingency budget (USD 9.45 billion), according to Dominion Energy.

CVOW will consist of 176 Siemens Gamesa 14 MW wind turbines and three offshore substations in the 113,000-acre commercial lease area.

Last month, the developer received the last two major federal approvals needed to begin the construction of its 2.6 GW offshore wind project, which is expected to commence this spring.

Dominion Energy said that the 2.6 GW offshore wind project is on schedule to generate enough clean, renewable energy to power up to 660,000 homes once fully constructed in late 2026.

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