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Dominion Energy Sells Half Virginia Offshore Wind Farm for $3B to Stonepeak

Dominion Energy offshore Virginia
Dominion Energy installed two test wind turbines and is now starting construction of the 2.6 GW offshore wind farm (Dominion Energy)

Published Feb 22, 2024 2:18 PM by The Maritime Executive

 

Dominion Energy has agreed to sell half of its planned Coastal Virginia Offshore Wind project in a move the company reports is designed to reduce its risk profile as the giant wind farm moves into construction. The company will sell a 50 percent noncontrolling interest in a newly formed partnership to Stonepeak, one of the leading U.S. private equity firms that is focused on infrastructure.

Under the terms of the agreement, which requires regulatory approval, the companies would be partners in a newly created public utility that would be a subsidiary of Dominion Energy. The company reports it expects to receive approximately $3 billion representing half the construction costs of the wind farm. Dominion Energy will retain full operational control for the construction and operation of the wind firm with the two companies sharing in the costs. 

The Coastal Virginia Offshore Wind farm has completed its permitting and is approved to begin construction which is projected to cost approximately $10 billion. Dominion previously reported that the first components of the wind farm were already being staged in Virginia with the major contracts awarded for the project which they report remains on schedule and budget. There are provisions in the agreement for cost overruns above $11.3 billion.

The wind farm, which will be located offshore near Virginia Beach, will be one of the largest completed in the United States. The plan calls for 176 turbines and three offshore substations in a nearly 113,000-acre lease area. When completed in late 2026, it will have the capacity to provide 2.6 GW.

"A competitive partnership process attracted high-quality interest resulting in a compelling partner for CVOW,” said Robert Blue, Dominion Energy chair, president and chief executive officer. “Stonepeak is one of the world's largest infrastructure investors with more than $61 billion in assets under management and an extensive track record of investment in large and complex energy infrastructure projects including offshore wind. Their significant financial participation will benefit both our project and our customers.”

Dominion Energy cited several reasons for pursuing the partnership highlighting that it would improve the risk profile by establishing cost-sharing that provides “meaningful protection for any unforeseen project cost increases.” They also highlighted the attractive, well-capitalized, and high-quality nature of Stonepeak while noting the partnership is expected to be viewed as a “significant credit-positive” development for Dominion by the credit rating agencies.

In addition, by establishing the partnership as a public utility in Virginia it will be entitled to recover its costs of construction and operations. It will operate under the existing Virginia offshore wind rider program established by the regulators.

The deal is the latest in a series of significant investments by the private equity sector into the U.S. offshore wind sector. Last week, Eversource reported it had agreed to sell its 50 percent interest in both the South Fork Wind farm which is nearing completion, and the planned Revolution Wind to Global Infrastructure Partners (GIP) for approximately $1.1 billion. Eversource, which is New England’s largest energy delivery system, is exiting the wind sector with the private equity firm set to become partners with Ørsted in the development and operation of the two wind farms. BlackRock one of the largest private equity management firms is currently seeking to acquire GIP.