UPDATE: Oct. 23, 2024: Dominion Energy has closed its $2.6 billion sale of a 50% noncontrolling interest in its 2.6-GW Coastal Virginia Offshore Wind project to Stonepeak, the company announced Oct. 22. Stonepeak will fund 50% of project construction costs “with meaningful protection from any unforeseen increases in the current project construction budget,” Dominion said, and the company’s proceeds from the sale “[represent] reimbursement of approximately 50% of project-to-date capital investment.”
Dive Brief:
- Investment firm Stonepeak will acquire a 50% noncontrolling interest in Dominion Energy’s 2.6-GW Coastal Virginia Offshore Wind project, or CVOW, the utility announced Thursday.
- When the deal closes, Stonepeak “will make a cash payment to Dominion Energy to reimburse 50% of the capital spent to date less $145 million,” Dominion’s CEO Robert Blue said in the utility’s earnings call for the fourth quarter of 2023. “This nearly $3 billion project cost reimbursement will be used to reduce parent-level debt,” Blue said. After that, Stonepeak will fund a 50/50 pro rata share of capital calls.
- “We said that we needed a transaction that made sense for our customers and our shareholders, that was in keeping with the objectives that we set out in the business review, and we believe this transaction with Stonepeak meets that extremely well,” said Blue.
Dive Insight:
Under the terms of the agreement, Dominion “will retain full operational control of the construction and operations” of the wind farm, the utility said in its earnings release kit. When the project reaches commercial operation, Stonepeak will make a final payment to Dominion, with the amount depending on the project’s final construction cost.
The deal is expected to close by the end of 2024, Dominion said. Construction on CVOW is expected to finish in late 2026. The project is currently the largest offshore wind farm being developed in the U.S.
“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,” Stonepeak’s Senior Managing Director Rob Kupchak said in a joint release from Stonepeak and Dominion.
While Dominion will continue to oversee the project’s day-to-day operations and construction, the release said that Stonepeak will provide expertise regarding “large and complex renewables and energy infrastructure projects including offshore wind.”
The deal also provides flexibility regarding Stonepeak’s capital contributions as the project continues. The firm has agreed to contribute capital to help fund up to $11.3 billion in project expenditures on a 50/50 pro rata basis, but if project costs exceed that, Stonepeak can decide whether or not to provide additional funding.
“In that hypothetical case, Stonepeak would continue to share in project costs through a gradually increasing spectrum of dilution to Dominion’s share of project ownership,” Blue said.
Currently, fixed costs make up 92.4% of the capital budget, according to Dominion. The utility estimates that unfixed costs total around $744 million and include onshore electrical work, fuel for transportation and installation, and contingency costs.
Certainty regarding those unfixed costs will “come in sort of gradually as we move closer to the end of the project,” Blue said.
Blue said Dominion’s Jones Act-compliant installation vessel Charybdis is 82% complete, and the utility expects the vessel to be floated in the coming weeks.
“There's been no change to [Charybdis’] project costs of $625 million,” he said. “And there's no change to the vessel’s expected availability to support the current CVOW construction schedule, including its availability to support any third party charter agreements in 2025.”
