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Dominion Selling Three Power Plants, Considering Blue Racer Sale

Dominion Energy said it has sold its interest in two combined-cycle gas turbine (CCGT) facilities and a hydroelectric project in two separate transactions to an affiliate of Starwood Capital Group Global LP for $1.32 billion.

The Richmond, VA-based operator also said it is continuing to evaluate its 50% stake in Blue Racer Midstream LLC, a joint venture (JV) with Caiman Energy II LLC, after receiving "strong interest from third parties." Caiman provides midstream services to natural gas producers in the Utica and Marcellus shales of Ohio, Pennsylvania and West Virginia.

In the power plant sales, Dominion executed definitive agreements to sell its 100% interest in the 1,240 MW Fairless Power Station in Pennsylvania and the 468 MW Manchester Street Power Station in Rhode Island to Starwood Energy Group Global LLC. Dominion also agreed to sell its 25% stake in Catalyst Old River Hydroelectric LP, which owns a 192 MW hydroelectric power plant in Louisiana.

In the first transaction, the Fairless and Manchester plants, both CCGT facilities, are being sold for about $1.23 billion in cash. The sale is subject to customary regulatory approvals. Dominion's stake in Catalyst is being sold for about $90 million in cash. The transactions are expected to close by the end of the year.

The Fairless plant is about 26 miles northeast of Philadelphia. It began commercial service in 2004 and powers 992,000 homes. The Manchester plant in Providence, RI, began commercial service in 1995 and powers 360,000 homes. Catalyst's hydroelectric power plant is in Concordia Parish, LA, near Vidalia.

Dominion CEO Thomas Farrell said total proceeds from the sale exceeded the midpoint of a guidance range of $1.0-1.5 billion. He said the sale marked the successful completion of a series of initiatives announced in March to improve the near-term credit profile. The initiatives followed plans to cut $1 billion in capital expenditures over the next two years.

"We appreciate the opportunity to have worked with Starwood Energy and know that it will benefit greatly from the continued efforts of the plant employees who have delivered best-in-class performance at Fairless and Manchester Street," Farrell said Monday.

Greenwich, CT-based Starwood Energy Group is a private investment firm that specializes in energy infrastructure investments. According to its website, the firm has raised equity commitments of about $3 billion and has executed transactions totaling more than $7 billion in enterprise value.

When Dominion announced the initiatives to improve its credit profile it said its divestiture of noncore assets "could include" its interest in Blue Racer. Although Dominion said it has fielded interest in its stake in the JV, "additional noncore asset sale proceeds are not required to achieve Dominion Energy's credit objectives."

Dominion formed Blue Racer with Caiman in December 2012. The companies collectively contributed $1.4 billion of equity capital to the JV from its formation through October 2014. Blue Racer currently operates 688 miles of natural gas gathering pipeline, 153 miles of natural gas liquids and condensate lines, and the 400 MMcf/d Berne processing complex in Monroe County, OH.

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