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Dominion Delays Parts of ACP to 2020 After Recent Setbacks; Sells Stake in Blue Racer

Parts of the Atlantic Coast Pipeline (ACP) won’t start up until mid-2020, and the project will cost more than previously thought, backer Dominion Energy announced Thursday.

The Richmond, VA-based company revealed the changes to its plans for the embattled greenfield Appalachia-to-Southeast pipeline as it rolled out 3Q2018 results.

The project will pursue a phased in-service approach, “whereby we maintain a late 2019 in-service for key segments of the project to meet peak winter demand in critically constrained regions served by the project,” management said. “ACP will be pursuing a mid-2020 in-service date for the remaining segments of the project. Abnormal weather and/or work delays (including delays due to judicial or regulatory action) may result in cost or schedule modifications in the future.”

The project’s estimated cost has increased from $6-6.5 billion to $6.5-7.0 billion not including financing costs, Dominion said.

Thursday’s update is unlikely to surprise those that have closely monitored recent news developments surrounding ACP, which has faced a number regulatory setbacks recently. A series of federal appeals court decisions to either stay or vacate permits have raised uncertainty over the project timeline and led FERC to issue a temporary stop work order.

The 600-mile ACP would originate in West Virginia, pass through Virginia and into North Carolina to move 1.5 Bcf/d of Appalachian natural gas to the Southeast. The project is a joint venture of Dominion, Duke Energy, Piedmont Natural Gas and Southern Company Gas.

The related Supply Header Project, which is backed solely by Dominion and would include roughly 37.5 miles of pipeline looping and modifications to existing compressor stations in West Virginia and Pennsylvania, remains on track for a late 2019 in-service date, the company said.

"We have been constructing ACP in West Virginia and North Carolina and on Oct. 19 we received the final Virginia permit required to petition FERC to be underway with full mainline construction in all three states," Dominion CEO Thomas Farrell said. "Following approval from FERC of our Notice to Proceed filing, we will begin mainline construction in Virginia.

"We continue to achieve key milestones toward the successful completion of this critical energy infrastructure project and look forward to delivering safe, reliable, and affordable energy to our customers in time to meet peak demand for the 2019/20 winter season," Farrell added.

Meanwhile, Dominion also announced Thursday that it has reached a deal to divest its 50% interest in Blue Racer Midstream to First Reserve and affiliated investment funds for up to $1.5 billion, including $1.2 billion in cash and up to $300 million in earn-out payments based on Blue Racer’s performance from 2019 through 2021. The transaction is expected to close by the end of the year.

"Blue Racer Midstream is a high-quality business with an extremely capable management team.  However, this investment has become non-core to Dominion Energy as we continue to focus on regulated energy infrastructure," Farrell said. "We have consistently indicated that a sale of Blue Racer would be opportunistic based on a compelling valuation and transaction structure.”

Dominion reported 3Q2018 earnings of $854 million ($1.30/share), versus earnings of $665 million ($1.03/share) for 3Q2017.

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