Regulatory delays have forced Dominion and Equitable Resources Inc. to terminate their agreement for the purchase of the Dominion Peoples and Dominion Hope natural gas distribution companies by Equitable, the companies said last week.
"Given the continued delay in achieving the final regulatory approvals for this transaction, we believe it is best to terminate our agreement," said Dominion CEO Thomas F. Farrell II and Equitable CEO Murry S. Gerber. "While we remain convinced that customers would have benefited from the transaction and are disappointed that it could not be completed in a timely manner, we recognize that it is time to move forward."
Dominion said it plans to seek other offers for the purchase of the utilities.
"These are high-quality assets," Farrell said. "Dominion has received a number of unsolicited inquiries in recent months from others expressing an interest in acquiring Dominion Peoples and Dominion Hope. We now will contact those companies as well as other potential buyers. In light of the regulatory groundwork done since the agreement with Equitable was announced, we anticipate moving quickly to seek the required approvals once a new buyer has been identified."
In making its decision, Equitable cited the need to focus on significant organic growth opportunities in other parts of its business.
"We have decided to focus our growth efforts on exciting strategic opportunities for expanded horizontal drilling and infrastructure development in the Appalachian Basin," Gerber said. "That growth will add jobs and contribute substantially to the economic revitalization of western Pennsylvania and the other communities in which we invest."
Dominion and Equitable in March 2006 announced a sales agreement for about $970 million plus adjustments to reflect capital expenditures and changes in working capital (see NGI, March 6, 2006). The Pennsylvania Public Utility Commission approved the sale of Dominion Peoples in April 2007 (see NGI, April 16, 2007). Approval of the Dominion Hope sale is still pending before the West Virginia Public Service Commission.
The Federal Trade Commission (FTC) opposed the sale in Pennsylvania. On May 14, 2007 a federal judge ruled against the FTC's request for an injunction to prevent the Dominion Peoples sale (see NGI, May 21, 2007). The FTC appealed this ruling to the U.S. Third Circuit Court of Appeals. On June 1, 2007 the Third Circuit granted the FTC's request to enjoin the sale pending the court's decision. The FTC's appeal remains pending before the Third Circuit court.
Dominion Peoples serves about 359,000 homes and businesses in Pennsylvania from its headquarters in Pittsburgh, and Dominion Hope serves about 115,000 homes and businesses in West Virginia from its headquarters in Clarksburg, WV. Together, they serve less than 12% of Dominion's four million electric and natural gas local distribution customer accounts in the Mid-Atlantic and Midwest.
Goldman Sachs will remain as Dominion's financial adviser in any transaction and McGuireWoods LLP will provide legal services.
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