Dominion Resources on Thursday said it reached a deal to sell its natural gas utilities in Pennsylvania and West Virginia to Pittsburgh, PA-based Equitable Resources for an estimated $970 million. The transaction, which is expected to be completed either late this year or in early 2007, will make Equitable the largest gas service provider in Pennsylvania and second largest in West Virginia.
Under the agreement, the Richmond, VA-based energy company said it will sell Dominion Peoples, which serves about 357,000 households and businesses in Pennsylvania from its headquarters in Pittsburgh, and Dominion Hope, which serves 116,500 households and businesses in West Virginia from its headquarters in Clarksburg, WV. The two utilities combined serve less than 12% of Dominion's four million electric and natural gas utility customers in the Mid-Atlantic and Midwest regions, Dominion said.
Dominion Peoples and Dominion Hope will be integrated into the operations of Equitable Gas Co., a division of Equitable Resources. The addition of 475,000 gas utility customers will triple Equitable's customer base to more than 750,000, according to the company. The transaction also will add 33 Bcf of gas storage, 936 miles of gathering pipelines and 466 miles of high-pressure transmission lines to Equitable's current natural gas operations in southwestern Pennsylvania and West Virginia.
Dominion Resources picked up the two gas utilities when it acquired Consolidated Natural Gas of Pittsburgh in early 2000. Equitable Resources noted that the transaction will return the Peoples' utility to Pittsburgh ownership.
Equitable said it expects to add up to 200 new jobs in the region to replace part of Dominion's support operations in Ohio and Virginia, which will remain with Dominion's other business units.
The agreement is subject to the approval of regulators in Pennsylvania and West Virginia, as well as requires approval under the federal Hart-Scott-Rodino Act, according to the company.
"The acquisition is consistent with our growth strategy and will benefit customers, shareholders and the region," said Equitable Resources' President and CEO Murry S. Gerber.
Dominion said proceeds from the sale will be used for general corporate purposes, including paying down debt. By applying 50% of the after-tax proceeds to repay debt and 50% to buy back stock at Dominion's current share price, the effect of the transaction would be slightly accretive to earnings, it noted. However, if Dominion management should choose to use a greater portion of the proceeds to pay down debt, the result may be mildly dilutive to earnings.
"We continually review our assets to determine if they fit strategically and will provide the commensurate return on invested capital. In reviewing Dominion Peoples and Dominion Hope, we determined that these businesses might be of greater value to another owner," said Dominion President and CEO Thomas F. Farrell II.
"We received a number of unsolicited expressions of interest in the two businesses. We pursued that interest through a competitive auction process that resulted in the sale agreement. We look forward to working with Equitable to make this a smooth transition for everyone involved."
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