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Dominion Sets Terms for Cove Point Midstream MLP Offering

Dominion Resources Inc. announced terms earlier this week for its midstream master limited partnership (MLP), which would own the Cove Point liquefied natural gas (LNG) terminal in Maryland. Dominion said it expects to raise more than $400 million in an initial public offering (IPO).

Dominion Midstream Partners LP will offer 17.5 million common units, with an additional 30-day option granting the IPO's underwriters a chance to purchase more than 2.6 million units, priced between $19 and $21, according to a registration statement filed with the U.S. Securities and Exchange Commission on Monday. A date for the launch was not set.

The partnership has been approved to list its units on the New York Stock Exchange under the symbol "DM." The common units being offered represent a 27.4% limited partnership interest in Dominion Midstream, or a 31.5% interest if the underwriters exercise their 30-day option. In that case, Dominion Resources would own the remaining 68.5% interest in the partnership, the company said.

Dominion first proposed the MLP in September 2013 and issued its prospectus in late March (see Shale Daily, April 2; Sept. 13, 2013). The partnership would also include a stake in Blue Racer Midstream LLC, which Dominion shares with a Williams unit to deliver Utica Shale liquids to the Gulf Coast and East Coast markets (seeDaily GPI, Dec. 24, 2012). Dominion Midstream would also own Dominion Transmission, Dominion East Ohio Gas and about a quarter of the Iroquois Pipeline.

Cove Point, which also consists of 136 miles of natural gas pipeline to connect it with interstate lines, is already generating revenue and earnings from annual payments under regasification, storage and transportation contracts. Late last month, however, FERC authorized it to construct an LNG export facility, making it the first East Coast export project to proceed after earning U.S. Department of Energy approval last year (see Daily GPI, Sept. 30; Sept. 12, 2013). Under current plans, the Cove Point export facility could be in service by late 2017, with approval to export up to 5.75 million tons of LNG per year.

Dominion Resources will retain significant midstream assets after the MLP goes public. It currently owns 10,900 miles of natural gas transmission and gathering lines, in addition to 21,900 miles of distribution pipelines and 947 Bcfe of storage capacity.

The MLP will allow Dominion Midstream to acquire some of those assets in the long-run and give it the financing and structure to make other acquisitions in a part of the country where dozens of midstream projects are planned to serve growing volumes of natural gas in the Appalachian Basin (see Shale Daily, July 17).

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