Item 7.01 Regulation FD Disclosure.
On February 22, 2024, the Company issued a press release and presentation related to the matters described in this Current Report on Form 8-K, copies of which have been furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference. The information in this Item 7.01, Exhibit 99.1 and Exhibit 99.2 furnished herewith shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such a filing.
Item 8.01 Other Events.
On February 21, 2024, Virginia Electric and Power Company (Virginia Power), a wholly-owned subsidiary of Dominion Energy, Inc. (Dominion Energy), and Dunedin Member LLC (Investor), an affiliated investment vehicle of Stonepeak Partners LLC (Stonepeak) entered into an Equity Capital Contribution Agreement (the Contribution Agreement). Stonepeak is one of the world’s largest infrastructure investors with over $61 billion in assets under management and an extensive track record of investment in large and complex energy infrastructure projects.
Virginia Power is currently developing the Coastal Virginia Offshore Wind commercial project (CVOW). The 2.6-gigawatt CVOW, the largest offshore wind farm in the U.S., is on schedule to generate enough clean, renewable energy to power up to 660,000 homes once fully constructed in late 2026. CVOW will consist of 176 turbines and three offshore substations in a nearly 113,000-acre lease area off the coast of Virginia Beach. Under the terms of the Contribution Agreement, Virginia Power will contribute CVOW to a proposed limited liability company, OSW Project LLC (OSW), and the Investor will contribute cash in exchange for a 50% non-controlling interest. Virginia Power will retain full operational control of the construction and operations of CVOW, while Investor will have customary minority interest rights.
The closing of the transaction is subject to the satisfaction of certain customary closing conditions described in the Contribution Agreement, including, receipt of required approvals from the State Corporation Commission of Virginia and the North Carolina Utilities Commission and certain consents from the Bureau of Ocean Energy Management and other regulatory agencies regarding the assignment of certain contracts and permits needed for the partnership post-closing. The parties currently expect for the transaction to close by the end of 2024 after all required approvals and consents have been received.
At closing, Virginia Power expects to receive proceeds of approximately $3 billion, representing 50% of the CVOW construction costs incurred through closing less an initial withholding of $145 million. Following closing of the transaction, Virginia Power and Investor will each contribute 50% of the remaining capital necessary to fund construction of CVOW, provided the total construction costs, excluding financing costs, do not exceed $11.3 billion (which is $1.5 billion more than the current budget for CVOW). Investor will have the option to make additional capital contributions if the total costs, excluding financing costs, are between $11.3 billion and $13.7 billion, with Virginia Power contributing between 67% and 83% of such contributions. If Investor chooses not to make capital contributions, Virginia Power will receive an increased ownership percentage of OSW for any contributed capital.
If the final construction costs of CVOW are under $9.8 billion, excluding financing costs, Virginia Power will receive $100 million of the initial withholding, but if the final construction costs of CVOW are over $9.8 billion, the amount of the initial withholding received by Virginia Power will be adjusted downwards and no withheld amounts will be received if the total costs, excluding financing costs, exceed $11.3 billion. CVOW is currently on time and on budget.
Virginia Power will use 100% of the net proceeds to reduce debt at the parent level. The transaction is expected to improve Dominion Energy’s estimated 2024 consolidated funds from operations to total debt ratio by approximately 1% and reduce the overall financing needs during construction of CVOW.