Item 1.01 Entry into a Definitive Material Agreement.
Proposed Sale of 50% Non-controlling Interest in Coastal Virginia Offshore Wind Commercial Project
As previously reported, 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, a Delaware limited liability company (Investor), an affiliated investment vehicle of Stonepeak Partners LLC (Stonepeak) entered into an Equity Capital Contribution Agreement (the Contribution Agreement) in connection with the development of the Coastal Virginia Offshore Wind commercial project (CVOW) (the Transaction). In connection with the closing of the Transaction, Virginia Power will form a new limited liability company, OSW Project LLC (OSW), and at closing, Virginia Power and Investor will enter into a Limited Liability Company Agreement (LLC Agreement) that will, among other things, provide for Virginia Power to contribute all of its rights, title and interest in all of the assets relating to CVOW (except for certain specified contracts) to OSW. Pursuant to the terms of the Contribution Agreement, Investor will contribute cash in a net amount representing 50% of the CVOW construction costs incurred through closing less an initial withholding of $145 million to OSW, which is expected to be approximately $3 billion. In exchange, each of Virginia Power and Investor will receive a 50% interest in OSW. Virginia Power will retain full operational control of the construction and operations of CVOW, while Investor will have customary minority interest rights. As an inducement for Virginia Power to enter into the Contribution Agreement, Stonepeak entities entered into an equity commitment letter and a debt commitment letter committing to invest cash for the purpose of funding certain of Investor’s obligations.
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 certain other third parties 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.
The Contribution Agreement may be terminated, at any time prior to the closing, under certain conditions, including: (i) by mutual written consent of the parties; (ii) by either party, if the closing has not occurred on or before the termination date; (iii) by either party, as the case may be, prior to the closing upon certain material breaches or failures to perform any of the representations, warranties, covenants or agreements by the other party; (iv) by either party prior to the closing in the event of a final and non-appealable law or order restraining, enjoining or otherwise prohibiting the closing in any competent jurisdiction. Investor has agreed to pay to Virginia Power a termination fee of $200 million under certain conditions. As an inducement for Virginia Power to enter into the Contribution Agreement, Stonepeak delivered to Virginia Power a limited guaranty to guarantee for the benefit of Virginia Power the due and punctual payment of any termination fee, including related costs upon termination, owed by Investor.
The Contribution Agreement contains customary representations and warranties by Virginia Power and Investor. The representations and warranties of each party set forth in the Contribution Agreement have been made solely for the benefit of the other party and their respective affiliates to the Contribution Agreement, and such representations and warranties should not be relied on by any other person. In addition, such representations and warranties (a) have been qualified by disclosure schedules that the parties have delivered in connection with the execution of the Contribution Agreement, (b) are subject to the materiality standards set forth in the Contribution Agreement, which may differ from what may be viewed as material by investors, (c) in certain cases, were made as of a specific date, and (d) may have been used for purposes of allocating risk between the respective parties rather than establishing matters of fact. Accordingly, no person should rely on the representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the execution of the Contribution Agreement. The Contribution Agreement also contains customary covenants, including that certain activities relating to the construction of CVOW require the consent of Investor prior to closing.
The LLC Agreement (when executed at closing), among other things, will provide for additional capital contributions, cash distributions, governance rights, transfer and exit rights and other arrangements for OSW from
