Dominion Midstream Partners, LP has entered into agreements with affiliates of National Grid plc and New Jersey Resources Corporation, to acquire their ownership interests in Iroquois Gas Transmission System, L.P. in exchange for the issuance of approximately 8.6 million common units in Dominion Midstream – having an agreed-upon value of approximately US$286.5 million.
As part of the agreements, National Grid and New Jersey Resources would contribute their combined 25.93% ownership interests in Iroquois to Dominion Midstream in exchange for newly issued Dominion Midstream common units. Dominion Midstream has no plans to acquire the ownership interest in Iroquois currently held by Dominion Gas Holdings, LLC – a wholly owned subsidiary of Dominion Resources, Inc.
Issuing the units
Under these agreements, approximately 6.8 million units (representing approximately US$225.4 million at the agreed-upon unit price) would be issued to National Grid, and approximately 1.8 million units (representing approximately US$61.1 million at the agreed-upon unit price) would be issued to New Jersey Resources.
National Grid and New Jersey Resources have agreed to certain transfer restrictions applicable to such units including, with certain exceptions, a general one year lockup period, and would be granted certain registration rights and piggyback registration rights with respect to future Dominion Midstream equity offerings. No public market issuance of units is planned in connection with these transactions.
Comments from Dominion
Thomas F. Farrell II, chairman, president and chief executive officer of Dominion Resources and Dominion Midstream GP, LLC, stated: "This is an excellent example of what we have laid out as our core strategy since Dominion Midstream's IPO – that is, to achieve best-in-class growth through the acquisition of high-quality, stable, regulated midstream gas infrastructure. Dominion knows Iroquois well, and Dominion Midstream is pleased to acquire a stake in this well-run, safety-conscious pipeline system. We also welcome National Grid and New Jersey Resources as partners in Dominion Midstream."
The Iroquois partnership
Iroquois Gas Transmission System, L.P., is a Delaware limited partnership that owns and operates a 416 mile, FERC-regulated natural gas transmission pipeline extending from the Canada-US border near Waddington, N.Y., through New York and Connecticut to South Commack, N.Y., on Long Island and Hunts Point, N.Y., in the Bronx.
The partnership expects that cash flows associated with Dominion Midstream's existing preferred equity interest in Cove Point, ownership of Dominion Carolina Gas Transmission (acquired in April 2015), and the Iroquois interests acquired from National Grid and New Jersey Resources will be sufficient to support annual cash distribution growth at Dominion Midstream at the targeted rate of 22% through 2016. The purchase price equates to a 9.8x multiple of estimated 2015 EBITDA.
The closing of both transactions is subject to clearance under the Hart-Scott-Rodino Act.
Edited from press release by Stephanie Roker