Dominion Energy said Oct. 5 it would sell its Questar Pipelines unit to Southwest Gas Holdings Inc. in a nearly $2 billion deal that includes the assumption of $430 million in debt. The deal follows the collapse of the sale in 2020 of Questar to Berkshire Hathaway, and it drew scathing criticism from Carl Icahn, who owns a stake Southwest Gas.

In July, Dominion was forced to terminate its deal to sell Questar to Berkshire Hathaway Energy because approval from the Federal Trade Commission was in doubt. The uncertainty stemmed from provisions in the Hart-Scott-Rodino Antitrust Improvements Act of 1976. 

Berkshire Hathaway agreed to buy Questar in July 2020 as part of a $10 billion purchase of Dominion’s natural gas and storage assets. The transaction followed Dominion’s decision to cancel its Atlantic Coast Pipeline, an $8 billion project that would have moved natural gas from West Virginia to points in Virginia and North Carolina.

The deal with Southwest Gas is an improvement for Dominion over the terms of the sale to Berkshire Hathaway. Southwest Gas will pay $1.975 billion plus assume $430 million in debt, while in the previous deal Berkshire would have only paid $1.3 billion and the assumption of debt.

Bloomberg reported that Icahn, who disclosed his 4.9% stake in Southwest on Oct. 5, called the deal a mistake in a letter to the company’s board of directors.

“During the past few years, management of SWX has made a number of egregious errors at the expense of shareholders,” Icahn wrote. “The purchase of Questar you are currently being rumored to make at the price you are willing to pay will make all past errors pale in comparison.” 

Questar Pipelines consists of FERC-regulated, long-term contracted, transportation and underground storage assets in Utah, Wyoming and Colorado, together with related services and processing entities. The transaction is expected to close in fourth-quarter 2021, subject to regulatory approvals.

“This transaction represents another significant step in our evolution as a company, allowing us to focus even more on fulfilling the energy needs of our utility customers and continuing growth of our clean-energy portfolio, including development of the largest offshore wind farm in North America,” Robert M. Blue, Dominion Energy chair, president and CEO, said in a statement announcing the deal.

Dominion said the announcement does not change its existing financial guidance. Questar Pipelines will continue to be accounted for as discontinued operations.

Proceeds from the sale will be used by Dominion Energy to reduce parent-level debt, including retiring the 364-day term loan that was entered into in July, which Dominion Energy previously used to repay the approximately $1.3 billion transaction deposit made by Berkshire Hathaway Energy. Proceeds will also be used to support Dominion Energy’s regulated capital plan, one of the largest decarbonization programs in the industry.

McGuireWoods LLP served as legal counsel to Dominion Energy. Barclays acted as the company’s financial adviser. 

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