Energy Business

Dominion MLP IPO Filing All About LNG Exports

Paul Ausick

CovePointLNG
Source: Dominion Resources Inc.
Dominion Resources Inc. (NYSE: D) announced Monday morning that its wholly owned subsidiary Dominion Midstream Partners L.P. has filed a Form S-1 with the U.S. Securities and Exchange Commission (SEC) for an initial public offering of common units in a master limited partnership (MLP). The number of common units to be sold and the price range have not yet been determined. The new MLP expects to apply for a listing on the New York Stock Exchange under the ticker symbol DM.

Initially Dominion Midstream’s assets will include all the outstanding preferred equity interests in the Cove Point LNG import and regasification plant on Maryland’s Chesapeake Bay coast and a 136-mile pipeline that connects the Cove Point plant to onshore interstate pipelines.

But the big deal is the company’s application to construct an LNG liquefaction plant at Cove Point with the purpose of exporting LNG. The proposed $3.8 billion project received conditional approval from the U.S. Department of Energy last September to export 770 million cubic feet of liquefied natural gas per day. Other reviews and permits still need to be completed. The company expects the plant to be operational by late 2017.

According to the filing, Dominion Midstream has reached long-term agreements with a Japanese joint venture between Sumitomo and Tokyo Gas and India’s GAIL to take all the new liquefaction plant’s production once the plant is placed into service.

The only LNG liquefaction plant so far approved in the United States is the Sabine Pass terminal in the Gulf of Mexico, which Cheniere Energy Partners L.P. (NYSEMKT: CQP) expects to have in operation by the end of 2015.

Dominion Midstream should also anticipate a burst of environmental protest against the plan. Environmental groups energized by their success at delaying — and possibly killing — the Keystone XL pipeline have taken aim at the proposed liquefaction plant.

As is common with MLP spin-offs, Dominion will retain 100% ownership of the general partner of Dominion Midstream and 100% of the incentive distribution rights. Dominion will also retain a majority of the common units in the new MLP.

Shares of Dominion’s stock traded down 0.8% at $70.49 in the first hour of Monday trading. Its 52-week range is $53.79 to $72.22.