Dominion Midstream to Obtain 25.9% Stake in Iroquois Gas

Dominion Midstream Partners, LP DM has entered into an agreement with two gas utilities – National Grid plc NGG and New Jersey Resources Corp. NJR – to acquire their combined interest in Iroquois Gas Transmission System, L.P., a limited partnership of five U.S. and Canada based energy companies that operate a 416-mile interstate natural gas pipeline. The transaction is subject to clearance under the Hart-Scott-Rodino Act.

Dominion Midstream will issue roughly 8.6 million of its common units with an agreed-upon value of approximately $286.5 million in exchange of National Grid and New Jersey Resources’ collective interest of 25.93% in Iroquois Gas Transmission. The rest of the ownership in Iroquois Gas Transmission is held by Dominion Resources, Inc.’s D wholly owned subsidiary, Dominion Gas Holdings, LLC, and is not intended to be acquired by Dominion Midstream.

Of the total units to be issued by Dominion Midstream, about 6.8 million units (approximate agreed-upon value of $225.4 million) would be issued to National Grid and the remaining 1.8 million units ($61.1 million) will be given to New Jersey Resources. However, these units are subject to certain transfer restrictions and conditions.

Dominion Midstream already holds an equity interest in the Cove Point Liquefaction project which when combined with the 25.93% interest in Iroquois Gas Transmission will result in an annual cash distribution growth rate of 22% through 2016.

The partnership recently reported second-quarter 2015 earnings of 26 cents per unit beating the Zacks Consensus Estimate by a penny. The partnership increased its quarterly cash distribution by 7% year over year to 18.75 cents per unit.

Dominion Midstream was formed by Dominion Resources in 2014 to own and operate natural gas import, storage, regasification, transportation and related assets in response to the shale gas boom in the U.S.

Dominion Midstream Partners currently has a Zacks Rank #3 (Hold).

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