Global energy demands are ever-increasing, the global population only continues to grow, and quality of life improvements see the development of a myriad of technologies and solutions which escalate energy usage as they are integrated throughout every level of society. In the IEA World Energy Outlook 2022 Report, the International Energy Agency (IEA) reported that energy consumption will increase by a further 50% between 2021 and 2040. As the rising demand for energy remains uncurbed, it is integral that natural gasses, which make up a significant amount of total energy demands, continue to remain available to make up the difference despite the move toward ‘green’ products such as electric vehicles and renewables.
Earlier this week, this market saw some upheaval as Dominion Energy agreed on the sale of its 50% stake in the Cove Point liquefied natural gas facility, situated in Maryland’s Chesapeake Bay, to a unit of Warren Buffett’s Berkshire Hathaway. Located in Lusby, Maryland, about 60 miles (97 km) southeast of Washington, D.C., the Cove Point energy facility retains a storage capacity of 14.6 billion cubic feet. It provides liquefied natural gas to supplant coal-burning power plants and supports energy needs in 28 countries.
The sale, which was valued at $3.3 billion, will provide Berkshire Hathaway Energy with a 75% ownership stake upon closing, having already possessed a 25% stake as they previously operated the facility. While the remaining 25% share is owned by a unit of Brookfield Infrastructure Partners.
In a statement by Robert Blue, Dominion’s chief executive, he stated that the facility was a “non-core” business, and selling it would free the Richmond, Virginia-based company to focus on state-regulated utility operations.
Dominion also expects to receive a $200 million payout from the termination of an array of interest-rate derivatives and would be owed a further $150 million termination fee from Berkshire if the deal failed to close under specified circumstances. Dominion aims to use the culminated compensation to repay accumulated debts after the transaction is closed post receiving federal regulatory approval, which is expected by the end of 2023.
During this timeframe, global natural gas consumption is expected to grow at an annual average rate of 0.8%, according to the IEA, providing a considerable downward revision of their previous forecast from the year prior, which anticipated a CAGR of 1.7%.
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