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Dominion Midstream to acquire Questar Pipeline

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World Pipelines,

Dominion Midstream Partners, LP and Dominion Resources, Inc. have recently announced that it has begun an agreement under which Dominion Midstream will acquire Questar Pipeline, LLC for consideration of approximately US$1.725 billion.

Dominion Midstream intends to finance the acquisition through the following:

  • Dominion Midstream's assumption of Questar Pipeline's US$435 million of outstanding indebtedness.
  • Equity offerings.
  • A US$300 million term loan provided by a group of banks that will allow Dominion Midstream to repay an existing term loan currently provided by Dominion.

the equity offerings mentioned above include an underwritten public offering of Dominion Midstream common units representing limited partner interests in the partnership; Commitments received from a group of investors that is led by Stonepeak Infrastructure Partners for US$137.5 million of common limited partner units and up to US$600 million of convertible preferred units representing limited partner interests in the partnership that are to be issued privately; and common units and preferred units that are to be issued to Dominion.

Upon closing, the acquisition of Questar Pipeline – which owns and operates the Federal Energy Regulatory Commission-regulated natural gas transmission and storage assets in Colorado, Utah and Wyoming – will be immediately accretive to Dominion Midstream's distributable cash flow and supportive of the partnership's intention to grow distributions to unitholders at a compounded annual growth rate of 22%/y.

the deal is also expected to more than double Dominion Midstream's existing adjusted EBITDA, thus obviating the partnership's need to acquire additional assets or issue additional equity to meet its annual distribution growth targets until 2Q18.

The Dominion board of directors and the board of directors and Conflicts Committee of Dominion Midstream GP, LLC, the general partner of Dominion Midstream, have approved the transaction.

Thomas F. Farrell II, Chairman, President and CEO of Dominion and Chairman and CEO of Dominion Midstream, said: "Dominion Midstream's planned acquisition of Questar Pipeline and related financing have been anticipated as part of the financing structure of the Dominion-Questar Corporation combination since it was announced in February 2016. The capital generated from the Questar Pipeline dropdown will allow Dominion to pay down debt while supporting its earnings and dividend growth targets.

The transaction expected to close on 1 December 2016.

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