BofA Securities analysts valued the equity of the three natural gas utilities Dominion Energy Inc sold to Enbridge at $12 billion, which is more than the $8.7 billion after-tax cash consideration the company agreed to receive.
In a note to clients, they called the deal’s valuation “disappointing,” while reiterating their ‘Underperform’ rating and $44 per share price objective on Dominion Energy, calling the stock "expensive."
The utilities sold consist of East Ohio Gas Co, Questar Gas and Public Service Company of North Carolina.
"While North Carolina commanded a premium valuation, Ohio and Questar had weak valuations, and Dominion appears to be excluding the pension income from its 16.3x 2023 and 16.0x operating P/E (price-to-earnings) ratios," the analysts wrote.
They added that materially weaker North Carolina and Questar earnings imply that the core businesses were degrading far more rapidly than the analysts expected, which they believe is a cautious sign for the retained utilities in Virginia and South Carolina that theoretically face the same dynamics.
Analysts at BofA also called Dominion’s delay of its business review conclusion to 4Q 2023 from September 2023, a “disappointing development,” with management stating that further asset sales are being evaluated including the offshore wind assets.
Shares of Dominion Energy slipped 1.7% to $46.02 in late-afternoon trading on Wednesday and have fallen 27% year to date.
Contact Sean at sean@proactiveinvestors.com