A utility holding company recently launched a sale process for several retail gas marketing businesses in the U.S., prompting speculation about potential buyers.

The businesses for sale are unregulated gas distribution subsidiaries of Dominion Energy, including those in the Southeast that Dominion came to own as a result of its $14.6 billion acquisition of SCANA Corp., says a deal watcher. The SCANA acquisition closed in January.

Also on the block are Dominion's legacy gas retail operations in unregulated markets in Ohio and Pennsylvania.

As Dominion's financial adviser, Barclays Capital opened the bidding last week, says the deal watcher.

A spokesperson for Barclays in New York declined to comment and a spokesperson for Dominion in Richmond, Va., did not respond to an inquiry by press time.

Dominion reports earnings for SCANA and its operating companies, which include utilities South Carolina Electric & Gas Co. and Public Service Co. of North Carolina as well as deregulated gas marketer SCANA Energy Marketing, in a segment called Southeast Energy Group. The company's other operating segments are Power Delivery, Power Generation and Gas Infrastructure.

However, the company is in the process of implementing an alternative breakdown structure that would include a segment called gas distribution. This segment generated $370 million of Ebitda in the first quarter of 2019.

The sale process has led to speculation among financiers about the identities of the bidders that may toss their hats into the ring. 

“Somebody like Exelon that has a big merchant retail business and trades in their Constellation portfolio. They’d be the first ones that come to mind,” says a project finance banker.

"Exelon continually evaluates strategic opportunities to add value for our shareholders and customers, including mergers and acquisitions," says a spokesperson for Exelon in Baltimore, while declining to comment on whether the Dominion gas business was one of them.

"All the IPPs have been buying up power retail businesses but I’m not sure how many are interested in gas retail that’s being sold,” says the project finance banker.

For instance, NRG Energy recently signed a deal to acquire Stream Energy’s retail book for $300 million plus working capital, in an all-cash transaction that valued the business at about 4.6 times adjusted Ebitda (PFR, 5/20).

Exelon, meanwhile, reached a deal to acquire First Energy Solutions' retail and wholesale load-serving business last July, but the $140 million sale fell through in January after FES's creditors decided to hold onto the retail book, prompting litigation.

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