On Sunday, Dominion Energy, one of the largest energy companies in the United States, announced a final agreement to sell virtually all of its assets in the gas transportation and storage segment of Berkshire Hathaway Inc. under a deal valued at $9.7 billion, including its current debt of $5.7 billion.
The deal with Dominion will be Berkshire’s largest acquisition since its acquisition of industrial company Precision Castparts Corp. in 2016.
As of the end of March, Berkshire published a balance of available funds of $137.2 billion in cash.
The company of world-renowned investor Warren Buffett sold almost its entire stake in the largest US airlines in May saying it “does not see anything really attractive” to buy.
Berkshire Hathaway shares have fallen 21% since the beginning of the year. For the first quarter, the company posted a net loss of $49.75 billion, while a similar figure showed a net profit of $21.66 billion a year ago.
The agreement with Dominion confirmed Buffett’s ability to make profitable purchases “in crisis” and the practice of “buying in the bottom line” (when the price is understated and profitable). Natural gas futures prices in the US last month fell to the lowest level in 25 years due to the coronavirus pandemic. The prices have recovered slightly since then.
Under the terms of the agreement, Berkshire Hathaway Energy will acquire 100% of Dominion Energy Transmission, Questar and Carolina, as well as 50% of the Iroquois gas transmission system. Berkshire will also acquire 25% of Cove Point LNG, a liquefied natural gas (LNG) export, import and storage facility, one of six LNG export terminals in the United States.
The agreement is subject to regulatory approval and is expected to be completed in the fourth quarter of this year.
“We are very proud to add such a large portfolio of natural gas company assets to our already strong energy business,” said Warren Buffett commenting on the deal.
The agreement will turn Berkshire Hathaway Energy into one of the country’s largest natural gas transportation companies. It will account for 18% of all natural gas transportation in the country compared to 8% earlier.
Berkshire currently owns 91.1% of Berkshire Hathaway Energy’s energy division, which owns such energy companies as MidAmerican Energy, NV Energy and PacifiCorp, gas pipelines, wind energy assets and electricity companies in the UK and Canada.
In 2019, the energy division accounted for 12% of Berkshire’s operating profit, and its chairman, Greg Abel, is also Berkshire’s vice chairman.
To strengthen its market position, Dominion Energy has recently taken a number of steps to optimize its assets and investments through mergers with Questar Corporation and SCANA Corporation, as well as the sale of Blue Racer Midstream assets. Dominion has also refused to invest in a large eight-billion-dollar project to build a pipeline along the Atlantic coast with Duke Energy. The decision was made with reference to ongoing delays due to growing regulatory control and “cost uncertainty” which cast doubt on the economic viability of the investment.
The Dominion agreement with Berkshire also allows the energy company to achieve its profitability goals and implement a large long-term program to the transition of electricity production to zero carbon emissions.
A number of states, including New York, California and Virginia, the homeland of Dominion, have passed laws requiring utilities to move to zero carbon emissions by 2050.
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