Warren Buffett’s Berkshire Hathaway finally pulls the trigger.
The conglomerate spends $ 4 billion to buy natural gas transfer and storage assets for Dominion Energy. Including the assumption of debt, the deal amounts to almost $ 10 billion. It is the first major acquisition from Berkshire since the coronavirus pandemic and subsequent market collapse in March.
At his annual shareholders’ meeting in May, Buffett revealed that Berkshire had built a record $ 137 billion deal when the financial market went down, and that he had not seen many opportunistic deals, despite the stock market̵
“We haven’t done anything because we don’t see anything attractive to do,” Buffett said at the time, suggesting that the rapid measures taken by the Federal Reserve this year meant companies could have more access to funding in the public markets than they could during the financial crisis of 2008 and 2009.
“If we really liked what we saw, we would, and it will happen someday,” Buffett said in May.
For Dominion, the movement is one of the series it takes to turn into a purely game-regulated utility company that focuses on clean energy production from wind, solar and natural gas. After the sale, Dominion estimates that 90% of its future operating profit comes from its utility companies that supply energy to more than 7 million customers in states such as Virginia, North and South Carolina, Ohio and Utah.
Dominion also announces that it is canceling the Atlantic Coast Pipeline project with Duke Energy. The $ 8 billion project has been faced with increased regulatory scrutiny and delays that have estimated costs and cast doubt on its financial feasibility.
As a result of the sale and its streamlined operations, Dominion warns that they now expect their operating profit for 2020 to be $ 3.37 to $ 3.63 per share. Its previous guidance was for $ 4.25 to $ 4.60 per share. The company also plans to reduce its dividend during the fourth quarter to 63 cents per share, from 94 cents a share it paid out in each of the first two quarters of the year and that it expects to pay out for the third quarter.
Dominion currently pays 85% of its operating profit, but after the transaction, the company is aiming for a payout of 65%, which it says is more in line with its peers.
For Berkshire, the movement greatly increases its footprint in the natural gas industry. With the acquisition, Berkshire Hathaway Energy will carry 18% of all intergovernmental natural gas transmission in the United States, up from 8% currently.
Under the terms of the transaction, Berkshire Hathaway Energy will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission and 50% of the Iroquois Gas Transmission System. Berkshire will also acquire 25% of Cove Point LNG, a liquefied natural gas export, import and storage facility, one of only six LNG export terminals in the United States
Berkshire Energy pays $ 4 billion in cash for the assets and takes on $ 5.7 billion in debt. Dominion plans to use about $ 3 billion of after-tax revenue to repurchase its shares later this year.
The deal is subject to regulatory approval and is expected to close during the fourth quarter of this year.