Buffett’s Berkshire Buys Dominion Natural Gas Assets for $ 10 Billion

Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) has announced an agreement to purchase the natural gas transmission and storage assets of public utility Dominion Energy Inc. (D) in a deal currently valued at $ 9.7 billion in total, including a cash payment of $ 4 billion and the assumption of $ 5.7 billion of debt incurred by the Dominion Gas Transmission and Storage segment. Subject to regulatory approvals, the deal is expected to close during the fourth quarter of 2020.

It is Berkshire Hathaway’s latest foray into the energy market, and occurs at a time when the coronavirus pandemic, in addition to a dispute between OPEC members and their allies, leveled energy prices across the complex. . By purchasing Dominion’s assets, Berkshire Hathaway Energy will transport 18% of all interstate natural gas transmission in the United States, compared to 8% today.

What Berkshire Will Get

The agreement would transfer more than 7,700 miles of natural gas transmission lines from Dominion to Berkshire, including approximately 20.8 billion cubic feet per day of transportation capacity, 900 billion cubic feet of natural gas storage operated with 364 billion cubic feet of company-owned working storage capacity, plus partial ownership of a liquefied natural gas export, import, and storage facility.

Additionally, Berkshire Hathaway Energy will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission, plus 50% of the Iroquois gas transmission system. The agreement does not include the Dominion Atlantic Coast pipeline. However, it does include 25% of Cove Point LNG, a liquefied natural gas (LNG) export, import and storage facility in Maryland that is one of only six LNG export facilities in the US Dominion will retain a 50% interest in Cove Point, while Brookfield Asset Management will continue to own 25%.

Berkshire logic

“This important natural gas transmission and storage business has been best operated and managed,” according to Bill Fehrman, Berkshire Hathaway Energy President and CEO. “The acquisition of this portfolio of natural gas assets considerably expands our company’s presence in various eastern and western states, as well as globally, increasing the market reach and diversity of Berkshire Hathaway Energy,” he added.

Domain justification

Thomas F. Farrell II, President, CEO and President of Dominion, said the following about the deal: “This narrowing of focus will also allow us to increase our long-term earnings growth rate guidance by 30 percent. This transaction represents another significant step in our evolution as a company, allowing us to focus even more on meeting the needs of utility customers and positioning ourselves for a brighter and increasingly sustainable future. “

Touching a huge treasure of cash

Berkshire ended the first quarter of 2020 with cash and cash equivalents of $ 137.3 billion, up from $ 128.0 billion in the fourth quarter of 2019. During its last annual meeting in May, in response to a shareholder question about As he planned to deploy his growing treasury of cash, Buffett replied, “We are not in the business of subsidizing companies with [our] shareholder money. “It appears that it has now found a sufficiently attractive deal, in the face of battered energy prices.