Warren Buffett’s Berkshire Hathaway is finally pulling the trigger.
The conglomerate is spending $ 4 billion to buy Dominion Energy’s natural gas transmission and storage assets. Including debt assumption, the deal totals nearly $ 10 billion. It is Berkshire’s first major purchase since the coronavirus pandemic and the subsequent market crash in March.
At his annual shareholder meeting in May, Buffett revealed that Berkshire had accumulated a record amount of $ 137 billion in cash as the financial market sank, and that he had not seen many opportunistic deals, despite the market’s deep swoon. of values.
“We haven’t done anything because we don’t see anything as attractive,” Buffett said at the time, suggesting that swift action by the Federal Reserve this year meant that companies could have more access to financing in public markets than they could during the crisis. financial of 2008 and 2009.
“If we really liked what we were seeing, we would, and that will happen one day,” Buffett said in May.
For Dominion, the move is one of a series he is taking to transition to a regulated utility company that focuses on producing clean energy from wind, sun, and natural gas. After the sale, Dominion expects 90% of its future operating profit to come from its utility companies that provide power to more than 7 million customers in states such as Virginia, North and South Carolina, Ohio, and Utah.
Dominion simultaneously announces that it will cancel the Atlantic Coast Pipeline project with Duke Energy. The $ 8 billion project has faced increasing regulatory scrutiny and delays that have increased projected costs and raised questions about its economic viability.
As a result of the sale and its streamlined operations, Dominion warns that it now expects its 2020 operating profit to be $ 3.37 to $ 3.63 per share. Your previous guide was $ 4.25 to $ 4.60 a share. The company also plans to cut its fourth-quarter dividend to 63 cents a share, from the 94 cents a share it paid in each of the first two quarters of the year and plans to pay in the third quarter.
Dominion currently pays 85% of its operating profit, but after the transaction the company is targeting a 65% operating profit payment, which it says is more in line with its peers.
For Berkshire, the measure greatly increases its presence in the natural gas business. With the purchase, Berkshire Hathaway Energy will transport 18% of all interstate natural gas transmission in the United States, up from 8% today.
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 six LNG export terminals in the US.
Berkshire Energy will pay $ 4 billion in cash for the assets and assume a debt of $ 5.7 billion. Dominion plans to use around $ 3 billion of after-tax proceeds to buy back its shares later this year.
The deal is subject to regulatory approval and is expected to close in the fourth quarter of this year.
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