Berkshire Hathaway has reached an agreement to buy Dominion Energy’s natural gas transmission and storage business for $4 billion. Including debt, the deal has an enterprise value of approximately $9.7 billion, the companies said in a statement.
Its Berkshire Hathaway’s first major deal since the COVID-19 crisis.
During the company’s annual shareholder meeting in May, Chairman Warren Buffett said Berkshire Hathaway had built up a record $137 billion in cash to pursue acquisitions.
“We have not done anything because we don’t see anything that attractive to do,” Buffett said at the time. “If we really liked what we were seeing, we would do it, and that will happen someday.”
The deal includes more than 7,700 miles of natural gas transmission lines, 900 billion cubic feet of operated natural gas storage, and partial ownership of a liquefied natural gas export, import, and storage facility. It does not include the Atlantic Coast Pipeline.
Dominion announced it is cancelling the $8 billion project with Duke Energy as regulatory scrutiny and delays raise doubts about its feasibility. The company has said it is transitioning to a utility company focused on clean energy.
Dominion said it expects 90% of its earnings to come from utility companies. Its goal is to reduce the percentage operating earnings it pays out to 65%, down from its current payout of 85%.
After the deal, Berkshire Hathaway Energy will carry 18% of all interstate natural gas transmission in the U.S., up from 8% today.
Berkshire’s Class A shares are down nearly 20% this year but rose more than 2% on the news. Dominion Energy shares fell 6.7%.
The deal is expected to close in the fourth quarter of 2020.
“I’m inspired to see that, given that he’s bearish, he’s still willing to make acquisitions where he thinks it makes sense and where it meets Berkshire’s hurdle points,” Darren Pollock, a portfolio manager at Cheviot Value Management, said. Pollock’s fund invests in Berkshire Hathaway shares.