Warren Buffett finally found something that caught his eye. This is Berkshire Hathaway’s first significant purchase since the Coronavirus pandemic hit during March, and Warren Buffett has said back in May that he “hasn’t seen anything that attractive”, hence Berkshire Hathaway was sitting on a record of US$137 billion in cash. After that, the company made headlines for selling all its airline stocks, signalling a big shift in the industry and underlining Buffett’s conviction that travel will be slow to recover.
Now, the conglomerate is spending $4 billion to buy the natural gas transmission and storage assets of Dominion Energy. Including the assumption of debt, the deal totals almost $10 billion.
Berkshire Hathaway Energy will now carry 18% of all interstate natural gas transmission in the United States, up from 8% currently.
This purchase will significantly up Berkshire Hathaway’s exposure in the natural gas business.
Following the sale, Dominion expects that 90% of its future operating earnings will come from its utility companies that provide energy to more than 7 million customers in states like Virginia and Ohio. Dominion will focus on clean energy production from wind, solar and natural gas.
The company has also announced the cancellation of its Atlantic Coast Pipeline project with Duke Energy. The $8 billion project has faced increasing regulatory scrutiny and delays.
Berkshire Hathaway Energy will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission, and 50% of Iroquois Gas Transmission System. This move signals that Berkshire is bullish on an industry that is facing more scrutiny as it aims to shift away from fossil fuels.
“It’s not something that’s going to move the needle from a balance sheet standpoint, but it’ll produce several hundred million dollars a year in net income to Berkshire,” said Darren Pollock, a portfolio manager at Cheviot Value Management (who invests in Berkshire shares) to Bloomberg.
