Berkshire Hathaway Inc. BRK.B has inked a deal to buy the natural gas transmission and storage assets of utility company Dominion Energy Inc. D. The purchase consideration of $9.7 billion consists of $4 billion in cash and $5.7 billion of assumed debt of the Gas Transmission & Storage segment of Dominion. The acquisition, pending regulatory approvals, is expected to see light in the fourth quarter of 2020.
Berkshire Hathaway now has 18% share of all interstate natural gas transmission in the United States. Through this acquisition, Berkshire Hathaway will get more than 7,700 miles of natural gas transmission lines, including about 20.8 billion cubic feet per day of transportation capacity; 900 billion cubic feet of operated natural gas storage with 364 billion cubic feet of company-owned working storage capacity, along with partial ownership of a liquefied natural gas export, import and storage facility.
Addition of these assets will ramp up Berkshire Hathaway’s natural gas transportation businesses, expand its presence in several Eastern and Western states and boosting Berkshire Hathaway Energy’s market reach and diversity.
Berkshire Hathaway Energy (BHE) will have 100% stake of Dominion Energy Transmission, Questar Pipeline, and Carolina Gas Transmission, plus 50% of the Iroquois Gas Transmission System 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 United States. BHE is a global energy company with subsidiaries that generate, transmit, store, distribute and supply energy. Berkshire currently owns 90.9% in BHE.
U.S. Energy Information Agency estimates that total U.S. working natural gas in storage at May end was about 2.8 trillion cubic feet (Tcf), 18% higher than the five-year (2015–19) average. EIA estimates inventories to increase by 2.1 Tcf from April through October to more than 4.1 Tcf on Oct 31. This acquisition will help BHE capitalize on the opportunity.
Berkshire Hathaway boasts a huge cash pile that helps it make prudent buyouts. The conglomerate ended the first quarter of 2020 with cash and cash equivalents and short-term investments in U.S. Treasury Bills with $137.3 billion, up 7.3% from 2019 end.
Shares of Berkshire lost 21% year to date, compared with the industry’s decline of 20.9%. Growing Insurance business, solid Manufacturing, Service and Retailing, and Finance and Financial Products segments, strategic acquisitions as well as strong capital position should help shares bounce back. The company carries Zacks Rank #4 (Sell).
There have been a host of acquisitions in the insurance space of late, given the significant capital available. Arthur J. Gallagher & Co. AJG acquired Barrett, Liner & Buss, LLC to enhance its employee benefit solutions to public entities and healthcare clients and expand its presence in northern Florida while Brown & Brown BRO acquired Loan Protector Insurance Services.
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