Billionaire Buffett’s Energy Unit To Buy Dominion Energy Assets For $4B

Billionaire Warren Buffett’s Berkshire Hathaway (BRK.A) said its energy unit will acquire Dominion Energy’s (D) natural gas transmission and storage business for $4 billion.

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As part of the deal, Berkshire will need to assume $5.7 billion in debt, giving the transaction a $9.7 billion enterprise value. The deal includes over 7,700 miles of natural gas transmission lines, with about 20.8 billion cubic feet per day of transportation capacity and 900 billion cubic feet of operated natural gas storage. The transaction is expected to close in the fourth quarter of this year pending regulatory approvals.

“We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business,” said Buffett, chairman of Berkshire Hathaway.

Berkshire’s energy subsidiary has a $100.8 billion portfolio of locally managed businesses, which aim to provide sustainable energy solutions. As part of the transaction, the energy unit will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission; and 50% of Iroquois Gas Transmission System. The agreement does not include the acquisition of the Atlantic Coast Pipeline.

Additionally, the company will acquire 25% of Cove Point LNG – an LNG export, import and storage facility in Maryland. Dominion Energy, which provides power and gas to 7 million customers in 20 states, will continue to own 50% of Cove Point, with Brookfield Asset Management continuing to own the remaining 25% share. Berkshire’s energy unit will operate the Cove Point facility once the transaction closes. The Cove Point export terminal is one of only six LNG export facilities in the U.S.

Virginia-based Dominion will use the proceeds of the sale to repurchase an estimated $3 billion in common shares, the company said.

Shares in Dominion have surged 16% over the past three months after hitting a low earlier this year. The stock is now trading close to its start-of-the-year level at $82.66 per share as of the close on July 2.

Seaport Global analyst Angie Storozynski last month initiated coverage of the stock with a Buy rating and a $93 price target (12% upside potential), saying that the Virginia Clean Economy Act offers the utility’s subsidiary VEPCO a premium rate base growth over the next 15 years.

Overall, Wall Street analysts are cautiously optimistic on the stock. The Moderate Buy consensus shows 4 Buy ratings versus 7 Hold ratings. In view of the recent share rally, the $85.90 average price target implies a modest 3.9% upside potential over the coming year. (See Dominion stock analysis on TipRanks)