Blog Post

By: Thomas Holst

Note: The opinions expressed are those of the author alone and do not reflect an institutional position of the Gardner Institute. We hope the opinions shared contribute to the marketplace of ideas and help people as they formulate their own INFORMED DECISIONS™.

Aug 14, 2020 – Warren Buffet’s Berkshire Hathaway acquired Dominion Energy’s interstate natural gas transmission and storage assets in a $10 billion deal featuring two active players in Utah’s energy market. First, Berkshire Hathaway Energy’s PacifiCorp utility provides electricity to 915,000 customers in Utah. Second, Dominion Energy provides natural gas to 1 million customers in Utah, Wyoming, and Idaho.

For Berkshire Hathaway, the $10 billion asset acquisition in early July was its largest since 2016.

Does the deal affect Dominion Energy’s local utility operations? No. Dominion Energy will continue to use its local distribution network to supply natural gas to customers in the Intermountain West.

How did the investment community react to the Berkshire-Dominion deal? In the month following the deal announcement, Dominion Energy share prices rose 9.5%, Berkshire Hathaway B shares 12%.

Dominion Energy, a Virginia-based company, will focus on its utility business that provides energy to 7 million customers in 20 states. To illustrate this point, over 90% of future Dominion operating earnings will come from its utility business. In becoming a pure play utility company regulated by state public utility commissions, Dominion provides steady income to investors.

With this deal, Berkshire’s energy footprint expands to transporting 18% of interstate natural gas movements. In addition, Berkshire becomes operator of the Cove Point (Maryland) export terminal for liquefied natural gas (LNG), one of just six LNG export terminals in the U.S that are in service or under construction.

Many business deals have a perceived winner and loser. How can this deal be good for both companies?

For Dominion Energy, the Berkshire deal coincided with Dominion’s announcement to cancel its long-delayed $8 billion Atlantic Coast Pipeline (ACP) project with Duke Energy. The ACP faced permitting delays and litigation over plans to bury the proposed pipeline underneath sections of the Appalachian Trail. Dropping the ACP project allows Dominion to focus on its core utility business.

For Berkshire Hathaway, which has a large cash balance ($137 billion), the Dominion deal erases doubts about Berkshire’s ability to find and structure attractive acquisitions. Berkshire Hathaway does not issue dividends to shareholders, but relies on increasing shareholder value by the quality of its large portfolio, ranging from insurance to household staples to railroads. After a three-year hiatus from acquiring new businesses, the Dominion deal signals a restart of Berkshire adding to its investment portfolio.

For Utahns, this deal highlights the quality assets and business discipline of Dominion Energy and Berkshire Hathaway Energy.

Thomas Holst is the senior energy analyst at the Kem C. Gardner Policy Institute.