Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) has agreed to acquire the natural gas transmission and storage assets of Dominion Energy (NYSE:D). The all-cash deal values the assets at $9.7 billion and includes the assumption of $5.7 billion in debt.
Berkshire Hathaway will acquire more than 7,700 miles of natural gas pipelines from Dominion, including its 100% interest in Dominion Energy Transmission, the Questar Pipeline, and Carolina Gas Transmission, as well as its 50% stake in the Iroquois Gas Transmission System. Berkshire will also purchase 900 billion cubic feet of natural gas storage assets from Dominion as well as a 25% stake in the Cove Point LNG facility, which is one of six currently operating LNG export terminals in the country.
The transaction will transform Berkshire Hathaway Energy into one of the country's largest natural gas transportation businesses. It will carry 18% of all the interstate natural gas transmission volumes in the country, up from 8%. In commenting on the deal, Warren Buffett said, "we are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business."
Meanwhile, the deal is transformational for Dominion as well. It will significantly reduce the company's debt while returning its focus to its core electric regulated utility operations. The company also plans to rebase its dividend. It will cut the payout from $3.76 per share to $2.50 per share after closing the transaction, which will improve its dividend payout ratio from 85% to 65%, with the latter more in line with the utility sector's leaders. These moves will enhance Dominion's financial foundation, providing it with greater flexibility to invest in expanding its utility business.