Warren Buffett bets big with $10 billion Dominion Energy deal—What it means

Warren Buffett’s Berkshire Hathaway is finally pulling the trigger.

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. It’s Berkshire’s first major purchase since the coronavirus pandemic and subsequent market collapse in March.

At his annual shareholder meeting in May, Buffett revealed that Berkshire had built up a record $137 billion cash hoard as financial markets tanked and that he hadn’t seen many favorable deals, despite the stock market’s swoon.

“We have not done anything because we don’t see anything that attractive to do,” Buffett said at the time, suggesting that the quick actions taken by the Federal Reserve this year meant companies could get more access to financing in the public markets than they could during the financial crisis in 2008 and 2009.

“If we really liked what we were seeing, we would do it, and that will happen someday,” Buffett said in May.

For Dominion, the move is part of its transition to a pure-play regulated utility company that focuses on clean energy production from wind, solar and natural gas. 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, North and South Carolina, Ohio and Utah.

Dominion also announced that it is cancelling its Atlantic Coast Pipeline project with Duke Energy. The $8 billion project has faced increasing regulatory scrutiny and delays that have ballooned projected costs and raised doubts about its economic feasibility.

As a result of the sale and its streamlined operations, Dominion is warning that it now expects its operating earnings for 2020 to be $3.37 to $3.63 a share. Its previous guidance was for $4.25 to $4.60 a share. The company is also planning to cut its dividend in the fourth quarter to 63 cents a share, from the 94 cents a share that it paid out in each of the first two quarters of the year and that it anticipates paying out for the third quarter.

Currently, Dominion pays out 85% of its operating earnings, but post transaction the company is targeting an operating earnings payout of 65%, which it says is more in line with its peers.

For Berkshire, the move greatly increases its footprint in the natural gas business. With the purchase, Berkshire Hathaway Energy will carry 18% of all interstate natural gas transmission in the United States, up from 8% currently.

Under the deal, Berkshire Hathaway Energy will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission and 50% of Iroquois Gas Transmission System. Berkshire will also acquire 25% of Cove Point LNG, an export-import and storage facility for liquefied natural gas, one of just six in the U.S.


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[Notjimmymaio]

This is actually a great deal. Dominion needs a way out. Buffett wants to expand Berkshire Energy that operates in middle America to now include the North East. And I am sure he got a great deal as he is holding pretty much all the cards.

[russfolts]

Can we get back to stormy danielle.i believe she has something to spread.

[miyuden]

Funny, everyone in the comments knows better than Buffet.
Fact is, he's just a human. At one point he will be outperformed by others, there will be someone with a much bigger portfolio than Buffet. And we will remember him as the best of his time. And nobody knows when that will be.

I call Ark Invest to surpass Berkshire in the long run. But that's just how I tick.

[p.gilmore]

Bets Big? $10b is 7.3% of CASH. I would hardly call that big.

[Kush]

Give money to your shareholders buffet, we need to eat too

[crystalclean]

Berkshire Hathaway one of the most undervalued stocks at the moment.
Market cap 440 billion
130 billion cash
90 billion Apple stock value
120 billion natural gas assets
80 billion net profit per year
200 billion( minimum )insurance business value
I even given you for free the remaining portfolio witch includes stocks, railroads, diverse manufacturers

[eyewitness]

I don't understand. Roe is 6.28%, p/b value is 2.18, p/e ratio is 34.36, this is based on Morningstar site. The ROE is low and P/E ratio is high, how is it a good investment? I'm so curious.

[BTsNemesis]

If there's one investor out there whose picks aren't bets it is Warren Buffett. So much dumb predictions on this channel and yet you call Buffets pick a bet??
Wtf

[davidpowell]

Is my impression correct: that Dominion sold this part of their business to W.B. for much less than it was worth? In other words as an investment advisor put it: "Dominion got fleeced" ?
wonder whether Buffet called Dominion or did Dominion call Buffet? And was the price set by Buffet?

[potateomine]

ENB and TRP are much much bigger pipeline companies.

[pcefsbx]

Could it be that Buffet no longer values stocks and see a commodity dominated future? If that's truly the case, we are headed for another Great Depression.

[cashflowinvestorspyd]

$D is a BUY for me at this price plus great dividend

[SejalPatelDrSej]

Shll/hyliion is making hybrid natural gas trucks that are net carbon negative

[Martin-seij]

I wonder with Buffets railways and now pipelines if he's just buying the land for future Hyperloop routes? Hyperloop above pipelines and trains below?

[meriliu]

Goodbye Oil.. Welcome Gas & Renewable Energy Era..

[roniquebreauxjordan]

.ahead of the transatlantic cable...well done.

[joshparrott]

Did he use the money he just got from the fed? Berkshire Hathaway got a big boost from the fed; now they buy DE?

[clayannsaid]

He 'll put it out and dbl., his profits, but guess what guys, increase prices. BUFFET IS A CROOK

[OldWorldMethod]

The Natural GAS take is quite brilliant. The blockchain can't make it without GAS.

[siraltitude]

I hope Warren will do what's right and turn the business Green