Buffett Finally Strikes
Months of market turmoil had passed before the Oracle of Omaha, Warren Buffett & his firm Berkshire Hathaway decided to make their first large acquisition of 2020.
Berkshire Hathaway, the conglomerate holding company built by billionaire investors Warren Buffett and Charlie Munger, recently made a large acquisition: the natural gas and storage assets of Dominion Energy.
The deal includes roughly 7,700 miles of natural gas storage and transmission pipelines, as well as 900 billion cubic feet of gas storage. These assets substantially augment Berkshire’s already enviable position in the industry.
According to CNN Business, as part of the deal, Berkshire will own outright Dominion Energy Transmission, Carolina Gas Transmission, and Questar Pipeline, and it will also hold a fifty percent stake in Iroquois Gas Transmission System coupled with a twenty-five percent stake in Cove Point, a liquid natural gas shipping facility.
The deal follows the cancellation of the Atlantic Coast Pipeline, a joint project between Dominion Energy and Duke Energy born in 2014 that faced increasingly strong opposition from environmentally conscious groups. Dominion and Duke attributed the cancellation of the project to delays, litigation, and unanticipated rises in costs.
With the failure of the Atlantic Coast Pipeline project, Dominion Energy has resolved to direct its efforts toward cleaner forms of energy, including renewable sources like wind and solar.
According to Forbes, Dominion aims to invest $55 billion into low-carbon energy sources by the year 2035. Moreover, just over the next decade, Dominion intends to invest $650 million into agriculturally derived gas projects.
The Berkshire-Dominion deal is quite advantageous to both parties. For Dominion, it is selling off some of its assets funds and decidedly bold ambitions for a greener future. For Berkshire, its purchase of these assets expands its burgeoning energy empire.
The deal also expressly instantiates Buffett’s claim that Berkshire’s acquisitions often happen serendipitously; indeed, neither Dominion nor Berkshire anticipated the occurrence of this deal.
What is also interesting about the deal is that it signals that Buffett feels very strongly about the usefulness of natural gas in the future. In contrast to Dominion, which is abandoning its natural gas assets for a cleaner, greener future, Berkshire is at least partly staking its very success on it.
Perhaps natural gas will play an integral role in the future of clean energy? This will surely prove Buffett is right in the future. Or perhaps it will eventually join the group of condemned fossil fuels, which now consists of coal and oil, proving Buffett wrong.
This ostensible threat to Berkshire’s future success notwithstanding, it still has a formidable portfolio of renewables on which to rely, and importantly, it has never been more likely that this portfolio will expand in the years ahead given the astonishing size of Berkshire’s cash pile and its knack for speedily and seamlessly making large and profitable acquisitions.
Written by Jared Nussbaum
Edited by Alexander Fleiss, Juan Agudelo, Jason Kauppila & Gihyen Eom