Each week, Offshore Technology’s writers select a deal that illustrates the themes driving change in our sector. The deal may not always be the largest in value or the highest profile, but it will tell us where the industry is focusing its efforts, and why. This thematic deal coverage is drawn from GlobalData’s Intelligence Centre, which collates information from across the sector.
The deal
Dominion Energy has announced plans to sell its 50% stake in Cove Point LNG to Berkshire Hathaway Energy. Berkshire Hathaway Energy will purchase the 50% non-controlling partner interest stake for $3.5bn. The Cove Point LNG facility is a liquefied natural gas (LNG) export facility in Maryland, US.
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The parties
Dominion Energy is a US-based energy company that supplies power to seven million customers across 16 US states. At time of writing, its NYSE share price is valued at $51.99 a share.
Berkshire Hathaway Energy is an offshoot of Berkshire Hathaway, the multinational conglomerate owned by Warren Buffet, the fifth-richest man in the world and one of the US’ most successful and best-known investors. The Berkshire Hathaway Energy portfolio encompasses 11 different energy companies supplying power to the US, Canada and the UK.
The implications
The sale means that Berkshire Hathaway Energy will now own a 75% limited partnership stake in Cove Point LNG, a significant and potentially lucrative asset for the conglomerate. It is a bold move from Berkshire Hathaway as many investors look to move away from fossil fuels and towards clean, green tech.
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For Dominion Energy, the estimated $3.3bn after-tax profit from the deal will allow the company to repay major debts including an existing $2.3bn term loan tied to its non-controlling interest in the Cove Point facility. Reducing the company’s debts will free up significant cash for investment, as Dominion has seen interest expenses grow significantly in recent years.
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By GlobalDataIn a press release, Robert M Blue, Dominion Energy chair, president and chief executive officer, said:
“Since 2002, Cove Point has been an excellent service provider to its international and domestic customers – linking global gas supplies with American customers, and American gas supplies with customers around the world.
“However, this investment is non-core to Dominion Energy as we focus on our state-regulated utility operations. The sale demonstrates our commitment to the company’s credit profile and represents an attractive exit from what has been an excellent investment for our shareholders. With this sale, we have recycled $8.9bn of cash flow, including dividends from Cove Point, since 2018 – well in excess of our total investment in the facility inclusive of the export project construction cost of approximately $4.1bn. Further, this sale gives us the opportunity to reduce variable rate debt consistent with our goal of strengthening our balance sheet.”
Notably, this is not the first time Berkshire Hathaway Energy has purchased assets from Dominion. In July 2020, Berkshire Hathaway bought the Gas Transmission and Storage operations of Dominion in a $9.7bn deal. This too, was a deal focused on reducing debt, with $5.7bn of the deal in the form of debt being transferred from Dominion to Berkshire Hathaway.
