Buffett pays US$5.6b for Vegas utility
Las Vegas-based NV Energy has just passed 1 gigawatt of renewable energy, with a target of 25 per cent renewables by 2025, and is the largest user of geothermal energy in the United States.
A Berkshire Hathaway unit will pay US$5.6 billion (HK$43.5 billion) for NV Energy, the electric utility serving Las Vegas and its power-hungry casinos, in yet another large energy deal for Warren Buffett in the western United States.
Berkshire’s MidAmerican Energy Holdings Co said it will buy NV Energy for US$23.75 per share, a 23 per cent premium to NV’s Wednesday closing price. NV Energy shares rose to US$23.90 in after-hours trading on Wednesday.
It is not uncommon for shares in Buffett’s target companies to trade slightly above the offer price, even where there are no competing bids and Buffett has said explicitly the offer is his best and final one.
“Berkshire has a lot of cash earning very little. If this is a US$5.6 billion cash deal, then Berkshire turns low-yielding cash into US$330 million of earnings,” said Steve Check, president of Check Capital Management, an investment advisory firm, referring to NV Energy’s earnings over the last 12 months.
“Nevada has historically been a fairly fast growth area,” Check said. “Add it all up, and I’m sure this will be another good, safe investment for Berkshire.”
NV Energy, which is based in Las Vegas and serves about 2.4 million people in Nevada, said last month it would accelerate the retirement of its coal-fired power generating facilities and the construction of natural gas and renewable power plants.