Warren Buffett before the Berkshire Hathaway Annual General Meeting of Shareholders in Omaha, NE.
David A Grogan | CNBC
Berkshire Hathaway Energy has agreed to acquire a 50% interest in the Cove Point liquefied natural gas facility for $3.3 billion in cash.
warren buffetthe large energy and utilities division bought the stake of Dominion Energy and will now hold a 75% limited partnership interest in Cove Point LNG located in Lusby, Maryland. A subsidiary of Brookfield Infrastructure Partners owns the remaining 25%.
While the deal, which was announced on Monday, is not big for Berkshireit relies on a growing bet on the conglomerate’s energy infrastructure as it takes control of one of the few functioning facilities in the United States that can export LNG.
“It builds on their long-term theme that energy resources become more valuable and owned by one of the few US LNG exporters,” said Bill Stone, chief investment officer at Glenview Trust and Berkshire shareholder.
The Cove Point LNG terminal has a storage capacity of 14.6 billion cubic feet and a daily outgoing capacity of 1.8 billion cubic feet. The company has a long-term contract with Sumitomo Corp., a Japanese trading company in which Buffett has also invested.
Berkshire Hathaway first bought a stake in Dominion’s gas pipeline and storage assets for $4 billion in 2020. Greg Abel, chairman and former CEO of Berkshire Hathaway Energy, previously told CNBC the deal in 2020 was made thanks to a strong relationship he had with former Dominion CEO Tom Farrell.
Abel is now vice president of non-insurance operations at Berkshire Hathaway and the 92-year-old successor to “Oracle of Omaha.” Buffett said Abel took many responsibilities within the conglomerate.
In 2022, Berkshire offered to spend nearly $4 billion to help generate more wind and solar power in Iowa. At the same time, the conglomerate has significantly increased its exposure to two traditional energy companies – western oil And Chevron.
“Buffett has been fond of pipelines for a long time, given their toll bridge-like revenues rather than pure commodity exposure, and that’s probably similar,” Stone said. “Natural gas prices are down a ton, but I think most of these exporters are working on long-term purchase or payment contracts.”
Natural gas futures have fallen more than 40% this year to $2.709 per million British thermal units.
