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Berkshire Bets on Greening Nevada in $10B NV Energy Deal

NEW YORK ( TheStreet) -- Berkshire Hathaway's (BRK.A - Get Report) energy subsidiary MidAmerican Energy is buying Las Vegas utility NV Energy (NVE) for $23.75 a share in cash for an enterprise value of about $10 billion.

Berkshire's head Warren Buffet characterized the deal as a long-term bet on Nevada's recovering economy and an investment in NV Energy's strong management team.

The deal also appears to champion MidAmerican and NV Energy's combined alternative energy power generation prospects.

"This is a great fit for Berkshire Hathaway, and we are pleased to make a long-term investment in Nevada's economy," Buffett said in a statement, while praising NV Energy's management and assets.

MidAmerican Energy will pay a 23% premium for Las Vegas-based NV Energy over today's closing price of $19.28. The deal has already been agreed by both companies' boards of directors.

Upon completion of the proposed acquisition, MidAmerican Energy will have assets of approximately $66 billion and its regulated electric and gas utilities will serve 8.4 million customers.

"By joining forces with MidAmerican, we will gain access to additional operational and financial resources as we continue to position NV Energy to support the evolving energy needs of our state and work with public policy leaders and regulators to reshape Nevada's energy future," Michael Yackira, President and CEO of NV Energy, said in a statement.

NV Energy could complement MidAmerican's leading role in wind energy generation in the U.S. and its expected top position in solar energy in coming years. Currently, MidAmerican has been one of the biggest investors in government-financed solar plants, which are due to come online starting in 2015.

Through investments in solar energy plants built by the likes of First Solar (FSLR - Get Report) and SunPower (SPWR - Get Report), MidAmerican Energy is already poised to emerge as a big power provider in the west as states such as California try to shift their power generation to alternative energy sources.

"Importantly, we will have the opportunity to combine MidAmerican's expertise in renewable energy with Nevada's vast renewable resources for the benefit of our customers and our state," Yackira of NV Energy said.

Wednesday's deal furthers Berkshire's commitment to MidAmerican Energy and keeps the company on track for as much as $100 billion in spending in the energy sector over the next 10 to 15 years. In a Jan. 2012 research note, Fitch Ratings highlighted NV Energy as a takeover candidate.

In Berkshire's 2011 annual shareholder meeting, Buffett and lieutenant Charlie Munger indicated they would be investing heavily in MidAmerican and the overall U.S. energy sector in coming years.

"MidAmerican Energy may have an opportunity to deploy as much as $100 billion over the next 10-to-15 years at very reasonable rate," Munger said.

While much of that spending is likely to be capital investment such as the First Solar and Sunpower solar plants, Wednesday's acquisition indicates MidAmerican may very well be an acquirer in the utilities space.

Warren Buffett's Elephant Gun Could Target Utilities Deals

MidAmerican Energy has previously tried to cut large deals, offering $4.7 billion for Constellation Energy (CEG) amid a broad market slump in September 2008. However, MidAmerican withdrew the bid in December after Constellation divested some nuclear businesses to Electricite de France. Constellation Energy was eventually sold to Exelon (EXC).

According to a press release, MidAmerican expects to complete its acquisition by the first quarter of 2014 and will operate NV Energy as a separate corporate subsidiary under its current name. The company will continue to be headquartered in Las Vegas.

NV Energy, a regulated utility, operates in two jurisdictions that will likely need to approve company's proposed takeover.

Lazard was financial adviser to NV Energy and Sidley Austin LLP, Hogan Lovells and Reno-based Woodburn and Wedge acted as legal advisers.

Why Warren Buffett Should IPO MidAmerican Energy Now

10 Dividend Rich, M&A Ready Utility Stocks

-- Written by Antoine Gara in New York

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NVE $0.00 0.00%
BRK.A $201,102.00 -0.26%
BRK.B $133.96 -0.50%
FSLR $56.42 0.57%
SPWR $24.12 0.65%


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