OMAHA (dpa-AFX) - Berkshire Hathaway Energy, the energy and utility division of Warren Buffett's conglomerate, announced on Monday its agreement to purchase a 50 percent stake in the Cove Point liquefied natural gas or LNG facility for $3.3 billion in cash. The stake was acquired from Dominion Energy, with Berkshire Hathaway Energy now owning a 75 percent limited partnership stake in Cove Point LNG. The remaining 25 percent is held by a subsidiary of Brookfield Infrastructure Partners.
Although not a large deal in terms of size for Berkshire Hathaway, it marks a significant move in their growing investment in energy infrastructure. The acquisition provides the conglomerate with ownership of one of the few functional LNG export facilities in the United States, aligning with their long-term theme of energy resources becoming more valuable.
The Cove Point LNG Terminal, located in Lusby, Maryland, has a storage capacity of 14.6 billion cubic feet and a daily send-out capacity of 1.8 billion cubic feet. It has a long-term contract with Sumitomo Corp., a Japanese trading company in which Warren Buffett has also made investments.
This latest acquisition follows Berkshire Hathaway's initial purchase of Dominion's gas pipeline and storage assets for $4 billion in 2020. Greg Abel, chairman of Berkshire Hathaway Energy, highlighted the strong relationship between the two companies, with the deal facilitated through his connection with Dominion's previous CEO, Tom Farrell.
Abel, now the vice chairman for non-insurance operations at Berkshire Hathaway and the successor to Warren Buffett, has taken on many responsibilities at the conglomerate. Berkshire Hathaway has been actively expanding its presence in the energy sector, proposing a $4 billion investment in wind and solar power generation in Iowa in 2022. Concurrently, the conglomerate has increased its exposure to traditional energy companies such as Occidental Petroleum and Chevron.
Bill Stone, chief investment officer at Glenview Trust and a Berkshire shareholder, noted that Buffett has a longstanding affinity for pipelines due to their toll bridge-type revenues, providing more stable returns compared to direct commodity exposure. Stone also mentioned that most LNG exporters typically operate on long-term take-or-pay contracts, mitigating the impact of fluctuations in natural gas prices.
This year, natural gas futures have declined by over 40 percent, currently priced at $2.709 per million British thermal units. Despite the decrease in prices, Berkshire Hathaway's investment in Cove Point LNG reinforces their confidence in the long-term value of energy infrastructure assets.
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