MidAmerican acquires NV Energy

July 2013 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

MidAmerican Energy Holdings Co., a gas and electric company owned by Warren Buffet’s Berkshire Hathaway Inc., continued its program of expansion in May when it announced that it had agreed to purchase NV Energy Inc. for $5.6bn. In a joint statement the two companies confirmed that the all-cash deal values NV Energy at around $10bn including debt.

NV Energy currently serves a customer base of around 1.3 million electric and natural gas customers in the Nevada region. Once the deal has been completed NV Energy will widen the amount of customers relying on MidAmerican’s regulated gas and electric utilities to 8.4 million. The deal will make MidAmerican the largest US utility owner by customer accounts.

Under the terms of the deal, MidAmerican will purchase all outstanding shares in NV energy, paying $23.75 per share. The agreed price represents a 23 percent premium over the company’s closing price of $19.28 on the day of the sale announcement, and roughly doubles the company’s 2010 share price of $12. After hours trading saw shares in NV Energy rise to $23.90.

The deal is expected to close in the first quarter of 2014 and will be the largest announced acquisition of a US power company sinceDuke Energy Corp. acquired Progress Energy Inc. for $17.8bn in July 2012.Upon completion of the acquisition, MidAmerican will have assets of around $66bn. However, at the time of writing the acquisition is still subject to state, federal and NV Energy’s shareholder approval.

The acquisition of NV Energy is the latest purchase made by MidAmerican as it continues to increase its investments in renewable energy projects. MidAmerican has been aggressively expanding its presence in the energy sector for some time – particularly in Nevada which has enormous solar, wind, and geothermal resources. Accordingly, the acquisition of NV Energy makes a great deal of sense. NV Energy has been moving towards renewable energy for the last few years. The company recently passed one gigawatt of renewable and has been boosting its purchases of electricity from solar plants and wind farms in order to meet a state requirementof obtaining 25 percent of its energy from renewable sources by 2025. Furthermore, in April the company said that it would accelerate the retirement of its coal fired power stations, as well as speeding up the construction of natural gas and renewable energy power plants. NV Energy is also the largest user of geothermal energy in the US.

MidAmerican’s growth has accelerated dramatically since Berkshire acquired a 29 percent stake in the company in October 1999, and the purchase of NV Energy is another example of the consolidation being carried out, not only by MidAmerican, but also across the energy sector. In the wake of weakening electric demand, rising costs associated with upgrading energy infrastructure, and the cost of cleaning up power generation to meet increasingly stringent environmental regulations, utility firms have been consolidating their positions. MidAmerican’s efforts have included the acquisitions of Northern Natural Gas for $928m in July 2002 and PacifiCorp, which serves California, Idaho, Oregon, Utah, Washington and Wyoming, for $5.1bn in 2006. In late May, Teco Energy Inc. purchased the New Mexico Gas Co. for $950m.

Under the terms of the deal NV Energy will continue to operate under its existing name as a separate subsidiary of MidAmerican, while remaining in its headquarters in Las Vegas. In the joint statement, Greg Abel, chairman, president and chief executive officer of MidAmerican, said “This partnership combines the strengths of two companies that share a common goal of serving our customers well through operational excellence and enhancing value for the communities we serve. Part of what attracted MidAmerican to NV Energy is its solid commitment to the state of Nevada and its performance as a high-quality energy business that has a strong focus on customer satisfaction, safety, environmental stewardship, and employee commitment.”

Richard Summerfield