Nevada’s officials are breaking out the champagne with the news that investor extraordinaire Warren Buffett is acquiring the state’s electric monopoly, NV Energy, for $5.6 billion.
Even more cause for celebration was the fact that Buffet agreed to pay 23% more per share ($23.75) than the energy monopoly was worth at closing yesterday ($19.28).
It’s a long-term investment in the state of Nevada, as Buffett puts it, and a good buy because it is, after all, a monopoly—one that earned $330 million over the past 12 months. This was in part boosted by a 2011 rate increase passed by the Public Utilities Commission—effective as of 2012.
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What this means for Buffett’s bigger picture is that his MidAmerican Energy Holding Co. will officially become the largest US utility owner, serving 8.4 million customers, according to Bloomberg.
The deal should be finalized by the end of Q1 2014, and will boost MidAmerican’s assets to $66 billion. The company’s utility stocks reached a five-year high in April this year, but then decline since.
The news of Buffett’s acquisition deal caused NV Energy to rise 22% in New York yesterday, to $23.59 in a self-fulfilling prophecy based on Buffett’s purchase price. This was the biggest rise for NV Energy in a decade.
Does it mean that regulated utilities are more attractive than we thought? Well, at least if Buffett’s behind it.
By. Jen Alic of Oilprice.comcom