Berkshire Hathaway Energy Commentary

Will Berkshire Hathaway Buy Dominion Energy’s Stake in Cove Point LNG?

(BRK.A), (BRK.B)

If ever there was a natural acquisition for Berkshire Hathaway it would be acquiring the majority stake in a company that it currently owns 25 percent of, and already runs on a daily basis.

Dominion Energy is reportedly looking to sell its 50% stake in Cove Point LNG, and Berkshire Hathaway would seem to be a natural suitor, if the price is right.

The offshore liquid natural gas shipping terminal is operated by Berkshire Hathaway’s BHE GT&S, a standalone subsidiary of Berkshire Hathaway Energy.

Berkshire Hathaway Energy acquired a 25% stake in the facility in November 2020 when it bought Dominion Energy’s natural gas transmission and storage business, exclusive of Questar Pipeline Group.

Located near Lusby, Maryland, on the western shore of the Chesapeake Bay, the facility is the first such facility on the East Coast. It is recognized as one of the most technically advanced and environmentally sensitive LNG facilities in the world, and has a storage capacity of 14.6 billion cubic feet (BCF) and a daily send-out capacity of 1.8 BCF.

Cove Point produces LNG under 20-year contracts for ST Cove Point, a joint venture of Sumitomo Corporation and Tokyo Gas, and for Gail Global (USA) LNG, the U.S. affiliate of GAIL (India) LTD.

Since the facility first entered commercial service in April 2018 for natural gas liquefaction and export, LNG produced from the facility has supported the energy needs of 28 countries, including many in Europe in recent months. And Cove Point LNG loaded its 300th commercial cargo at the end of July.

The terminal connects, via its own pipeline, to the major Mid-Atlantic gas transmission systems of Transcontinental Gas Pipeline, Columbia Gas Transmission and Eastern Gas Transmission and Storage.

The Cove Point facility is unique among U.S. LNG terminals for its operational flexibility and demonstrated ability to perform all the functions of an LNG facility, including import, export, vaporization and send out, and liquefaction.

According to Bloomberg, Dominion Energy has begun talking to companies about buying its stake in the facility, and while Berkshire’s separate deal to acquire Dominion Energy’s Questar Pipeline Group was abandoned in 2021 due to antitrust concerns, antitrust issues are unlikely to be a problem with a Cove Point LNG acquisition.

In addition to Dominion Energy and Berkshire Hathaway, Brookfield owns 25%, invested through its Super Core-infrastructure fund.

Berkshire Hathaway, which owns roughly 18 percent of the nation’s natural gas pipelines, would seem to be the most logical choice to become majority owner of Cove Point LNG, and it probably won’t be long before we learn whether that is in the cards.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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