NV Energy operations unlikely to change with purchase by Warren Buffett company
Yackira expects to remain as CEO, doesn’t foresee layoffs
Nati Harnik / AP
Next time you pay your power bill, just send the check to Warren Buffett.
The billionaire investor’s MidAmerican Energy Holdings Co. reached a $5.6 billion cash deal to acquire NV Energy, Nevada’s primary electric utility.
Including debt, the deal is valued at about $10 billion.
The sale, announced Wednesday, already has been unanimously approved by both companies’ boards of directors.
Buffett’s buyout is unlikely to significantly change NV Energy’s daily operations or ongoing projects like ON Line, the $552 million effort to link its Northern and Southern Nevada electric systems this year. Also, at least one analyst said ratepayers would not see their bills jump because of the sale.
Nevertheless, the deal comes after NV Energy, which serves about 90 percent of Nevada’s population, posted increasingly strong profits, thanks in part to a rate hike last year.
MidAmerican, based in Des Moines, Iowa, agreed to buy all outstanding stock in NV Energy for $23.75 per share, cash. The deal still requires approval by NV Energy’s shareholders as well as state and federal agencies.
The sale is expected to close in the first quarter of 2014.
The companies said NV Energy would operate as a subsidiary of MidAmerican under its current name and remain headquartered in Las Vegas.
In a phone interview, NV Energy CEO Michael Yackira said MidAmerican has shown a commitment to spending big dollars on renewable energy, citing its recently announced plan to install up to 656 additional wind turbines in Iowa by the end of 2015.
He said MidAmerican's "track record is not to have layoffs" when buying other companies, and that he expects to remain CEO alongside other current executives.
Additionally, Yackira noted that MidAmerican, through its Omaha, Neb., parent Berkshire Hathaway, can borrow money at cheap rates from the open market. Those costs are often passed on to customers, so the savings should benefit NV Energy and its ratepayers, he said.
"If that comes down, the costs should come down for our customers," Yackira said.
Buffett, the chairman and CEO of Berkshire Hathaway, has made billions buying steady if not boring companies like insurance providers and utilities. He typically keeps the executives in place to run things as usual.
“That’ll be the same here,” Fitch Ratings analyst Phil Smyth said.
Gov. Brian Sandoval said he spoke with Buffett on Wednesday and was told MidAmerican plans to keep NV Energy’s current management and employees.
He said he also was told MidAmerican wants to grow the utility.
“We'll see how this plays out, but it's a great shot in the arm and a great vote of confidence in Nevada,” Sandoval said.
As Smyth sees it, the buyout will have little, if any, direct impact on Nevadans’ power bills. He also does not expect it to alter company projects.
However, he said it would provide several benefits to NV Energy.
Utilities are generally slow-growth companies that pay dividends to help attract investors. Now that NV Energy will cease being a stand-alone company with its own shareholders, it no longer has to worry about that.
Smyth also noted the utility will be part of an energy conglomerate whose resources far outweigh NV Energy’s.
Through its existing subsidiaries, MidAmerican has $52 billion in assets and 7.1 million electric and natural-gas customers. NV Energy provides electric service to 2.4 million Nevadans and has about $12 billion in assets.
“I think the major benefit is being part of a bigger organization,” Smyth said.
Helped by a rate increase and lower expenses, NV Energy almost doubled its profit last year to $322 million from $163 million in 2011.
The $159 million rate hike, which took effect Jan. 1, 2012, was expected to increase the power bills for single-family homes in Southern Nevada by 3.5 percent.
Financially, the company had a good start to 2013. Despite a dip in revenue, NV Energy nearly doubled its first-quarter profit to $21.5 million, or 9 cents per share, up from $12.2 million of profit, or 5 cents a share, in the same period last year.
The higher profit was achieved partly by slashing energy efficiency program costs by $9.6 million and lowering maintenance costs by $7.6 million.
NV Energy’s stock, traded on the New York Stock Exchange, closed Wednesday at $19.28 per share. News of the MidAmerican buyout sent the stock up 23 percent after hours, to $23.73 per share.
Sun political editor Anjeanette Damon contributed to this report.