Berkshire-Led Group to Buy MidAmerican Energy

OMAHA —  Warren Buffett’s Berkshire Hathaway Inc. is leading an investor group that agreed to buy MidAmerican Energy Holdings Co. for $2.05 billion in cash, marking the billionaire investor’s first foray into energy.

Berkshire Hathaway said the group will pay $35.05 a share, 29% more than Friday’s close. The Buffett group also will assume about $7 billion in debt. The group plans to take the company private.

Buffett is betting that MidAmerican’s natural gas and electricity business in the U.S. and Britain and its power plants in Asia are better long-term investments than the company’s stock performance suggests, analysts said. The shares have fallen 21% this year.

“We buy good companies with outstanding management and good growth potential at a fair price, and we’re willing to wait longer than some investors for that potential to be realized,” Buffett said. “This investment is right in our sweet spot.”

Berkshire Hathaway said it will invest about $1.25 billion in common stock and a non-dividend-paying convertible preferred stock of MidAmerican, giving Berkshire a 75% stake.

Omaha-based Berkshire Hathaway also will buy $800 million of preferred stock. The other investors, who will invest about $300 million, are Omaha neighbors Walter Scott, former chairman of construction company Peter Kiewit Sons’ Inc. and MidAmerican’s largest individual shareholder, and David Sokol, chairman and chief executive of MidAmerican, which is based in Des Moines. Scott is a member of both Berkshire Hathaway’s and MidAmerican’s boards.

MidAmerican was formed when CalEnergy Co., an international power plant builder and operator, bought MidAmerican Energy Holdings, an Iowa electric utility, in March.

CalEnergy specialized in geothermal power plants, which use superheated pockets of water from deep in the Earth to generate electricity. Its first geothermal projects were in California.

After the company fell deep in debt in 1990, Peter Kiewit Sons’ bought a stake, andCalEnergy moved its headquarters from San Francisco to Omaha. The headquarters moved to Des Moines after CalEnergy bought MidAmerican, itself formed by the merger of three Midwestern utilities in 1995, and adopted its name this year.

The company expanded in the 1990s by building or buying more geothermal projects in the U.S., Philippines and Indonesia. It bought a controlling stake in Northern Utilities, a British utility that provides much of its revenue, in 1996.

MidAmerican shares rose $6.13 to close at 33.38 on the New York Stock Exchange.