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The D share crash has come after Dominion Energy and its partner Duke Energy announced that they are canceling the Atlantic Coastline Project citing the threat to the economic viability of the project.
Last weekend, Warren Buffett‘s Berkshire Hathaway (NYSE: BRK.A) announced the deal with Dominion Energy Inc (NYSE: D). This has been Berkshire’s first-ever major investment in the stock market during the COVID-19 economic crisis. The deal involves Berkshire Hathaway buying the Dominion Energy Gas Assets for nearly $10 billion. As part of the acquisition, Berkshire paid $4 billion and cash and took the remaining as part of the debt. However, the first trading session after the acquisition saw Dominion Energy stock crashing 11% on Monday, July 6. On Monday, closing, the stock was trading at $73.59 with a market cap of $61.78 billion.
Today, in the pre-market. Dominion Energy stock is also in the red. It is now 2.23% down, at $71.95.
Apart from the acquisition deal with Berkshire, there was also another major announcement by Dominion Energy. The company along with its partner Duke Energy canceled its project for the Atlantic Coast Pipeline. This decision came despite the Supreme Court’s decision to allow Dominion to proceed with the project, after some massive legal hurdles. In its statement, Dominion Energy said that “ongoing delays and increasing cost uncertainty which threatens the economic viability of the project.”
The Atlantic Coast Pipeline Project intended to send natural gas from the Appalachian region to Mid-Atlantic and Southeast. Initially pegged at a cost of $4-$5 billion, the costs went up to $8 billion with lawsuits and delays. Dominion and Duke thought that it was in the best interest of both the companies to forgo the project.
Focusing More on Renewable Energy Sources
It looks like Dominion energy is prepared enough to absorb this short-term loss and look ahead for a fresh beginning. Moreover, with the recent acquisition by Berkshire Hathaway, it has comfortable cash to make this move.
In fact, this acquisition from Berkshire Hathaway comes on the backdrop that Dominion is transitioning towards renewable energy sources. The Richmond-based company currently provides natural gas and electricity to its 7 million customers across 20 states.
Dominion CEO Thomas Farrell said that the company’s clean-energy transition has a target to achieve net-zero carbon and methane emissions by 2050. “Over the next 15 years we plan to invest up to $55 billion in emissions reduction technologies including zero-carbon generation and energy storage, gas distribution line replacement, and renewable natural gas,” he added.
Speaking on this acquisition, the oracle of Omaha Warren Buffett said: “We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business”.
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