This Week in Utilities: Buffett Buyouts and Regulatory Wins


Utilities have been busy this past week, making major moves to maximize profit potential. From Berkshire Hathaway buyouts to regulatory wins, here's what you need to know to stay on top of your dividend stocks' latest moves.

Buffett buyout
Warren Buffett's Berkshire Hathaway announced last week that its utility subsidiary, MidAmerican Energy, is buying out Nevada-based NV Energy. Including debt shouldering, the total deal clocks in at $10 billion and represents a 23% premium over share prices before the announcement. "Through MidAmerican, we have found in NV Energy a great company with similar values, outstanding assets, and a superb management team," the Oracle of Omaha noted in a press release.

TECO turns to natural gas
Buffett's not the only one buying. TECO Energy announced last week that it is buying Continental Energy Systems' New Mexico Gas Co. for $950 million. TECO President and CEO John Ramil noted: "We are adding 50% to our customer base in a single transaction, and we expect it to provide opportunities for future growth in an attractive Sunbelt location."

The new natural gas utility serves 509,000 customers and enjoyed $86 million in 2012 EBITDA. The deal is expected to close in the first quarter of 2014, with assets added on to TECO's books by fiscal year 2015.

Regulation elation
Illinois legislature made nice with its utilities through the approval of two new bills. The House of Representatives overturned its governor's veto to pass a controversial smart grid bill, paving the way for Ameren and Exelon to partially pass on modernization costs to consumers. Both utilities have been vocal proponents of the bill.

Ameren also scored political points in the Illinois Senate, where the legislative body approved new legislation that will allow the utility to invest $330 million more in its Illinois natural gas infrastructure. According to Ameren, passing of the "Natural Gas Consumer, Safety, & Reliability Act" would result in just a penny per customer per day for the next 10 years. The act now hits the governor's desk for final approval, a potential game changer if the smart grid bill is any evidence.

Over on the East Coast, North Carolina regulators approved a $179 million rate increase for Duke Energy . An average customer can expect to pay 5.5% more in two years' time, which translates to 10.2% return on equity for the utility. "We understand there is never a good time to increase rates," said Duke Energy's NC President Paul Newton in a statement. "However, we believe this approved settlement will allow us to keep the rate increase to customers as low as we reasonably can, and still recover the investments we've made to modernize our system and to ensure safe, reliable and increasingly clean electricity for the future."

Stay current on electricity
The world of utilities is changing fast, and dividend stocks aren't the stable stalwarts they once were. Be sure to check back weekly for the latest on your portfolio's moves, and you'll be well on your way to electrifying earnings.

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Fool contributor Justin Loiseau owns shares of Berkshire Hathaway and uses electricity. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool recommends Berkshire Hathaway and Exelon. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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