Finance History | Lloyd Center Tower, Portland, 21 March 2006 — US$5.1 Billion Added a Regulated Western Utility

On 21 March 2006, MidAmerican Energy Holdings completed its purchase of all PacifiCorp common stock for US$5.1095 billion in 2006 dollars. MidAmerican financed the purchase primarily by selling US$5.07 billion of its own common stock in 2006 dollars to Berkshire Hathaway, with another US$35.5 million in 2006 dollars supplied by other MidAmerican shareholders. The acquisition added a regulated electric utility serving customers across six Western states. PacifiCorp's generating plants, transmission lines and local distribution systems required large investments that would be used over decades. Regulation shaped the return on those assets. State commissions reviewed costs and rates, seeking reliable service at reasonable prices while allowing the utility an opportunity to earn on prudent capital committed to the system. That arrangement could produce relatively steady demand and long asset lives, but it did not eliminate risk. Fuel costs, drought, storms, environmental rules, wildfire exposure and disallowed spending could shift costs between shareholders and customers. The transaction also demonstrated how Berkshire could supply equity to a capital-intensive subsidiary. Permanent funding supported an acquisition whose value depended on years of construction, maintenance and regulatory recovery rather than a quick resale. MidAmerican remained the direct acquirer, and Berkshire controlled approximately 99.76 percent of its voting securities after the financing. The legal structure kept PacifiCorp inside an energy holding company with its own creditors, regulators and minority interests. For the seller, the closing converted a utility shareholding into cash. For Berkshire, it exchanged liquid capital for a long-duration operating network that would continually require additional investment to remain safe and useful. Lloyd Center Tower at 825 Northeast Multnomah Street anchors the acquisition to PacifiCorp's Portland operations. The site represents a US$5.1095 billion purchase in 2006 dollars whose returns would be governed by physical reliability, regulatory decisions and disciplined reinvestment across a multistate power system. Photo: Cacophony, CC BY 3.0, via Wikimedia Commons.