Berkshire to buy Alberta's AltaLink

SNC-Lavalin Group says it has agreed to sell its AltaLink electric transmission company in Alberta for C$3.2bn ($2.91bn) to Berkshire Hathaway Energy (BHE), a move that could accelerate development of the province’s vast wind resource.

The proposed deal, which requires regulatory approval from the Alberta Utilities Commission (AUC) and the Canadian government, is expected to close late this year or in early 2015, according to Montreal-based SNC-Lavalin.

Under BHE, AltaLink would continue to operate as a separate company with its current name and retain headquarters in Calgary.

“The acquisition of AltaLink represents a great long-term opportunity to invest in Alberta’s critical transmission infrastructure,” says Greg Abel, chief executive of BHE, an 89.8%-owned unit of billionaire Warren Buffett’s Berkshire Hathaway, the largest US conglomerate by sales.

BHE ownership will provide AltaLink with quick and ready access to lower-cost capital for transmission projects that the Canadian company estimates could add six times the amount of wind energy now on Alberta’s grid. AltaLink is the dominant transmission player, serving 85% of the province’s population.

Some of Alberta’s best wind resource is located in regions without high-voltage power lines to bring potential electricity to load centers.

Privately-owned BHE doesn’t pay a dividend to the parent company, so it retains its cash flow – which it uses to help fund growth and improve already solid credit metrics, should it need to borrow.

The proposed transaction is second in less than a year for BHE, which earlier paid $5.6bn to acquire NV Energy, the principal electric utility in Nevada. AltaLink and NV Energy are what Buffett calls “bolt-on” deals that are relatively low-risk, increase earnings and help slow cash accumulation.

BHE and SVC-Lavalin, a large engineering and construction company, says they will collaborate on development projects for transmission and distribution in the US and Canada.

There is continued talk in Alberta of expanding power exports to the US, which could include wind energy if transmission infrastructure were in place.

Last year, the Enbridge-owned Montana-Alberta Tie Line (MATL) became fully operational – the province’s first merchant interconnection with the US.