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utilities nv energy sale drives up stock, expected to help company By Eli Segall staff writer When retiree Shelley Chin worked at a junior high school in Henderson, she taught her students about people like Warren Buffett and Bill Gates, billionaire businessmen whose hard work paid off big. Little did she know, she would be poised years later to earn her own chunk of change from one of them. Chin owns stock in NV Energy, the Las Vegas power company Buffett's MidAmerican Energy Holdings Co. plans to buy for $5.6 billion cash. Including debt, the deal is valued at about $10 billion. The sale was announced last month and is expected to close during the first quarter of next year. It already has been approved unanimously by both companies' boards of directors, although shareholders and state and federal officials still must green-light it. Chin, of Anthem, bought her stock in the mid-1980s when it hovered between $13 and $19 a share. Despite its inconsistent performance over the years — it plunged below $3 in 2003 — she held onto it. Buffett, the chairman and CEO of MidAmerican's Omaha, Neb., parent Berkshire Hathaway, plans to pay stockholders $23.75 a share, a price they haven't seen since 1999. Chin said she likely will vote for the sale. Buffett wouldn't buy a stagnant company, she figures. Indeed, on May 30, the day after Buffett's plan was announced, NV Energy's stock price soared. It closed at $23.62 per share, up $4.34 or 22.5 percent from the day before. On May 29, it closed at $19.28 per share. It was the largest percentage gain of the day for companies listed on the New York Stock Exchange. What's more, approximately 55.3 million shares of NV Energy changed hands, a 2,213.6 percent increase over its 65-day average volume. As NV Energy's stock shot up in value, however, out-of-state lawyers began prowling for shareholders who want to sue NV Energy for selling too low. At least six law firms so far have announced investigations of NV Energy's | 17 JUNE 2013 20130617_VI07_F.indd 7 | vegas inc file selling point: Warren Buffett, one of the world's richest men with a net worth of more than $50 billion, has built a fortune buying steady companies such as insurance providers and utilities. buyout triggers cantly change NV Enerboard of directors. Texas firm Deans & Lyons action on wall st. gy's daily operations or its ongoing projects such as solicited clients by saying it In general, news of a pendwould seek "more value" for ing buyout often is followed ON Line, its $552 million by a jump in stock price for effort to link Northern shareholders, in part by "enthe target company. suring the highest price rea- For instance, shares of Las and Southern Nevada electric systems this year. sonably available is obtained." Vegas' Service1st Bank of Company officials said It advertised the name, phone Nevada's parent company NV Energy will operate as number and email address of shot up 34 percent on the first full trading day after a subsidiary of MidAmerian attorney whom investors Bank of Nevada's parent can contact to discuss their announced plans to buy the can under its current rights and remedies. company. It was the largest name and remain headquartered in Las Vegas. NV Energy spokeswoman percentage gain that day NV Energy CEO Michael Jennifer Schuricht declined of any company listed on the Nasdaq Stock Market Yackira said MidAmericomment. or the New York Stock can, based in Des Moines, Shareholder lawsuits are Exchange. Iowa, has a track record of common with buyouts of U.S. keeping employees when it public companies. For deals announced in 2010 and 2011, absorbs a company. He said he expects to almost every acquisition worth at least remain CEO alongside the utility's other $100 million prompted multiple share- executives. Buffett also told Gov. Brian Sandoval holder lawsuits, according to Cornerthat MidAmerican has no plans for workstone Research. However, only a small fraction of those er layoffs and hopes to grow the utility. "We'll see how this plays out, but it's a suits resulted in payments to stockholders. Most settled for additional disclo- great shot in the arm and a great vote of sures or, less frequently, changes in the confidence in Nevada," Sandoval said. Yackira touted MidAmerican for merger terms, Cornerstone reported. Buffett's buyout is unlikely to signifi- showing a commitment to spending big dollars on renewable energy and cited its recently announced plan to install up to 656 additional wind turbines in Iowa by the end of 2015. At least one analyst said ratepayers would not see their bills jump because of the sale (although the deal comes after NV Energy, which serves about 90 percent of Nevada's population, posted increasingly strong profits, thanks in part to a rate hike last year.) Because MidAmerican can borrow money at cheap rates through Berkshire Hathaway from the open market, savings could be passed on to ratepayers. "If (the interest rate) comes down, the costs should come down for our customers," Yackira said. The sale also offers several benefits to NV Energy. Utilities generally are slow-growth companies that pay dividends to help attract investors. Now that NV Energy will cease being a stand-alone company with its own shareholders, it no longer has to worry about wooing shareholders. The utility will be part of an energy conglomerate whose resources far outweigh NV Energy's. Through its existing subsidiaries, MidAmerican has $52 billion in assets and 7.1 million electric and natural gas customers. NV Energy provides electric service to 2.4 million Nevadans and has about $12 billion in assets. "I think the major benefit is being part of a bigger organization," Fitch Ratings analyst Phil Smyth said. Helped by a rate increase and lower expenses, NV Energy almost doubled its profit last year to $322 million from $163 million in 2011. The $159 million rate hike, which took effect Jan. 1, 2012, was expected to increase power bills for single-family homes by 3.5 percent. Financially, the company had a good start to 2013. Despite a dip in revenue, NV Energy almost doubled its first quarter profit from $12.2 million, or 5 cents a share, to $21.5 million, or 9 cents per share. That was achieved partly by slashing energy efficiency program costs by $9.6 million and by lowering maintenance to save $7.6 million. 7 6/13/13 2:09:28 PM