In a $2.9-billion deal that seems to work for both participants for different reasons, Canadian engineer SNC-Lavalin Group Inc. said on May 1 that it will sell its 100% stake in AltaLink, Alberta's largest regulated electricity transmission firm, to Berkshire Hathaway Energy, a unit of the firm run by investor Warren Buffett.
Montreal-based SNC-Lavalin aims to use the cash to boost its core design-and-construction business, while the Des Moines, Iowa-based buyer gains a power-sector foothold in Canada and added revenue growth.
Under the deal, the two firms also would collaborate on power-transmission projects in North America.
Calgary-based AltaLink owns more than half the transmission grid in Alberta, operates about 12,000 kilometers of transmission lines and serves 85% of the province.
The firm reported revenue of about $490.7 million last year, up from $373.6 million in 2012.
The asset sale is part of SNC-Lavalin's strategic plan, announced in 2013 by CEO Robert Card, to invest more in its global engineering and construction business. "We are pleased with our agreement with [Berkshire Hathaway Energy] to pursue transmission and distribution development opportunities," said Alexander Taylor, president of SNC-Lavalin's power unit.
Card said the sale process was "robust" and told the Toronto Globe and Mail that "a large quantity of very well-heeled people" showed interest in AltaLink and that bidding was "highly competitive."
Berkshire Hathaway Energy, which just changed its name from MidAmerican Energy Co., owns about $70 billion in utility assets, including Nevada utility NV Energy, which was purchased last year for $5.6 billion.
"SNC was looking for a stepping-stone into the U.S., and we fail to see a more blue-chip partner than Berkshire," said Maxim Sytchev, construction-sector research analyst for Dundee Capital Markets, Toronto, in a May 1 note.
"SNC and Berkshire in the same sentence—that ... has to be worth $1 billion in future potential collaborations. We also believe that this is a critical piece of SNC's turnaround puzzle."
Sytchev speculated the firm could use the sale proceeds to make an acquisition or buy back stock. It also is weighing sales of other infrastructure assets in Canada, including the E407 toll highway around Toronto.
The deal is set to gain regulatory approvals and close by Dec. 31, but, according to the Edmonton Journal, officials in Alberta's opposition party claim it will drive up local energy costs and