Williams sells unit
Power producer steps ahead with sale, equity investment deal with Berkshire Hathaway unit.
March 7, 2002: 4:08 p.m. ET
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NEW YORK (CNN/Money) - Williams Cos. has agreed to sell its Kern River interstate natural-gas pipeline business to a unit of Berkshire Hathaway for $450 million in cash, the two companies said Thursday.
The buyer, MidAmerican Energy Holdings Co., also will assume $510 million of debt as part of the transaction. The company said it will continue an expansion of the Kern River system that is in the works and said the value of the pipeline including the expansion exceeds $2 billion.
Williams (WMB: up $0.73 to $22.83, Research, Estimates), the energy trader and natural-gas pipeline operator, said the transaction will reduce its capital expenditure requirements by $1.26 billion over the next 1-1/2 years.
In a related transaction, Williams agreed to sell $275 million of 9-7/8 percent cumulative preferred stock to a unit of MidAmerican, a unit of Berkshire Hathaway (BRK.A: up $2000.00 to $71800.00, Research, Estimates), the conglomerate run by billionaire investor Warren Buffett. The sale, which is contingent on the successful completion of the Kern River transaction, is part of Williams' effort to shore up its balance sheet. In the wake of the Enron scandal, credit-rating agencies have tightened the balance-sheet and liquidity standards for energy-trading companies.
The companies expect the transaction to close no later than March 31. Lehman Brothers acted as Williams' financial adviser on the transaction. MidAmerican didn't announce the name of its financial adviser, if any.
In related news, the announcement of the sale to MidAmerican prompted Moody's Investors Service to affirm Kern River Funding Corp.'s "A2" senior unsecured debt rating, saying that the strong financial backing from MidAmerican Energy Holdings and Berkshire Hathaway should ensure Kern River the necessary capital for planned expansion.
Also Thursday, Williams reported a loss for 2001 after taking a big one-time charge related to its struggling former telecommunications subsidiary, Williams Communications. Williams Cos. reported a net loss of $477.7 million, or 95 cents a share, for the year, including charges that amounted on an after-tax basis to $1.31 billion, or $2.62 a share.
Net income for 2000 was $524.3 million, or $1.17 a share. 
-- from staff and wire reports
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