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October 25, 2014

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Acquisition of NV Energy could produce savings for customers

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Nati Harnik / AP

In this Nov. 14, 2011, photo, billionaire investor Warren Buffett speaks in Omaha, Neb., at an event to raise money for the Girls Inc. charity organization.

Customers of NV Energy may see some savings when the utility is sold to billionaire Warren Buffett.

The official application of MidAmerican Energy to buy the Nevada utility company was filed with the state Public Utilities Commission on Wednesday, and with it, hundreds of pages of prepared testimony and exhibits.

E. Kevin Bethel, controller for NV Energy, said preliminary discussions by the two companies show there could be cost reductions of $30 million a year. That’s 1 percent of retail revenues. He called these “reasonable” estimates.

But he cautioned that “ultimate savings could be greater or less than this amount.”

MidAmerican, owned by Buffet’s Berkshire Hathaway Inc., plans to pay $23.75 per share of stock. The NV Energy board of directors has approved the purchase, but the shareholders must still vote.

William Fehrman, president and chief operating officer of MidAmerican, wants state and federal approvals by early January 2014 so the final pieces of the transaction can then be completed.

The Public Utilities Commission has tentatively set Dec. 2 for a hearing on the application.

Jonathan Halkyard, chief financial officer of NV Energy, said in the pre-filed testimony that the purchase would result in a better credit rating for the firm.

Halkyard said the sale will mean cost savings on interest, debt and information technology. Fehrman said it also will result in lower costs on things such as poles, transformers, cable and safety equipment.

NV Energy contributes $4.3 million annually to community activities, and that will not change, Halkyard and Fehrman said.

In prepared testimony, Fehrman said MidAmerican had no role in writing or lobbying the controversial bill in the Nevada Legislature to shut down the coal-fired Reid Gardner plant in Southern Nevada operated by NV Energy.

The bill would require NV Energy to switch to other, less polluting sources of energy.

Fehrman said that 40 percent of MidAmerican’s generating capacity comes from coal, 27 percent from renewable energy and 22 percent from natural gas. MidAmerican has developed 15 percent of the solar power in the nation and is ranked at the top in wind-powered generation, he said.

Fehrman said the company can offer NV Energy "expertise" in renewal energy development.

Bethel broke down some of the savings: Elimination of the independent board of directors will save $1.6 million annually; another $1.3 million will be saved by cutting the staff and expenses of the board. He also estimated there will be a reduction in fees to national organizations, accounting firms, outside attorney costs and insurance purchases.

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