A unit of billionaire U.S. investor Warren Buffett's (search) Berkshire Hathaway Inc (BRKA) (BRKB) has agreed to buy U.S. electricity firm PacifiCorp for $5.1 billion from British utility Scottish Power Plc.

The acquisition is Buffett's largest since he bought reinsurer General Re Corp in 1998.

Under it, MidAmerican Energy (search), his Des Moines, Iowa-based unit, will assume $4.3 billion of net debt. PacifiCorp (search) provides services to 1.6 million customers in six western U.S. states.

Scottish Power, which also posted annual earnings ahead of market forecasts despite PacifiCorp missing its targets, said on Tuesday it would return about $4.5 billion of the sale proceeds to shareholders, sending its shares up as much as 9 percent to 479-3/4 pence, their highest level since September 2001.

Some analysts also said the sale could turn Scottish Power into a takeover target.

"ScottishPower is likely to be an attractive takeover target for its larger UK competitors," brokers Cazenove said in a research note seen by Reuters. Traders in London and Frankfurt also relayed gossip that Germany's E.ON might be interested in the remainder of Scottish Power.

Buffett, the world's second richest person according to Forbes magazine, had lamented his inability to find ways to spend Berkshire's $46.7 billion of cash. Best known for its insurance holdings, Berkshire also owns such companies as ice cream maker Dairy Queen (search) and underwear maker Fruit of the Loom.

"We are excited to be making this long-term investment, through MidAmerican, in the premier energy company in the West. PacifiCorp is a great company with outstanding assets," Buffett said in a statement.

He later told a news conference he hoped to buy more energy assets over the next decade. MidAmerican already owns British utility CE Electric UK.

ING analyst Fraser McLaren said investors would welcome the sale of PacifiCorp.

"We believe the market will react positively to this news which brings to an end the persistent uncertainty regarding PacifiCorp," he said in a research note.

The utilities sector has always been an attractive one for predatory investors, as companies in the sector are profitable and have strong cash-flows.

Scottish Power bought PacifiCorp in 1999 for around $10 billion, and the British company said the sale would lead to an impairment charge of 927 million pounds ($1.7 billion).

The U.S. electricity producer accounted for about 50 percent of overall earnings but has recently suffered from bad weather and plant outages.

On Tuesday, Scottish Power said PacifiCorp had operating profit before goodwill amortization and exceptional items for the year ended March 31 of $914 million. Its target had been $1 billion.

The company decided it was better to sell PacifiCorp than continue investing in the business to improve returns.

"This was proving to be a difficult year for PacifiCorp," Scottish Power Chief Executive Ian Russell told reporters, adding that the sale was not expected to lead to job cuts.

Scottish Power also reported that pretax profit before goodwill and exceptional items for the year ending March 31 rose 10 percent to 1.015 billion pounds, the first time the company had made a billion-pound profit.

Earnings per share (EPS) rose 10 percent to 40.22 pence, ahead of market forecasts, and the total dividend rose 10 percent to 22.50 pence.

CEO Russell said the sale of PacifiCorp could take between 12 and 18 months to complete, and added it was too early to say how Scottish Power would return the proceeds to investors.

PacifiCorp was originally meant to have been a key driver of earnings growth for Scottish Power.

Russell said that once the company had sold the unit, around 70 percent of its earnings would come from its infrastructure division, which owns and manages British power networks.

Investment banks UBS and Morgan Stanley advised Scottish Power on the PacifiCorp sale. Houlihan Lokey Howard & Zukin advised MidAmerican.

($1=.5468 Pound)