Warren Buffett’s MidAmerican Energy is close to buying Constellation Energy, the troubled American utility, for $4.7 billion (£2.6 billion) in cash.

MidAmerican Energy, a subsidiary of Berkshire Hathaway, said that it had reached a “tentative agreement” to acquire Constellation for $26.50 a share and said it hopes to enter a definitive merger agreement by tomorrow.

Shares in Constellation Energy have plunged by more than 50 per cent to $24.77 since the start of the week and yesterday it hired Morgan Stanley and UBS to advise it on a possible sale.

Mr Buffett, the chairman of Berkshire Hathaway, said: "MidAmerican has been a wonderful steward of its energy assets and the acquisition of Constellation Energy, when completed, will prove beneficial to all constituents,"

Mayo Shattuck, chief executive of Constellation Energy, said being backed by MidAmerican and Berkshire Hathaway would bring stability amid “unprecedented volatility” in the financial services and energy sectors.

Mr Buffett, the world’s richest man, runs Berkshire Hathaway from Nebraska, and is expected to be interested in acquiring subsidiaries of AIG, the world’s largest insurer, which was this week bailed out by the US Government.

He is also reported to be interested in Centrica, the British energy group.

Constellation will issue $1 billion in preferred equity to MidAmerican, the companies said. The deal has been approved by the boards of both groups but requires shareholder approval.

The proposed buyout follows concerns about Constellation’s liquidity, which sent the shares spiralling this week. Constellation Energy stock gained 94 cents, or 3.8 per cent, to $25.71 shortly after the opening in New York this afternoon.

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