MidAmerican Energy, which is owned by finance guru Warren Buffett, is close to buying Constellation Energy, the troubled American utility, for $4.7 billion (£2.6 billion) in cash.

MidAmerican said that it had reached a ‘tentative agreement’ to acquire Constellation for $26.50 a share and that it hoped to enter a definitive merger agreement very soon. Shares in Constellation Energy had plunged by more than 50 % to $24.77 in less than a week and it had hired Morgan Stanley and UBS to advise it on a possible sale. Mr Buffett, the chairman of Berkshire Hathaway, of which MidAmerican is a subsidiary, 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’.

Warren Buffett, the world’s richest man, runs Berkshire Hathaway from Nebraska, and is expected to be interested in acquiring subsidiaries of AIG, which in September was 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. Constellation Energy stock gained 94 cents, or 3.8 %, to $25.71 shortly after the announcement of the proposed deal.