Buffett bullish on utilities, warns against exports of ‘finite’ gas

Source: Rod Kuckro, E&E reporter • Posted: Wednesday, June 11, 2014

LAS VEGAS — Berkshire Hathaway Chairman and CEO Warren Buffett may be known as the “Oracle of Omaha,” but there wasn’t much need to read between the lines here yesterday as he addressed the nation’s leading electric utility executives.

Speaking at the annual meeting of the Edison Electric Institute, Buffett said he has $15 billion waiting to spend on more utility assets, especially renewables.For his holding company, utilities have been a solid investment since he bought the lion’s share of MidAmerican Energy Holdings Co. in 1999.Buffett joked that owning utilities are not so much a way to get rich as to stay rich. “Well, so far, we’ve stayed rich. We’ve never taken a dollar out of [MidAmerican]. I think that’s the best demonstration about how we feel about the utility business. We’ve poured billions and billions and billions of dollars in retained earnings and several billion in additional equity, and we’re going to keep doing that as far as the eye can see,” he said.

Buffett recently changed MidAmerican’s name to Berkshire Hathaway Energy, which has eight U.S. energy businesses, including three regulated electric utilities.

As for renewables and especially distributed generation, for Buffett the debate is over. He cited President Obama’s paraphrasing of President Lincoln when he says, “‘With public opinion, I can do anything; without it, I can do nothing.’ You’ve got to be there when it’s getting formed; you’re not going to change it later on,” Buffett asserted.

“So it’s enormously important for the industry to address public opinion,” which is strongly in favor of distributed generation, he said.

Renewables are challenging the utility industry’s business model, Buffett said, noting his early decision to invest $15 billion in renewable assets. “And there’s another $15 billion ready to go, as far I’m concerned. It’s where the country is going; we’ve got to move in an intelligent way,” he said.

And while it’s not possible to “change the industry overnight, public opinion has made up its mind on that, and the math is making sense for us as we put that $15 billion” to work, he said.

Asked about building the Keystone XL pipeline to bring Canadian oil sands crude to the United States, Buffett said he is all for it. “I’m very happy Canada has tremendous reserves; I’d rather it be in our hemisphere than in a hemisphere with an unfriendly government. I’m for the pipeline; I have no problem with that at all,” he said.

Acknowledging that “we’ve got problems with carbon and we have to address them,” Buffett said “the idea that you would take a wonderful friendly country that one way or another is going to sell the oil it develops and in effect snub them, I don’t think it makes any sense,”

Berkshire-owned railroads ship oil by rail car, and “we’ve had our share of problems there, so I see nothing wrong at all with another major pipeline,” he said.

He had a different take on efforts to export natural gas from the United States as liquefied natural gas. Despite the surge in discoveries of recoverable oil and gas reserves, they are “finite,” he said.

He urged the nation to “think about the centuries to come — you still should treat it as if it’s finite. I would just as soon the rest of the world use the resources of the rest of world than use ours over time. I love the idea of becoming self-sufficient. I don’t think when you’ve got a national treasure you should go around looking for ways to export it when you know it’s finite.”

On cybersecurity, Buffett said “the offense is always going to stay ahead of the defense.” Berkshire Hathaway’s companies — not just its utilities — are “vulnerable to attack,” but utilities “will be targets forever,” he said.