Buffett to Expand Energy Wager ‘As Far as the Eye Can See’

Source: By Noah Buhayar and Jim Polson • Posted: Wednesday, June 11, 2014

Photographer: Daniel Acker/Bloomberg
Berkshire Hathaway Inc., (BRK/A)which has struck deals to expand its utility business in Nevada and Western Canada, plans more investment in the industry, in part by betting on renewable power, ChairmanWarren Buffett said.

“We’ve poured billions and billions and billions of dollars in retained earnings, and several billion of additional equity,” into the energy business, Buffett, 83, said today at the Edison Electric Institute’s annual convention in Las Vegas. “And we’re going to keep doing that as far as the eye can see.”

Berkshire Hathaway Energy operates power grids in the U.K., natural gas pipelines that stretch from the Great Lakes to Texas and electric utilities in states including Oregon and Nevada. The business has committed $15 billion to renewable energy projects, like a solar farm in California that will be one of the world’s largest when it’s completed in 2015. Buffett said today that Berkshire could invest an additional $15 billion on such projects, aided by tax benefits as the U.S. strives to reduce carbon-dioxide emissions.

Buffett has been shifting toward capital-intensive businesses like energy and transportation, reducing Omaha, Nebraska-based Berkshire’s reliance on insurance operations and stock-picking. He’s said that utilities are a great way to preserve wealth since entering the industry about 15 years ago.

“So far, we’ve stayed rich,” Buffett said today.

Autos, Housing

Berkshire Hathaway Energy has $70 billion in assets and more than 8.4 million customers worldwide, according to its 2014 brochure. It has more than 34,000 megawatts of power generating capacity owned or under contract. Wind, solar, hydro, geothermal and other renewable plants account for about a quarter of capacity.

The range of Berkshire businesses, including a railroad and retailers, gives Buffett insight into the health of the world’s largest economy. Most of the company’s operations are based in the U.S. and the billionaire frequently praises the prospects for companies there.

“What we see is just steady, but far from spectacular, gains and that’s been going on now for five years,” Buffett said. “And autos are getting very strong now, they’ve really come back. Housing looked like it was catching a big tailwind, and it’s still doing OK, but it’s disappointing.”

‘Greatest Panic’

The U.S. economy is showing signs of expanding again after gross domestic product fell at a 1 percent annualized rate in the first quarter. A pickup in retail receipts and stronger manufacturing indicate that there’s pent-up demand after severe winter weather spurred a slowdown earlier in the year.

Employers added 217,000 jobs in May to push U.S. payrolls past their pre-recession peak and thejobless rate held at an almost six-year low of 6.3 percent, Labor Department figures showed June 6.

Buffett said Shaw Industries, a carpet maker owned by Berkshire, is one unit that’s finding it difficult to sustain expansion.

“Overall, businesses are getting better,” Buffett said. “But five years is a long time to come back from what was really the greatest panic I’ve ever seen.”