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Warren Buffett Bullish on Utilities

Written By Brian Hicks

Posted November 15, 2012

Berkshire Hathaway (NYSE: BRK.B)-owned power company MidAmerican Energy Holdings Co. (PINK: MWPSL) is actively seeking out investment opportunities in renewables, empowered by its access to the parent company’s $47.8 billion in cash.

Warren Buffett’s company owns a 90 percent stake in MidAmerican Energy. In January, MidAmerican developed a new unit dedicated to supporting the company’s investments in renewables.

MidAmerican’s overall renewables portfolio has risen from 19 percent (end of 2006) to 31 percent (end of September 2012).

From Bloomberg:

“We believe renewables is the better investment right now” because utilities are too expensive, MidAmerican’s [Chief Financial Officer Patrick] Goodman said in an interview today at an Edison Electric Institute conference in Phoenix. “As a cash buyer, we will be looking at utilities if pricing comes in a bit.”

Since December of 2011, MidAmerican has added 1.6 GW in wind and solar PV projects to its 3.3 GW of wind and geothermal installed power.

But the company is also involved in natural gas investments. Just last month, MidAmerican’s CEO Greg Abel reached an arrangement with TransAlta Corp (TSX: TA); the deal will fund half the cost of all natural-gas fueled power plants either developed or bought outright within Canada, Bloomberg reports.

MidAmerican has been scoping out natural gas investments within the U.S. too. MidAmerican’s customers number around 6.3 million and are spread over Iowa, Oregon, and Utah.

Buffett has famously stated that owning utilities like MidAmerican, which are resistant to economic doldrums, is “a way to stay rich”—something that sounds like sage advice.

If Buffett is confident about renewables, and if President Obama faces a second term with not much to lose, then investors should probably take a very close look at the sector.