Utility death spiral? Bull, says Warren Buffett

Utility death spiral? Bull, says Warren Buffett



Quick Take:  Everywhere you go â€" including Smart Grid News â€" you see stories about the pending "utility death spiral." For instance, we recently reported on a study predicting that utilities will soon be obsolete in certain states.


If that's the case, why is the world's most successful investor shopping for electric power utilities? Simple â€" Warren Buffett only buys utilities in states with a favorable regulatory climate. In other words, he sees the possibility of a death spiral, but he believes regulators won't let it happen. I agree, in part. I think many regulators will see the problem and take steps to correct it. But I'm not confident that all 50 states will get it right and get it done in time. â€" Jesse Berst


Last year, Warren Buffett paid more than $5 billion for the Nevada utility NV Energy. In his annual letter to Berkshire shareholders on March 1, Buffett confirmed that NV Energy will not be his last major acquisition in the power sector. Bloomberg confirms he is hunting for more utilities, predicting his targets include Wisconsin Energy Corp. and Alliant energy Corp. They say there are 19 utility and pipeline owners that meet Buffet's minimum requirements for profit and a return on equity.


Buffett "is likely looking at a lot of small, regulated utilities that have a lot of growth on the table where his low cost of capital is an incredible advantage," MorningStar analyst Mark Barnett told Bloomberg.