Dive Brief:
- "NV Energy will not be MidAmerican’s last major acquisition," Warren Buffett said in Berkshire Hathaway's annual report for 2013.
- Last year, MidAmerican Energy bought NV Energy for $5.6 billion. "This acquisition fits nicely into our existing electric-utility operation and offers many possibilities for large investments in renewable energy," Buffett wrote in the report.
Dive Insight:
Unlike some on Wall Street, Buffett sees opportunity in the electric utility business.
"I think it's way more than a hint," Jeff Matthews, author of several books on Berkshire, told the New York Times. “He clearly sees more deals at MidAmerican.”
In the report, Buffett touts "recession-resistant earnings" and a unique "diversity of earnings streams" as being essential to MidAmerican's success. This broad earnings base, extended even further by the NV Energy acquisition, allows MidAmerican to "significantly lower their cost of debt," according to the report.
Buffett also sees an opportunity in renewables. "MidAmerican now accounts for 7% of the country’s wind generation capacity," but there's "more on the way," according to the report.
Despite some degree of regulatory uncertainty, Buffett says his confidence in the future of a regulated business like MidAmerican is buoyed "by the knowledge that society will forever need massive investments in [...] energy."
