Warren Buffett took full control of Berkshire Hathaway Energy, a utility giant that it has owned a majority stake in since 1999, but the business has been a drag on the conglomerate. The Omaha-based Berkshire entered a deal to acquire the 8% remaining stake in BHE from the heirs of the late Walter Scott, a former director and a lifelong friend of Buffett who died in 2021. Berkshire bought the stake for $2.37 billion in cash, $600 million in debt as well as a significant amount of Berkshire Class B shares , according to a regulatory filing. Analysts and investors who watch the conglomerate closely seem to believe that the deal price marked a drop in valuation for BHE, whose businesses including energy, utility and pipeline operations experienced a tumultuous period with liabilities related to wildfires. “Buffett didn’t pay a premium for BHE, which implies that he is still concerned about the future of the business,” Bill Stone, chief investment officer at Glenview Trust Company and a Berkshire shareholder, told CNBC. Berkshire Vice Chairman Greg Abel, Buffett’s designated successor, sold his 1% stake in BHE for $870 million at a much higher valuation just two years ago. Abel is currently the chairman of BHE. ‘A Costly Mistake’ Buffett has recently expressed a fatalistic view about the utility industry amid staggering losses from wildfires as well as a tough regulatory environment. “It will be many years until we know the final tally from BHE’s forest-fire losses and can intelligently make decisions about the desirability of future investments in vulnerable western states,” he wrote in his 2023 annual letter. “I did not anticipate or even consider the adverse developments in regulatory returns and, along with Berkshire’s two partners at BHE, I made a costly mistake in not doing so.” The 94-year-old “Oracle of Omaha” said the regulatory climate in a few states has raised the specter of zero profitability or even bankruptcy, making what was once one of the most stable industries extremely unpredictable. The utility arm has been a weak spot for the conglomerate, which has otherwise enjoyed a few outstanding years. Berkshire’s 2024 rally has propelled it to a $1 trillion market cap , the first non-tech company in the U.S. to reach such a milestone. “BHE has been under pressure,” said Cathy Seifert, Berkshire analyst at CFRA Research. “First half 2024 revenues at BHE were off fractionally and pretax profits fell more than 10%.”
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