Warren Buffett: Why Utility Businesses Make Good Investments

Johnny HopkinsWarren Buffett1 Comment

It’s no surprise that Warren Buffett recently agreed to buy Dominion Energy’s natural gas assets in a $10 billion deal. Back in 1998, in a lecture at the University of Florida School of Business, he was asked specifically about his thoughts on utility businesses. Here’s his response:

Well I’ve thought about that a lot because you can put big money in it and I’ve even thought of buying the entire businesses. There’s a fellow in Omaha actually that’s done a little of that through Cal Energy but I don’t quite understand the game in terms of how it’s going to develop with deregulation.

I mean it’s it has got it… I can see how it destroys a lot of value for the high cost producer once they’re not protected by a monopoly territory and I don’t for sure see how who benefits and how much.

I mean obviously the guy with very low cost power. Some guy’s got hydropower you know at two cents a kilowatt or something like that there’s got a huge advantage. But how much of that he’s going to get to keep and everything or how extensively he can send that outside his natural territory I haven’t been able to figure it out so that I really think I know what the industry is going to look like in ten years.

But it is something I think about. If I ever develop any insights, the call for action, I’ll devote… I will act on it because I think I can understand the attractiveness of the product and it’s all the aspects of certainty of user need and the fact it’s a bargain and all of that I understand. I just don’t understand who’s gonna make the money in 10 years from now on and that keeps me away.

You can watch the entire presentation here:

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One Comment on “Warren Buffett: Why Utility Businesses Make Good Investments”

  1. Such a good example of how Buffett thinks. He is fixated on what he is doesn’t understand even though he can see more or less how things will be in ten years time.

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