Buffett’s Under-the-Radar Energy Trade

Warren Buffett is super bullish on energy.

On Saturday Berkshire Hathaway (NYSE: BRK-B) quietly disclosed a new $870 investment.

The transaction gives Berkshire an additional 1% stake in subsidiary Berkshire Hathaway Energy.

Berkshire Hathaway Energy is now valued at $87 billion – a 74% increase in just two years.

Buffett increased his stake in Berkshire Hathaway Energy by purchasing a 1% interest from Greg Abel. Abel is the Vice Chairman of Berkshire and the CEO of the energy subsidiary.

Berkshire now owns 92% of Berkshire Hathaway Energy. Meanwhile, 8% of the company is owned by the estate of Walter Scott.

Berkshire Hathaway Energy is an energy utility serving over 12 million customers in the U.S., U.K., and Canada. The company’s power plants use both fossil fuels as well as hydro, wind and solar. 

Plus, Berkshire Hathaway is investing billions in a secret next generation energy technology.

What the Deal Means for Berkshire Shareholders

Greg Abel is the #1 executive at Berkshire.

He serves as the CEO of the company’s most valuable division. His appointment as Vice Chairman means he’s the likely successor to Warren Buffett.

During Berkshire’s annual meeting a shareholder raised the issue of Abel owning 1% of Berkshire Hathaway Energy. The concern was that this large ownership in a Berkshire subsidiary might create conflicts if he was leading the entire company.

At the time Buffett dismissed concerns of a conflict.

However, it seems that things changed in recent months.

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Abel will be paid cash for his stake in the energy division. This is also unusual – since Buffett prefers to pay cash for Berkshire acquisitions. It’s possible that Abel will use some of this cash to buy Berkshire shares.

Abel only owns $700,000 of Berkshire stock. That’s a small position for a senior executive who earns $13 million a year.

This transaction may also set the stage for Berkshire to buyout the final 8% owned by the Scott family. 

Berkshire is currently sitting on $105 billion in cash. The company could easily spend $7 billion to gain 100% control of Berkshire Hathaway Energy.

Berkshire is aggressively investing in clean energy solutions – and moving away from coal. For example, the company ha already invested $6.7 billion on solar energy projects.

Plus, Berkshire is investing in new technologies to transform America’s energy grid. These new initiatives will help provide cheaper and reliable electricity to millions of Americans.

Today you can get in on the ground floor of this unstoppable growth trend.

Yours in Wealth,
Ian Wyatt

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