- Warren Buffett’s Berkshire Hathaway wants to stop the next Texas blackout.
- It’s willing to invest $US8.3 ($11) billion in emergency power plants and energy storage.
- Berkshire wants its money back and a guaranteed 9.3% yearly return.
See more stories on Insider’s business page.
Warren Buffett’s Berkshire Hathaway has a plan to prevent the next Texas power crisis – and make billions of dollars in the process.
The famed investor’s conglomerate wants to create a new company called the Texas Emergency Power Reserve, the Dallas Morning News reported on Thursday.
Berkshire’s energy unit is pitching the idea after winter storms knocked out dozens of Texas power plants in February. The blackout left upwards of 4 million people in the dark, sparked shortages of food and water, and led to more than 100 deaths.
Berkshire’s reserve would invest $US8.3 ($11) billion in new power generation, the Dallas Morning News said. It would build 10 power plants across the state by November 2023, with a week’s worth of natural-gas storage on site in case of supply disruptions.
The initiative would add about 10 gigawatts of generation to the state electricity grid, or at least half of the supply cut off last month, Chris Brown, the CEO of Berkshire’s energy-infrastructure unit, told the Dallas Morning News.
Brown described the proposal as “blackout insurance” – a fitting label given Berkshire owns several insurance companies including Geico and National Indemnity.
Berkshire would back its program with a $US4 ($5) billion guarantee, meaning Texas would pocket that sum if the reserve failed to deliver on its promise. However, Texans would fund the project through higher energy bills, in the same way that regulated utilities recoup their infrastructure expenses.
Buffett and his team want to recover their initial investment and earn a 9.3% annual return, the Dallas Morning News said. They claim their emergency backup would be cheaper than revamping the electric grid to withstand cold weather, or altering the state-energy market to build excess capacity. However, Berkshire’s guaranteed return would be unique in a competitive market.
Berkshire executives were in Austin this week to lobby lawmakers, as their plan would require a vote by the state legislature, the Dallas Morning News said.
Chris Bloomstran, a veteran Berkshire investor and the boss of Semper Augustus Investments, suggested the deal could appeal to Texas authorities in a tweet on Thursday. “Political but a $US4 ($5) billion surety guarantee will be hard to beat,” he said.
Berkshire’s desire to ensure a return isn’t surprising, as Buffett famously goes to great lengths to avoid losing money.
For example, when Berkshire bailed out Goldman Sachs in 2008 and Bank of America in 2011, Buffett demanded preferred stock paying hefty dividends, as well as stock warrants allowing him to buy more shares at a set price in the future.