Warren Buffett’s Berkshire Hathaway has acquired the remaining 8% stake in Berkshire Hathaway Energy (BHE) for $4 billion. This move gives Berkshire Hathaway full control of the energy business. Berkshire Hathaway Energy operates various electric and gas utilities, pipelines, and infrastructure assets.
Its domestic regulated energy interests include four regulated U.S. utility companies and five integrated natural gas pipelines with 21,000 miles of operated pipeline. The acquisition highlights Berkshire Hathaway’s confidence in the utility and energy sectors. It also reflects the company’s shift towards more value-oriented sectors and away from growth stocks.
“Berkshire Hathaway Energy has been a great business for Berkshire Hathaway, and I’m pleased that we will now own 100% of the company,” said Warren Buffett, Chairman and CEO of Berkshire Hathaway. The utility sector has seen strong performance recently, with the Vanguard Utilities ETF up 27.8% year to date. This outperforms major indexes like the Nasdaq Composite and the Dow Jones Industrial Average.
Berkshire Hathaway’s energy acquisition strategy
Regulated utilities work with government agencies to set consumer prices. This allows for steady returns, infrastructure investments, and consistent dividend payments to shareholders.
Higher demand for computing power for artificial intelligence models could boost electric utilities. This justifies more infrastructure investment in the sector. Lower interest rates also benefit utilities by reducing the cost of capital and increasing potential returns on investment.
Many utilities can refinance debt at lower costs, reducing interest expenses. For passive income-oriented investors, the utility sector remains attractive. It offers a safe and reasonably valued market segment.
Investors seeking exposure to the utility sector can consider investing in an exchange-traded fund (ETF) like the Vanguard Utilities ETF. It features a low expense ratio of 0.1%, a minimum investment of $1, and a yield of 3%.
