Buffett bets big on power with $9-billion Oncor deal
Warren Buffett's Berkshire Hathaway Inc said on Friday it agreed to pay $9 billion to buy the parent of Texas power transmission company Oncor Electric Delivery Co, stepping up its pursuit of steady profits from utilities and infrastructure deals.
If the all-cash purchase wins approval from federal and state regulators and a bankruptcy judge, Buffett's Berkshire Hathaway Energy unit will assume control of one of the largest US electricity transmission companies.
"Buffett views infrastructure bets as a good long-term investment," said Steven Check, president of Check Capital Management Inc in Costa Mesa, California, which invests $300 million of the $1.4 billion it oversees in Berkshire.
"With the relatively limited opportunities available to a company of Berkshire's size, investments such as Oncor that are likely to yield 8 to 10 percent annually are acceptable," Check added.
The acquisition also highlights the growing prominence of Greg Abel, 55, Berkshire Hathaway Energy's chief executive.
Investors consider him a top candidate to succeed Buffett, 86, at the Omaha, Nebraskabased parent company's helm.
Abel and other Berkshire Hathaway Energy executives were not available on Friday for interviews. Buffett's office did not respond to separate interview requests.
Dallas-based Oncor delivers power to more than 3.4 million homes and businesses through roughly 122,000 miles (196,000 km) of transmission and distribution lines.
It is 80 per cent owned by Energy Future Holdings Corp, the company Berkshire has agreed to buy out of bankruptcy. Oncor posted $431 million of profit in 2016, and similar sums in the prior three years.
Buffett values such consistency, telling Berkshire shareholders in February that utilities generate "recessionresistant" earnings because they offer an "essential service" that generates "remarkably steady" demand.
Meanwhile, Abel said in a statement the companies "share a common goal of providing exceptional customer service and a commitment to invest in critical infrastructure."