Warren Buffett says Berkshire Hathaway – which has emerged as one of the leading holders of renewable energy capacity in the US with what will grow to a $15bn (€13.4bn) portfolio – has to trust future regulation to make such long-term commitments.
The company’s Berkshire Hathaway Energy (BHE) arm, from a “standing start” 10 years ago, now accounts for 6% and 7%, respectively, of the US’s wind and solar generation capacity, Buffett points out in his latest letter to investors.
“When BHE completes certain renewables projects that are underway, the company’s renewables portfolio will have cost $15bn,” the ‘Sage of Omaha’ writes, saying simply: “We are a leader in renewables.”
But he adds: “We relish making such commitments as long as they promise reasonable returns – and, on that front, we put a large amount of trust in future regulation.”
Buffett’s annual letter, at 42 pages this year, is widely read to gauge the thoughts of the legendary investor and philanthropist.
He also discusses the outlook for the conglomerate’s BNSF (Burlington Northern Santa Fe) transportation business, which disappointed in 2014, saying his confidence is “justified both by our past experience andby the knowledge that society will forever need massive investments in both transportation and energy”.
“A century hence, BNSF and Berkshire Hathaway Energy will still be playing vital roles in our economy,” Buffett reckons.
“We are a leader in renewables.”
He adds it is in the “self-interest” of governments to treat capital providers in a manner that will ensure the “continued flow of funds to essential projects”.
Buffett also discusses Tesco, the UK retailer hit by an accounting scandal, noting that he has now completely sold out of the company, at a $444m loss: “I made a big mistake with this investment by dawdling.”
In typical homespun language, Buffett says: “In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.”
The 84-year-old billionaire also slams as a “fool’s game” the practice of institutional investors hiring expensive consultants who recommend high-fee asset managers. He recommends instead Vanguard Group founder Jack Bogle’s The Little Book of Common Sense Investing.