Why is Harry Reid Supporting Warren Buffett’s Energy Bid?
While it would seem unlikely anyone needs to help Warren Buffett, Senate Majority Leader Harry Reid (D-Nev.) has been offering the Oracle of Omaha a hand in the purchase of NV Energy (NYSE:NVE). MidAmerican Energy Holding Co., a Berkshire Hathaway (NYSE:BRK.A) company, would become the largest utility company in the U.S. if the sale went through, according to Energy and Environment Daily. Reid’s motivations appear to be two-fold.
Reid has been in the news several times this year for his support of the MidAmerican buy. On July 23, the Senate Majority Leader sent a letter to the Federal Energy Regulation Commission maintaining his support. Reid framed the deal as both good for the environment (greener energy sources) and good for his state’s overall economy.
“This matter will impact Nevada’s clean energy future and is important to investments…in infrastructure,” Reid wrote in his signature sostenuto style. He added that it would “bolster the stability of the state’s largest electrical utility.” Regarding Berkshire Hathaway’s position following the deal, it would give the powerhouse company the largest utility holding company in the United States, adding to the string of good news for Buffett’s firm.
Berkshire Hathaway Inc. posted another impressive earnings report this week, with net income increasing 46 percent in the second quarter compared to 2012. The company posted revenues of $44.7 billion, reflecting a rise of 16 percent compared to the same period the year earlier, according to the Omaha World-Herald. Creating the nation’s biggest utility company would likely add even more momentum.
Nevada is known for its renewable energy projects, and Reid clearly sees potential for economic benefits in the state as well as the start of a new day in terms of energy policy. President Obama and EPA chief Gina McCarthy have been in the news for their approach to climate change, and the push-back from Senator Joe Manchin (D-W. Va.) with respect to the coal industry, noted in the press earlier this week.
The renewable energy business would not only get a boost in Nevada; it would get the backing of one of the largest companies in the United States. Reid mentioned in his letter that the “access to capital” MidAmerican would bring to new projects made it the most logical choice to acquire NV Energy, and he hoped the company could get started before the year’s end. Clearly, Buffett and his partners see the business opportunity in cleaner energy.
According to Green Tech Media, MidAmerican’s acquisition of NV Energy would smooth the transition to renewable energy in the state. The website quoted NV Energy CEO Michael Yackira saying the company would begin focusing on “new, zero- and low-carbon generation options.”
That sounded like a quote from President Obama’s speech on administration energy policies, though Yackira’s letter came nearly a month earlier. Buffett’s acquisition of NV Energy represents a superior strategy than Manchin’s insistence on the continuing role of highly polluting coal. With political support and the opportunity to pioneer a new industry, renewable energy could be the next great investment of Berkshire Hathaway.