Warren Buffett drops $10B on gas pipelines while fossil fuels' future is extra-uncertain
Big splurge after months of holding out... Warren Buffett's Berkshire Hathaway just made its 1st big investment since the pandemic started (over a decade ago, in corona years). Buffett's legendary holding company hoarded up a record $137B in cash and held off on money moves...until now:
- Berkshire is acquiring Dominion Energy's natural gas assets (gassets?) in a deal worth nearly $10B — Berkshire's biggest deal since 2016. Dominion's gassets: 7.7K miles of natural gas pipelines and massive storage facilities.
- With this gassy splurge, Berkshire will control 18% of all US interstate natural gas transmission (up from 8%). With its gassets sold, Dominion gets to shift its focus from gas to clean utilities (like renewable energy).
Fossil fuels aren't hot right now... While natural gas pollutes less than crude oil (which is refined to make gasoline), it's still a fossil fuel. Natural gas generates electricity and heats our homes, but pollutes in the process. Now that corona-conomy is accelerating the transition to clean energy, fossil fuels are facing more uncertainty than ever:
- On Sunday, Dominion said it's scrapping its Atlantic Coast pipeline project due to regulatory scrutiny.
- On Monday, a Federal Court ordered the Dakota Access Pipeline to close pending an environmental review. So why is Buffett dropping $10B on pipelines?
Buffett's all about the "value investment"... like that $98 Gucci bag from Marshalls. Warren buys companies that he believes are undervalued. His MO: "Be fearful when others are greedy and greedy when others are fearful.” With so much negative buzz around pipelines, he sees Dominion as a good deal — The increased scrutiny around building new pipelines could actually be a boon to Dominion's existing ones.