This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Berkshire Hathaway's Next Elephant Acquisition

Stocks in this article: BRK.B EXC

It's hard to know where Berkshire might want to expand in the utilities business. NV Energy seemed a perfect fit for MidAmerican's increasing exposure to western power markets and its deployment of billions in capital on renewable energy projects.

In a 2012 column, TheStreet pointed to NRG Energy (NRG) as a company that MidAmerican has partnered with on many renewable energy projects. The company's market capitalization of less than $10 billion would also fit within Berkshire's elephantine deal parameters.

On the East Coast, where MidAmerican has little exposure, utilities are suffering. Exelon (EXC) is currently mired in a four-year slump that's seen the company's share price fall from nearly $50 a share at the beginning of 2010 to just $30.30 a share as of Monday morning trading.

Jefferies utilities analyst Paul B. Fremont recently equated a recovery at Exelon to "waiting for Godot," given forecasts that gross margins will continue to fall at the company through 2016. Maybe, in Exelon's case, Buffett's MidAmerican Energy unit can play the savior role.

Given Jefferies analyst Fremont's price target of $24 a share for Exelon, continued underperformance could put the $26 billion market cap company within the reach of Berkshire's elephant guns.

It's also worth noting that Berkshire Hathaway attempted to buy Constellation Energy in the market panic of 2008, after providing the company $1 billion in preferred financing. However, Berkshire's proposed $4.7 billion takeover fell apart and Constellation was eventually sold to Exelon or $7.9 billion. Maybe Buffett and MidAmerican will eventually get their deal.

"A century hence, BNSF and MidAmerican Energy will still be playing major roles in our economy," Buffett said in his 2013 investor letter.

If Berkshire is playing the 100-year game, Consolidated Edison (ED), the nation's oldest electric utility may be another East Coast utility to watch. Since Superstorm Sandy battered the greater New York, New Jersey and Connecticut regions in October 2012, ConEd's shares have fallen from above $60, given recovery capex and a political maelstrom from duration of some power outages.

After ConEd agreed to a new two-year rate settlement with the New York Public Service Commission (NYPSC) that contained no revenue increases, Fremont, the Jefferies analyst, upgraded his rating on the stock to 'hold' from 'underperform.' ConEd said in February it will invest nearly $1 billion in capex for solar energy projects in its unregulated business.

Buffett said Berkshire Hathaway will always keep $20 billion in cash in the company's bank account to maintain financial flexibility. He also said Berkshire will carefully weigh any share issuance for acquisitions, a strategy the company employed to buy railroad BNSF in 2009.

Berkshire Hathaway reported year-end 2013 cash and cash equivalents of over $42 billion, meaning few utilities deals are out of the company's reach.

-- Written by Antoine Gara in New York

2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs