> Warren Buffett Blog: Warren Buffett making money in Canadian electric market

Monday, June 27, 2016

Warren Buffett making money in Canadian electric market

Two years ago, Buffett’s Berkshire Hathaway Inc. bought more than half of all the electric transmission lines crisscrossing Albertan farmland in a $3.2-billion acquisition of Calgary-based AltaLink LP from troubled SNC-Lavalin Group Inc., making Berkshire Hathaway the electricity transmission provider to 85 per cent of Albertans.

Electricity analysts in the province say that purchase, like many of Buffett’s deals, now looks brilliant. Electricity prices in the province have collapsed — from $49 per megawatt hour in 2014 to around $16 so far this year — but transmission prices have risen, and will continue to rise for at least the next five years.

“It’s got to be the sweetest deal around,” said Calgary-based electricity consultant Sheldon Fulton of Buffett’s business in Alberta, where controversial government regulations force consumers to pay 100 per cent of the cost to build new transmission lines while AltaLink — or its smaller competitors such as Atco Ltd., Enmax Corp. and Epcor Utilities Inc. — have a provincially set 8.75-per-cent after-tax return on their equity in the power lines.