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 http://www.idahostatesman.com/apps/pbcs.dll/article?AID=/20050621/NEWS02/506210353/1001/NEWS

Photos by Joe Jaszewski / The Idaho Statesman
Billionaire Warren Buffett outlines plans for PacifiCorp
Idaho Statesman 6/21/05

Sharon Gascon, deputy executive director of the National Association of Water Companies, asks Berkshire Hathaway chairman and chief executive officer Warren Buffett about his interest in investing in utility companies in the United States. Gascon, of Georgetown, S.C., said Buffett previously expressed interest in United Kingdom utilities, and Buffett told her that he was interested in U.S. utilities as well.

Utility regulators are told Buffett's interest is for the long run

Billionaire investor Warren Buffett touted his plan to acquire PacifiCorp a six-state utility with 1.6 million customers in the western United States, including 60,000 in Idaho during an appearance Monday in Boise.

Buffett addressed the annual meeting of the Western Conference of Public Service Commissioners, a group of state regulatory agencies that must sign off on the proposed acquisition of PacifiCorp by MidAmerican Energy Holding Co. Buffett's Berkshire Hathaway investment arm controls 80 percent of Mid-American.

MidAmerican Energy recently announced that it agreed to acquire PacifiCorp from its parent, Scottish Power, for $5.1 billion, plus the assumption of $4.3 billion in debt. The company operates as Utah Power in southeastern Idaho.

Buffett joked that Monday's audience members should urge people to visit the R.C. Willey Home Furnishings store his company owns at the intersection of Franklin and Eagle roads in Meridian.

"But if they're a Geico policy holder, tell them to make sure they drive carefully," he said in reference to another company he controls.

Buffett assured his audience that he views the acquisition of PacifiCorp as a long-term investment, not a cash cow to be milked before being sold off. Regulators, while generally receptive to Buffett's homey approach, said they would reserve judgment until they see an official filing on the proposed deal.

"He was very personable. But we don't rely much on luncheon speeches," said Marsha Smith, an Idaho Public Utilities Commission member. "We have to rely on evidence in the filing. Such as whether (the acquisition) is in the public interest, whether it would benefit the ratepayer."

Lee Beyer, Oregon Public Utility Commission chairman, said Buffett's speech did not answer all of his questions.

"But then, I didn't expect it to," Beyer said.

Beyer said MidAmerican Energy still has to prove that its deal for PacifiCorp "is a benefit to consumers."

He said Oregon regulators recently scuttled a proposed acquisition of Portland General Electric by Texas Pacific Group because of fears that the deal was too highly leveraged.

"But with Mr. Buffett, MidAmerican will have some very deep pockets," Beyer said. "So I don't think that's going to be a problem."

Buffett said he has no "exit strategy" when he adds a company to his portfolio, unlike investors who buy a company and "are looking to see what they can get for it by 3:30 that afternoon."

"I call that 'gin rummy management,' " he said, "where you pick up one business, and get rid of another."

He assured the gathering of state regulators that MidAmerican would have the financial resources to invest in PacifiCorp. to grow the business.

"We're going to put every dime into the company that's needed," he said.

Buffett touched on a number of topics from a possible bubble in the real estate market to his company's long-term investment strategy during his talk Monday to the Western Conference of Public Service Commissioners at the DoubleTree Riverside Hotel in Boise.

The world according to Warren Buffett

On the benefits of the PacifiCorp acquisition to Idahoans:
"The people of Idaho are going to know that there's going to be money put into the business, and that they'll have just one owner."

On the real estate bubble:
"People think the price of their home is going to go up because it went up last year. That's dangerous psychology."

How he chose managers to run his companies:
"I have to decide, do they love the money, or do they love the business? Is it their passion?"

How he sees the Idaho economy:
"We have a furniture store, R.C. Willey. It's going good in Utah, but Idaho has been No. 1, where it's been extraordinary. Something like a 21-percent gain last month over the previous month."

On University of Nebraska football:
"We knew we were in trouble last year when somebody asked one of our starters what the 'N' on his helmet was for, and he said 'Knowledge.' "

 

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