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🏢 MidAmerican Energy
📝 Description
MidAmerican Energy (now Berkshire Hathaway Energy) is a major public utility company. Berkshire made a significant investment in the company in 1999, partnering with Walter Scott Jr. and CEO David Sokol.
The acquisition was structurally complex due to regulations like the Public Utility Holding Company Act of 1935. Berkshire structured the deal to acquire ~76% of the equity interest while retaining just under 10% of the voting power to avoid gaining voting control.
🔗 Connection to Berkshire
- The Deal: Berkshire invested approximately $2 billion for an 11% fixed-income security, common stock, and exchangeable preferred stock.
- Partnership: Buffett entered the deal primarily due to his trust in Walter Scott Jr., a long-time friend and Berkshire director.
- Management: Led by David Sokol, whom Buffett praised for his entrepreneurial talent.
🚀 2002: Strategic Expansion into Pipelines
In 2002, MidAmerican dramatically expanded its footprint by acquiring two major natural gas pipelines:
- Kern River: Acquired in March 2002 for $960 million.
- Northern Natural: Acquired in July 2002 for $1.1 billion.
- Strategic Importance: These acquisitions highlighted Buffett's pivot toward regulated utilities as a "sink" for Berkshire's massive and growing capital. He noted that regulated utilities offer a chance to deploy large amounts of cash for a decent (but not spectacular) return, which is essential as Berkshire's size grows.
🌊 2007: Record Earnings and the Klamath Controversy
The 2007 cycle highlighted MidAmerican's evolution into a global energy powerhouse and a focal point for regulatory and environmental debates:
- Financial Performance: Recorded record earnings before corporate interest and taxes of $2.1 billion.
- The PacifiCorp Integration: Following the 2006 acquisition of PacifiCorp (which includes Pacific Power and Rocky Mountain Power), MidAmerican successfully integrated the operation, serving 1.7 million customers across six western states.
- Klamath Dams Controversy: At the 2007 Meeting, Buffett addressed the controversy regarding hydroelectric dams on the Klamath River and their impact on salmon populations.
- Non-Intervention Policy: Buffett clarified his "hands-off" role to the FERC (Federal Energy Regulatory Commission), explaining that while he owns the utility, he signs affidavits promising not to interfere in its specific operations. He emphasized that PacifiCorp is a "public utility responding to public policy," and decisions on dam removal belong to the FERC and state commissions, not the holding company.
- HomeServices Success: Despite a "disastrous year" for real estate broadly, HomeServices remained the second-largest brokerage in the U.S., with Buffett affirming his commitment to the "traditional" high-touch model.
🤝 2010: The "Social Compact" and Regulated Growth
The 2010 cycle deepened the philosophical justification for MidAmerican (and BNSF) as the future of Berkshire:
- 2010 Letter: Definition of the "Social Compact" and wind energy commitments.
🔥 2012: The "Powerhouse Five" and Renewable Ambitions
The 2012 cycle marked MidAmerican's elevation to Berkshire's core operations:
- 2012 Letter: Highlighted as a key member of the "Powerhouse Five," generating $1.3 billion in pre-tax profit. Buffett emphasized the ongoing search for multi-billion dollar renewable energy projects.
- 2012 Meeting: Buffett and Munger discussed the massive capital runway, projecting $100 billion in potential investment over the next decade. Buffett clarified that a 12% ROE is a "sensible" and satisfactory return for these regulated, capital-intensive operations.
⚡ 2013: The NV Energy Acquisition
The 2013 cycle highlighted MidAmerican's continuing massive capital deployment in the utility sector:
- NV Energy: MidAmerican acquired NV Energy for $5.6 billion, dramatically expanding its footprint.
- Renewables Leadership: With the acquisition, MidAmerican now accounts for 7% of U.S. wind generation capacity and bolstered its leadership in renewables.
- Customer Satisfaction: The utility ranked #1 in customer satisfaction.
🌎 2014: The Berkshire Hathaway Energy Rebrand
In 2014, MidAmerican Energy was officially rebranded as Berkshire Hathaway Energy (BHE).
- The Rationale: The name change reflected the massive diversification of the company’s assets globally, moving far beyond its midwestern roots into international pipelines, massive renewable projects, and the UK power grid.
- Capital Intensity: In the 2014 Letter, Buffett celebrated BHE as a model of the "Social Compact," noting that it had never paid a dividend to Berkshire in 15 years, choosing instead to reinvest all $15 billion of earnings into essential infrastructure and renewable generation.
⚡ 2016: Iowa Leads the Nation
The 2016 cycle marked Berkshire Hathaway Energy's most dramatic demonstration of its renewable strategy:
- Iowa Wind Leadership: Iowa wind generation reached 55% of retail electricity sales — a world-class achievement for a U.S. utility. Iowa electricity rate: 7.1¢/KWH vs. national average 10.3¢. The rate gap directly drove large tech companies (including Google) to build massive server farms in Iowa.
- $3.6B New Wind Commitment: Announced a new $3.6 billion wind generation investment during the 2016 Annual Meeting period — the largest single renewable commitment in Berkshire Hathaway Energy's history.
- Rate Freeze Through 2029: Committed to no rate increases for Iowa customers through 2029 (13 years from the 2016 meeting date) — a direct consequence of the low-cost wind strategy. Competitor Alliant Energy, which did not pursue renewables as aggressively, faced the prospect of near-term rate increases.
- $30B Renewables Pledge: BHE has pledged a cumulative $30 billion in renewable investment over the long term — enabled by Berkshire's massive tax appetite, which makes production tax credits particularly valuable.
- BHE + BNSF Infrastructure: Together with BNSF, the two regulated giants invested $8.9 billion in infrastructure in 2016 alone.
- 🗣️ Buffett at 2016 Meeting: "Iowa has gotten plant after plant and job after job and increased property tax revenues — and that's being done because we have cheap wind-generated electricity."
- Greg Abel's Role: Greg Abel (CEO of BHE) presented alongside Buffett at the 2016 Annual Meeting, defending NV Energy's rooftop solar policy (99% of customers should not subsidize 1% with above-market buyback rates).
⚡ 2018: The Zero-Dividend Moat
The 2018 cycle reaffirmed BHE's unique structural advantage:
- 2018 Letter: Buffett highlights BHE as a prime example of Berkshire's model. Because BHE does not pay a dividend to the parent company, it can retain all earnings to invest in massive, long-term infrastructure projects (like wind and solar) that other utilities simply cannot afford without going to the capital markets. This "zero-dividend" structure is a massive, hidden competitive advantage.
⚡ 2021: The Final Giant and Pragmatic ESG
The 2021 cycle elevated BHE to one of the central pillars of Berkshire's value:
- 2021 Letter: Designated as "Giant 4" in the "Four Giants" framework. Earned a record $4 billion (up from $122M in 2000). Highlighted for leading the modernization of the electric grid and massive renewable energy investments.
- 2021 Meeting: Buffett and Abel defended BHE's massive, industry-leading $30 billion commitment to green energy against "asinine" standardized climate reporting mandates. Abel provided crucial real-world inflation data regarding raw material scarcity.
💡 Key Mentions
- 1999 Letter: Entry into a regulated but capital-intensive industry.
- 2002 Letter: Pipeline acquisitions and capital-retention logic.
- 2007 Letter / 2007 Meeting: PacifiCorp integration and Klamath Dams controversy.
- 2010 Letter: Definition of the "Social Compact" and wind energy commitments.
- References: 1999 Letter, 2002 Letter, 2004 Letter, 2007 Letter, 2010 Letter, 2016 Letter, 2016 Meeting
- Index: index
📚 Historical Mentions & Citations (26)
Click a reference document below to expand and read the exact paragraph(s) containing this concept in the archive.
📜1999 LetterExcerpt Available▼
1999 LetterExcerpt Available
Our goal is to run our present businesses well — a task made easy because of the outstanding managers we have in place — and to acquire additional businesses having economic characteristics and managers comparable to those we already own. We made important progress in this respect during 1999 by acquiring Jordan’s Furniture and contracting to buy a major portion of MidAmerican Energy. We will talk more about these companies later in the report but let me emphasize one point here: We bought both for cash, issuing no Berkshire shares. Deals of that kind aren’t always possible, but that is the method of acquisition that Charlie and I vastly prefer.
Now, for our second acquisition deal: It came to us through my good friend, Walter Scott, Jr., chairman of Level 3 Communications and a director of Berkshire. Walter has many other business connections as well, and one of them is with MidAmerican Energy, a utility company in which he has substantial holdings and on whose board he sits. At a conference in California that we both attended last September, Walter casually asked me whether Berkshire might be interested in making a large investment in MidAmerican, and from the start the idea of being in partnership with Walter struck me as a good one. Upon returning to Omaha, I read some of MidAmerican’s public reports and had two short meetings with Walter and David Sokol, MidAmerican’s talented and entrepreneurial CEO. I then said that, at an appropriate price, we would indeed like to make a deal.
📜2001 LetterExcerpt Available▼
2001 LetterExcerpt Available
(in millions) Pre-Tax Earnings Berkshire’s Share of Net Earnings(after taxes and minority interests) 2001 2000 2001 2000 Operating Earnings: Insurance Group: Underwriting - Reinsurance $(4,318) $(1,416) $(2,824) $(911) Underwriting - GEICO 221 (224) 144 (146) Underwriting - Other Primary 30 25 18 16 Net Investment Income 2,824 2,773 1,968 1,946 Building Products(1) 461 34 287 21 Finance and Financial Products Business 519 530 336 343 Flight Services 186 213 105 126 MidAmerican Energy (76% owned) 600 197 230 109 Retail Operations 175 175 101 104 Scott Fetzer (excluding finance operation) 129 122 83 80 Shaw Industries(2) 292 -- 156 -- Other Businesses 179 221 103 133 Purchase-Accounting Adjustments (726) (881) (699) (843) Corporate Interest Expense (92) (92) (60) (61) Shareholder-Designated Contributions (17) (17) (11) (11) Other 25 39 16 30 Operating Earnings 488 1,699 (47) 936 Capital Gains from Investments 1,320 3,955 842 2,392 Total Earnings - All Entities $1,808 $5,654 $ 795 $3,328
• MidAmerican Energy, of which we own 76% on a fully-diluted basis, had a good year in 2001. Its reported earnings should also increase considerably in 2002 given that the company has been shouldering a large charge for the amortization of goodwill and that this “cost” will disappear under the new GAAP rules.
🎙️2001 MeetingReference Only▼
2001 MeetingReference Only
Mentioned in this document.
📜2002 LetterExcerpt Available▼
2002 LetterExcerpt Available
Berkshire also made some important acquisitions last year through MidAmerican Energy Holdings (MEHC), a company in which our equity interest is 80.2%. Because the Public Utility Holding Company Act (PUHCA) limits us to 9.9% voting control, however, we are unable to fully consolidate MEHC’s financial statements.
(in millions) Pre-Tax Earnings Berkshire’s Share of Net Earnings(after taxes and minority interests) 2002 2001 2002 2001 Operating Earnings: Insurance Group: Underwriting – General Re $(1,393) $(3,671) $(930) $(2,391) Underwriting – Berkshire Group 534 (647) 347 (433) Underwriting – GEICO 416 221 271 144 Underwriting – Other Primary 32 30 20 18 Net Investment Income 3,050 2,824 2,096 1,968 Apparel(1) 229 (33) 156 (28) Building Products(2) 516 461 313 287 Finance and Financial Products Business 1,016 519 659 336 Flight Services 225 186 133 105 MidAmerican Energy (80% owned) 613 565 359 230 Retail Operations 166 175 97 101 Scott Fetzer (excluding finance operation) 129 129 83 83 Shaw Industries(3) 424 292 258 156 Other Businesses 256 212 160 131 Purchase-Accounting Adjustments (119) (726) (65) (699) Corporate Interest Expense (86) (92) (55) (60) Shareholder-Designated Contributions (17) (17) (11) (11) Other 19 25 12 16 Operating Earnings 6,010 453 3,903 (47) Capital Gains from Investments 603 1,320 383 842 Total Earnings – All Entities $6,613 $1,773 $4,286 $ 795
🎙️2003 MeetingExcerpt Available▼
2003 MeetingExcerpt Available
AUDIENCE MEMBER: Good morning. My name is Ken Goldberg (PH) from Sharon, Massachusetts. What is your long-term vision for MidAmerican Energy? And specifically, assuming the repeal of the Public Utility Holding Company Act, what is the nature of the type of assets that you would be interested in acquiring, be they generation, transmission, distribution-type properties?
📜2004 LetterExcerpt Available▼
2004 LetterExcerpt Available
We have an 80.5% (fully diluted) interest in MidAmerican Energy Holdings, which owns a wide variety of utility operations. The largest of these are (1) Yorkshire Electricity and Northern Electric, whose 3.7 million electric customers make it the third largest distributor of electricity in the U.K.; (2) MidAmerican Energy, which serves 698,000 electric customers, primarily in Iowa; and (3) Kern River and Northern Natural pipelines, which carry 7.9% of the natural gas consumed in the U.S.
🎙️2004 MeetingExcerpt Available▼
2004 MeetingExcerpt Available
AUDIENCE MEMBER: Speaking of MidAmerican Energy, a unit company underneath it, HomeServices, I see as a great opportunity. I would love to see and hear your thoughts about the future growth potential for it, especially against large consolidators like Cendant Corporation. Thank you.
AUDIENCE MEMBER: Hello, my name is Dan Cunningham, and I’m from Boston, Massachusetts, home of the 2004 world champion Boston Red Sox. (Applause and laughter) Thank you, Warren and Charlie, for providing this forum, and teaching over the years. It’s much appreciated. In a recent New York Times magazine cover story titled, “Up in Smoke,” David Sokol, who runs Berkshire’s MidAmerican Energy business was cited as a prominent CEO actively working to roll back the United States Clean Air Act, which 80 percent of Americans view as crucial to our public health. MidAmerican, itself, was cited as a major mercury polluter, among other things. With this in mind, could you see a role for a type of independent oversight committee charged with the purpose of auditing for shareholders the social responsibility of Berkshire’s businesses? This committee would monitor costs that Berkshire’s businesses incur for our society, but do not show up anywhere in an income statement. Maybe in Berkshire’s case, this would be a fraction of a person instead of a committee. Thank you.
📜2005 LetterExcerpt Available▼
2005 LetterExcerpt Available
• Last spring, MidAmerican Energy, our 80.5% owned subsidiary, agreed to buy PacifiCorp, a major electric utility serving six Western states. An acquisition of this sort requires many regulatory approvals, but we’ve now obtained these and expect to close this transaction soon. Berkshire will then buy $3.4 billion of MidAmerican’s common stock, which MidAmerican will supplement with $1.7 billion of borrowing to complete the purchase. You can’t expect to earn outsized profits in regulated utilities, but the industry offers owners the opportunity to deploy large sums at fair returns — and therefore, it makes good sense for Berkshire. A few years back, I said that we hoped to make some very large purchases in the utility field. Note the plural — we’ll be looking for more.
We have an 80.5% (fully diluted) interest in MidAmerican Energy Holdings, which owns a wide variety of utility operations. The largest of these are (1) Yorkshire Electricity and Northern Electric, whose
🎙️2005 MeetingExcerpt Available▼
2005 MeetingExcerpt Available
WARREN BUFFETT: Yeah, it’s a good question. We own, of course, as you know, 80 percent or so of MidAmerican Energy, which has a very large business in the U.K., but that’s an operating business. As you know, in the U.K. there’s a rule that requires reporting when you own three percent of a company’s stock. And actually, there’s some conditions under which the ownership will be reported even sooner than that three percent. There’s a provision that — I think if there is an inquiry or anything, that it has to be responded to. So, if you take a company with a market cap of, you know, £5 billion, if we bought £150 million of it, we would have to report, and that tends to mess up subsequent purchases. So, we bought stock — we own stock in Diageo, which was Guinness at the time. We’ve owned stock in some other U.K. companies.
📜2006 LetterExcerpt Available▼
2006 LetterExcerpt Available
Berkshire has an 86.6% (fully diluted) interest in MidAmerican Energy Holdings, which owns a wide variety of utility operations. The largest of these are (1) Yorkshire Electricity and Northern Electric, whose 3.7 million electric customers make it the third largest distributor of electricity in the U.K.; (2) MidAmerican Energy, which serves 706,000 electric customers, primarily in Iowa; (3) Pacific Power and Rocky Mountain Power, serving about 1.7 million electric customers in six western states; and (4) Kern River and Northern Natural pipelines, which carry about 8% of the natural gas consumed in the U.S.
🎙️2006 MeetingReference Only▼
2006 MeetingReference Only
Mentioned in this document.
📜2007 LetterExcerpt Available▼
2007 LetterExcerpt Available
Berkshire has an 87.4% (diluted) interest in MidAmerican Energy Holdings, which owns a wide variety of utility operations. The largest of these are (1) Yorkshire Electricity and Northern Electric, whose
3.8 million electric customers make it the third largest distributor of electricity in the U.K.; (2) MidAmerican Energy, which serves 720,000 electric customers, primarily in Iowa; (3) Pacific Power and Rocky Mountain Power, serving about 1.7 million electric customers in six western states; and (4) Kern River and Northern Natural pipelines, which carry about 8% of the natural gas consumed in the U.S.
🎙️2007 MeetingReference Only▼
2007 MeetingReference Only
Mentioned in this document.
📜2008 LetterExcerpt Available▼
2008 LetterExcerpt Available
Berkshire has an 87.4% (diluted) interest in MidAmerican Energy Holdings, which owns a wide variety of utility operations. The largest of these are (1) Yorkshire Electricity and Northern Electric, whose
3.8 million end users make it the U.K.’s third largest distributor of electricity; (2) MidAmerican Energy, which serves 723,000 electric customers, primarily in Iowa; (3) Pacific Power and Rocky Mountain Power, serving about 1.7 million electric customers in six western states; and (4) Kern River and Northern Natural pipelines, which carry about 9% of the natural gas consumed in the U.S.
🎙️2008 MeetingReference Only▼
2008 MeetingReference Only
Mentioned in this document.
📜2009 LetterExcerpt Available▼
2009 LetterExcerpt Available
Berkshire has an 89.5% interest in MidAmerican Energy Holdings, which owns a wide variety of utility operations. The largest of these are (1) Yorkshire Electricity and Northern Electric, whose 3.8 million end users make it the U.K.’s third largest distributor of electricity; (2) MidAmerican Energy, which serves 725,000 electric customers, primarily in Iowa; (3) Pacific Power and Rocky Mountain Power, serving about 1.7 million electric customers in six western states; and (4) Kern River and Northern Natural pipelines, which carry about 8% of the natural gas consumed in the U.S.
Dave Sokol, the enormously talented builder and operator of MidAmerican Energy, became CEO of NetJets in August. His leadership has been transforming: Debt has already been reduced to $1.4 billion, and, after suffering a staggering loss of $711 million in 2009, the company is now solidly profitable.
🎙️2009 MeetingReference Only▼
2009 MeetingReference Only
Mentioned in this document.
📜2010 LetterExcerpt Available▼
2010 LetterExcerpt Available
We have two very large businesses, BNSF and MidAmerican Energy, with important common characteristics that distinguish them from our many others. Consequently, we give them their own sector in this letter and split out their financial statistics in our GAAP balance sheet and income statement.
📜2011 LetterExcerpt Available▼
2011 LetterExcerpt Available
Our major businesses did well last year. In fact, each of our five largest non-insurance companies — BNSF, Iscar, Lubrizol, Marmon Group and MidAmerican Energy — delivered record operating earnings. In aggregate these businesses earned more than $9 billion pre-tax in 2011. Contrast that to seven years ago, when we owned only one of the five, MidAmerican, whose pre-tax earnings were $393 million. Unless the economy weakens in 2012, each of our fabulous five should again set a record, with aggregate earnings comfortably topping $10 billion. * In total, our entire string of operating companies spent $8.2 billion for property, plant and equipment in 2011, smashing our previous record by more than $2 billion. About 95% of these outlays were made in the U.S., a fact that may surprise those who believe our country lacks investment opportunities. We welcome projects abroad, but expect the overwhelming majority of Berkshire’s future capital commitments to be in America. In 2012, these expenditures will again set a record.
We have two very large businesses, BNSF and MidAmerican Energy, that have important common characteristics distinguishing them from our many other businesses. Consequently, we assign them their own sector in this letter and also split out their combined financial statistics in our GAAP balance sheet and income statement.
📜2012 LetterExcerpt Available▼
2012 LetterExcerpt Available
Last year I told you that BNSF, Iscar, Lubrizol, Marmon Group and MidAmerican Energy — our five most profitable non-insurance companies — were likely to earn more than $10 billion pre-tax in 2012. They delivered. Despite tepid U.S. growth and weakening economies throughout much of the world, our “powerhouse five” had aggregate earnings of $10.1 billion, about $600 million more than in 2011.
Those building blocks rest on a rock-solid foundation. A century hence, BNSF and MidAmerican Energy will continue to play major roles in the American economy. Insurance, moreover, will always be essential for both businesses and individuals — and no company brings greater resources to that arena than Berkshire. As we view these and other strengths, Charlie and I like your company’s prospects.
🎙️2012 MeetingReference Only▼
2012 MeetingReference Only
Mentioned in this document.
📜2013 LetterExcerpt Available▼
2013 LetterExcerpt Available
NV Energy, purchased for $5.6 billion by MidAmerican Energy, our utility subsidiary, supplies electricity to about 88% of Nevada’s population. This acquisition fits nicely into our existing electric-utility operation and offers many possibilities for large investments in renewable energy. NV Energy will not be MidAmerican’s last major acquisition.
Those building blocks rest on a rock-solid foundation. A century hence, BNSF and MidAmerican Energy will still be playing major roles in our economy. Insurance will concomitantly be essential for both businesses and individuals — and no company brings greater human and financial resources to that business than Berkshire.
📜2014 LetterExcerpt Available▼
2014 LetterExcerpt Available
Our “Powerhouse Five” — a collection of Berkshire’s largest non-insurance businesses — had a record $12.4 billion of pre-tax earnings in 2014, up $1.6 billion from 2013.* The companies in this sainted group are Berkshire Hathaway Energy (formerly MidAmerican Energy), BNSF, IMC (I’ve called it Iscar in the past), Lubrizol and Marmon.
📜2016 LetterExcerpt Available▼
2016 LetterExcerpt Available
Early in 2000, I atoned for that folly by buying 76% (since grown to 90%) of MidAmerican Energy, a brilliantly-managed utility business that has delivered us many large opportunities to make profitable and socially-useful investments. The MidAmerican cash purchase — I was learning — firmly launched us on our present course of (1) continuing to build our insurance operation; (2) energetically acquiring large and diversified non-insurance businesses and (3) largely making our deals from internally-generated cash. (Today, I would rather prep for a colonoscopy than issue Berkshire shares.)
🎙️2016 MeetingExcerpt Available▼
2016 MeetingExcerpt Available
WARREN BUFFETT: Yeah, I used to worry more about that than I do now. Partly, size is one factor. I think the more important factor would be that Berkshire will always be in a position to repurchase very significant amounts of stock, and as long as it’s willing to buy that stock at some price — and it should be — close to intrinsic value, there should not be a large margin, in terms of anybody that might come along and think there’d be a lot money to be made by breaking up. There would be money lost by breaking it up, in terms of we’d lose — there’d be certain advantages lost. MidAmerican Energy could not have done what it has done in renewables without Berkshire being the parent. I mean, if it had been split off, it would have been worth — the parts would have been worth — less than the whole. And there are other instance — I could give you significant instances of that in other cases. So, I don’t think there will be a spread that will be enticing to anyone.
📜2022 LetterReference Only▼
2022 LetterReference Only
Mentioned in this document.