Only the Oracle of Omaha Warren Buffett can bet on coal and electric cars without looking dirty.
Perhaps the biggest deal of the month, Berkshire Hathaway Inc.'s (NYSE:BRK.A) $33.4 billion purchase of the 77.4% of railroad Burlington Northern Santa Fe Corp. (NYSE:BNI) that it doesn't already own, exemplifies the dichotomy of Warren Buffett's energy investments. One of Burlington Northern's biggest revenue drivers -- 25% in the third quarter of 2009 to be exact -- is coal deliveries,
notes MarketWatch. In fact, BN's tonnage of coal deliveries amounts to 10% of U.S. electricity, according to the MarketWatch report. Meanwhile, Berkshire Hathaway owns other energy assets, most notably MidAmerican Energy Holdings Co., an electricity utility that relies heavily on coal.
At the other end of the spectrum, Berkshire Hathaway via MidAmerican
owns a 10% stake in Chinese hybrid carmaker BYD Co. Ltd. While most of the major automakers like Toyota Motors Corp. (NYSE:TM) and General Motors Co. keep promising so-called plug-in hybrids, BYD has beat both the Prius plug-in and Chevrolet Volt to market with its own gas-electric cars that can recharge batteries via an electric outlet, the F3DM. The car has been zooming around China since December 2008 and is slated to hit Europe in 2010 and even the U.S. by 2011 -- the same time the Volt will hit showrooms.
Essentially, Berkshire Hathaway is a full-service conglomerate that toils on both sides of the fence when it comes to energy. The key to playing this game effectively is Buffett. His down to earth folksy charm could mitigate damage associated with coal. Meanwhile, his business success makes him a star to the Chinese, as
Heard on the Street noted is a factor in BYD's strong share growth. For Buffett, betting on both sides could be immensely profitable as plug-in hybrids will create demand for electricity, and since most electricity in the U.S. comes from coal (and likely will for the foreseeable future), Burlington Northern and Berkshire Hathaway's MidAmerican will profit. -
Matthew Wurtzel
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